This document provides an introduction to blockchain technology. It discusses the key components of blockchain including distributed networks, public ledgers updated by consensus, and cryptography. Blockchain allows for transparency, resilience, and censorship resistance. It explores the history of blockchain from Bitcoin's creation to Ethereum and smart contracts. Common design patterns for decentralization are presented, like open source code and oracles. Risks and best practices for smart contracts are covered. Applications including DeFi, DEXs, and yield farming are summarized at a high level.

1. Introduction to Blockchain
Laurence Kirk
Extropy.IO
Monday 28th June 2021

2. Extropy.io 2019
Website :
https://extropy.io
Email :
info@extropy.io
Twitter : @extropy
Free Developer
Workshops
● Basic
● Enterprise
● Advanced EVM
● Zero Knowledge
Proofs
Business Workshops
Providing Blockchain solutions
DApp development and customised
blockchains
Security Audits

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TLDR
The blockchain provides a
trust layer without a central
authority

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Overview of Blockchain
Components

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Gossip Network

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Shared Public Ledger

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Components of the Blockchain
● Shared public ledger
updated by consensus
● P2P Network
● Cryptography

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These components give a blockchain
system
● Transparency and verifiable state based on consensus
● Resilience
● Censorship resistance
● Tamper proof interactions

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● Timestamping and verification
● Digital Cash
● Proof of Work (Consensus)
● Byzantine Fault Tolerance (Consensus)
● Public keys as Identities
● Smart Contracts
Working Towards Bitcoin

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Satoshi Nakamoto is the name used by
the presumed pseudonymous person or
persons who developed bitcoin, authored
the bitcoin white paper, and created and
deployed bitcoin's original reference
implementation

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August 2008 - domain name bitcoin.org registered
October 2008 - A Peer-to-Peer Electronic Cash System posted to a cryptography mailing list
January 2009 - Software implementation released as open source
2010, the first known commercial transaction using bitcoin occurred when programmer Laszlo Hanyecz
bought two Papa John's pizzas for 10,000 BTC

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By MikeG001 - Own work, CC BY-SA 4.0,

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Blockchain Data structure

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Proof of Work

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Tx
Tx
Tx
Tx
Tx
Network point of view

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Building a consensus
Tx
Tx
Tx
Tx
Tx
Tx
Tx
Tx
Tx
?

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Proof of Work is not the only consensus mechanism used in blockchains
Avalanche
Polkadot consensus

21. Creates smart contract
and submits it to the
blockchain

22. The Ethereum Virtual
Machine

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Restrictions
● Gas - Amount of Computation
● Determinism
● Oracles - Getting data from the internet

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getWeather() getWeather()
getWeather()

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Oracles

26. EVM Languages

27. Solidity
The most popular programming language for Ethereum contracts
LLL
Low-level Lisp-like Language
Vyper
A language with overflow-checking, numeric units but without unlimited loops
Pyramid Scheme (experimental)
A Scheme compiler into EVM that follows the SICP compilation approach
Flint
A language with several security features: e.g. asset types with a restricted set of atomic operations
LLLL
An LLL-like compiler being implemented in Isabelle/HOL
HAseembly-evm
An EVM assembly implemented as a Haskell DSL
Bamboo (experimental)
- A language without loops but with explicit constructor invocation at the end of every call

28. Designing for
decentralisation

29. Rock Paper Scissors

30. Playing Rock Paper Scissors on the blockchain
Alice plays ‘Rock’
Bob sees Alice’s
transaction, so he plays
‘Paper’
and therefore wins
Here is your
prize

31. Common Patterns
And
Best Practices

32. Consensys : Best Practices
● Use caution when making external calls
● Mark untrusted contracts
● Avoid state changes after external calls
● Don't use transfer() or send().
● Handle errors in external calls
● Favor pull over push for external calls
● Don't delegatecall to untrusted code
● Remember that Ether can be forcibly sent to an account
● Remember that on-chain data is public
● Beware of the possibility that some participants may "drop offline" and not return
● Beware of negation of the most negative signed integer
● Enforce invariants with assert()
● Use assert(), require(), revert() properly
● Use modifiers only for checks
● Beware rounding with integer division
● Be aware of the tradeoffs between abstract contracts and interfaces
● Keep fallback functions simple
● Check data length in fallback functions
etc.

33. Open Zeppelin

34. Ownership and Access Control
Contracts:
Ownable
AccessControl

35. Tokens
● ERC20
● ERC721
● ERC777

36. Creating a DApp
https://web3js.readthedocs.io/en/v1.3.0/
Other languages are available
Java
Rust
.NET
….

38. DeFi

39. CEX / DEX

40. From CoinMarketCap : Exchanges

41. From CoinMarketCap : Exchanges

43. Introduction to AMMs

45. Problems with DEXs
● Performance
● Liquidity
● Regulation

46. Incentivising Users
● Users deposit funds into a liquidity pool, for example ETH and USDT
● This pool ( a token pair ) allows users to exchange (or maybe lend or borrow) tokens
● Interacting with the exchange incurs fees
● These fees are paid to the liquidity providers
The AMM works according to smart contracts
They are characterised as constant function market makers.
From Constant Function Market Makers
The term “constant function” refers to the fact that any trade must change the reserves in
such a way that the product of those reserves remains unchanged (i.e. equal to a constant).

47. LP Tokens
Typically the liquidity provider receives LP tokens when they add
liquidity, say ETH and USDT
Later they can take liquidity by providing LP tokens to the contract and
will receive back ETH and USDT.
Ideally they will make a profit

48. Risks when providing liquidity
● Slippage
○ Large trades can move the price
● Impermanent loss
As a result of volatility

49. Yield Farming

50. Yield Farming at its simplest is a means of earning rewards for depositing tokens
Users are rewarded for providing liquidity
Different strategies are used by investors to maximise their rewards from the many DeFi projects
Compound and yearn.finance introduced this area to DeFi

51. June 2020 - BAT token APY

52. Aave and Flash loans

56. Community education : http://extropy.foundation

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Q & A
https://bit.ly/HackAfrica1