Introduction to Ethereum based Blockchain
What is BLOCK CHAIN ?
What is Blockchain ?
Blockchain is a distributed database system that acts as an “open ledger” to store and manage transactions. Each record in the database is called a block and contains details such as the transaction timestamp as well as a link to the previous block. This makes it impossible for anyone to alter information about the records retrospectively. Also, due to the fact that the same transaction is recorded over multiple, distributed database systems, the technology is secure by design.
With the above in mind, “blockchain is immutable” — information remains in the same state for as long as the network exists.
In simple terms, Blockchain puts the trust from third parties into our own hands, allowing us to validate our own transactions and verify our own data. The technology allows for much faster and more secure global transactions, drastically expediting globalisation.
What is the need of BLOCK CHAIN Technology ?
- No central authority.
- Elimination of intermediaries
- Real-time settlement
- Drastic reduction in operational costs
- High levels of Transparency
- It enables bilateral settlement by eliminating midpoint failures, delays, collateral costs, and minimizes credit risks and exchange spreads.
There are various functions available in Blockchain. . They define it out of all other competitors and the functions are compiled below;
- Distributed agreement
- Transaction verification
- Value transfer
- Platforms for smart contracts
- Smart property
- Smart contracts
Where Blockchain can be implemented ?
Banking is not the only industry that blockchain will revolutionise, here a few great examples of why blockchain will be so powerful :
- Voting — with a distributed ledger, we can validate each and every vote and ensure no manipulation by third parties is occurring.
- Allows the unbanked to send money across borders — over 2 billion people do not have access to bank accounts, blockchain will enable them to send money home and economically better their families.
- Secure data storage — encrypted data will be fractionally stored across the blockchain, giving only the owner of the data access to the data when required.
- Contracts — smart contracts can be written into the blockchain to automatically trigger responses based on real time events.
Who controls the blockchain ?
No one controls the blockchain. In other words, it is decentralized by design. The network operates under its own management, on a peer-to-peer basis. Bitcoin, which is now widely accepted by businesses around the world, is managed by its network, not by any central authority.
How powerful is blockchain ?
A current case happened when China endeavored to get serious about clients and control the cryptocurrency inside their border. This sent a brief ripple through the world, where we saw a brief drop in the estimation of Bitcoin. But within days, Bitcoin continued its meteoric rise. In other words, not even a country as powerful and controlling as China can control the blockchain.
Without a doubt, it is this exceptionally decentralized plan that has enabled Bitcoin to end up standard, as well as has now brought forth many new cryptographic forms of money and another term: ICO (initial coin offering). By its inclination, utilizing blockchain innovation, it is totally unregulated and frequently exceptionally unsafe. ICOs are turning into a most loved method for crowdfunding for things like capital for new companies. At the point when an ICO goes out, a level of the recently “stamped” cryptographic money is sold either for money or other built up digital forms of money.
Who will use blockchain ?
With blockchain, clients can make exchanges for nearly anything on a shared premise, with no sort of bank association. While banks may lose some of their turf as the agent, many are presently offering and exchanging different digital currencies. They are additionally exploiting the tremendous cost investment funds in information administration and other record keeping. Truth be told, banks are scrambling to enlist blockchain engineers. Experienced blockchain engineers are relatively ready to request any compensation they like.
We have extremely just started to see where the blockchain will take us. Some are calling this, presumable as it should be, Web 3.0. The tremendous potential for new business applications is deserving of another article in itself, and likely more than one.
Decentralized Money Analogy :
Concept Behind Block Chain :
- The bitcoin network and blockchain system works very similar to the decentralized money management approach.
- The bitcoin network consists of thousands of computers (nodes), each of which maintains its own ledger. These computers communicate with each other by sending messages over the Internet.
- For example, if A was transferring 10 bitcoins to B, A would click initiate the transaction on the bitcoin wallet, and it would broadcast this transaction to all other bitcoin users.
- Anyone can join the bitcoin network by installing the bitcoin software.
- The software automatically downloads the global ledger — Blockchain, onto the computer.
- This distributed ledger allows bitcoin users to see every transaction that has ever happened in bitcoin’s history! Users can even browse through them online on sites.
What is an Ethereum ?
Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.
- Contracts lives on the Ethereum blockchain.
- They have their own Ethereum address and balance.
- They can send and receive transactions.
- They are activated when they receive a transaction, and can be deactivated.
- The Ethereum Virtual Machine runs a turing complete language.
- They have a fee per CPU step, with extra for storage.
- The user can run the application on their local blockchain.
Ethereum Programming Languages:
They are compiled into bytecode before being deployed to the blockchain
How Ethereum works :
- suppose X holds 1 ethereum in virtual wallet with associated public and private key.
- X wants to send 1 ethereum to Y who also has a wallet.
- Y sends his ethereum wallet address and public key to X.
- X creates transaction message with Y’s address and transaction amount.
- X signs transaction with his private key and announces his public key for signature verification
- X broadcasts the transaction on ethereum network for all to see.
*note:The Public Key is hashed with SHA-3 to produce a 256-bit output. The upper 96 bits are discarded, and the lower 160 bits become the Account Address.
Benefits of Blockchain :
- Fully Distributed System: No centralized authority.
- Transparency: All transactions are publically recorded and available for scrutiny.
- Security: The ledger is distributed across thousands of computers, meaning a practical hack is near-impossible.
- Risk: No single authority has control, which means if there is a fault, the rest of the network continues.
- Privacy: The user, or bitcoin owner, is anonymous and doesn’t need to provide ID credentials.
- Dependency: Use of the blockchain eliminates dependency on the base layer service for functionality.
- High Network Effects: There can be substantial benefits from very large groups of people (or even everyone) using the same service.
Limitation of ethereum blockchain:
The Ethereum Virtual Machine is slow, don’t use it for large computations
Storage on the block chain is expensive, use IPFS / Swarm Scalability is an issue, there is a trade off with decentralisation Private block chains are likely to proliferate.
on the next tutorial i will explain about the framework for ethereum and IDE used for solidity language………