Mastering blockchain by imran bashir

Customer Feedback Preface What this book covers What you need for this book Who this book is for Conventions Reader feedback Customer support Downloading the example code Downloading the

Mastering Blockchain

Table of Contents

Mastering Blockchain

Credits

About the Author

About the Reviewer

www.PacktPub.com

Why subscribe?

Customer Feedback

Preface

What this book covers

What you need for this book

Who this book is for

Conventions

Reader feedback

Customer support

Downloading the example code

Downloading the color images of this bookErrata

Types of consensus mechanism

The history of blockchain

Platforms for smart contracts

Transferring value between peers

Applications of blockchain technology

How blockchains accumulate blocks

Tiers of blockchain technology

Delegated Proof of Stake

Proof of Elapsed Time

Deposit-based consensus

Proof of importance

Federated consensus or federated Byzantine consensusReputation-based mechanisms

Practical Byzantine Fault Tolerance

CAP theorem and blockchain

Benefits and limitations of blockchain

Decentralized autonomous organizations

Decentralized autonomous corporations

Decentralized autonomous societies

Block encryption mode

Keystream generation modes

Message authentication modes

Cryptographic hashes

Electronic code book

Cipher block chaining

Counter mode

Data Encryption Standard (DES)

Advanced Encryption Standard (AES)

Encryption and decryption using RSA

Elliptic curve cryptography (ECC)

Mathematics behind ECC

Point addition

Point doubling

Discrete logarithm problem

How to generate public and private key pairs

Private key

Generate public key

How to encrypt and decrypt using RSA with OpenSSLEncryption

Decrypt

ECC using OpenSSL

ECC private and public key pair

Secure Hash Algorithms (SHAs)

Design of Secure Hash Algorithms (SHA)

SHA-256

Design of SHA3 (Keccak)

OpenSSL example of hash functions

Message Authentication codes (MACs)

MACs using block ciphers

HMACs (hash-based MACs)

Merkle trees

Patricia trees

Distributed hash tables (DHTs)

Digital signatures

Sign then encrypt

Encrypt then sign

Elliptic Curve Digital signature algorithm (ECDSA)

How to generate a digital signature

ECDSA using OpenSSL

Orders and order properties

Order management and routing systemsComponents of a trade

Keys and addresses

Public keys in bitcoin

Private keys in bitcoin

Bitcoin currency units

Base58Check encoding

Vanity addresses

Transactions

The transaction life cycle

The transaction structure

The script language

Commonly used Opcodes

Types of transaction

Coinbase transactions

What is UTXO?

Transaction feeContracts

Transaction malleabilityTransaction pools

Transaction verificationBlockchain

The structure of a block

The structure of a block header

The genesis block

The hashing rate

Paper walletsHardware walletsOnline walletsMobile walletsBitcoin payments

Bitcoin investment and buying and selling bitcoinsBitcoin installation

Setting up a bitcoin node

Setting up the source code

Setting up bitcoin.conf

Starting up a node in testnet

Starting up a node in regtest

Starting up a node in live mainnet

Experimenting with bitcoin-cli

Bitcoin programming and the command-line interfaceBitcoin improvement proposals (BIPs)

Difficulty adjustment and retargeting algorithmsKimoto Gravity Well

Dark Gravity Wave

Reward halving rate

Block size and transaction size

Ethereum clients and releases

The Ethereum stack

Ethereum blockchain

Currency (ETH and ETC)

Forks

Gas

The consensus mechanism

The world state

The account state

NonceBalanceStoragerootCodehashTransactions

Contract creation transaction

Message call transaction

Elements of the Ethereum blockchain

Ethereum virtual machine (EVM)

Execution environment

Machine stateThe iterator functionRuntime byte codeOpcodes and their meaning

Arithmetic operationsLogical operationsCryptographic operationsEnvironmental informationBlock Information

Stack, memory, storage and flow operations

The RIPEMD-160 bit hash function

The identity function

The bloom filter

Transaction validation and execution

The transaction sub state

The geth console

Funding the account with bitcoin

Applications developed on Ethereum

Scalability and security issues

Summary

8 Ethereum Development

Setting up a development environment

Test Net (Ropsten)

Setting up a Private Net

Starting up the private network

Running Mist on Private Net

Deploying contracts using Mist

Development tools and clients

InstallationTools and libraries

Node.js version 7Local Ethereum block explorerEthereumJS

Contract development and deployment

Introducing solidity

Types

Value types

BooleanIntegersAddressArray value types (fixed size and dynamically sized byte arrays)Literals

Integer literalsString literalsHexadecimal literalsEnums

Function types

Internal functions

External functionsReference types

ArraysStructsData locationMappings

Global variables

Control structures

EventsInheritanceLibrariesFunctionsLayout of a solidity source code fileIntroducing Web3

POST requests

The HTML and JavaScript frontend

Installing web3.js

ExampleDevelopment frameworks

Truffle

InstallationTesting using truffleBuild

Another exampleExample project: Proof of IdeaPermissioned distributed ledgersSummary

Chaincode services

Events

APIs and CLIs

Components of the Fabric

Peers or nodes

Applications on blockchainChaincode implementationApplication model

CorDappDevelopment environment

Summary

10 Alternative Blockchains

Blockchains

Ripple

Transactions

Payments relatedOrder relatedAccount and security relatedApplication layer

Transport layerInterledger layerLedger layerStellar

Rootstock

DrivechainQuorum

Transaction managerCrypto EnclaveQuorumChainNetwork managerTezos

IoT blockchain experiment

First node setup

Raspberry Pi node setup

Circuit

Post trade settlement

Financial crime prevention

Media

Summary

12 Scalability and Other Challenges

Scalability

Block size increase

Block interval reduction

Invertible Bloom lookup tables

Secure multiparty computation

Usage of hardware to provide confidentialityCoinjoin

Confidential transactions

MimbleWimble

Security

Smart contract security

Why3 formal verification

New programming languages

Hardware research and developmentResearch in formal methods and securityAlternatives to blockchains

Mastering Blockchain

Copyright © 2017 Packt Publishing

All rights reserved No part of this book may be reproduced, stored in a retrieval system, or

transmitted in any form or by any means, without the prior written permission of the publisher, except

in the case of brief quotations embedded in critical articles or reviews

Every effort has been made in the preparation of this book to ensure the accuracy of the informationpresented However, the information contained in this book is sold without warranty, either express

or implied Neither the author, nor Packt Publishing, and its dealers and distributors will be heldliable for any damages caused or alleged to be caused directly or indirectly by this book

Packt Publishing has endeavored to provide trademark information about all of the companies andproducts mentioned in this book by the appropriate use of capitals However, Packt Publishing cannotguarantee the accuracy of this information

First published: March 2017

About the Author

Imran Bashir has a M.Sc in Information Security from Royal Holloway, University of London, and

has a background in software development, solution architecture, infrastructure management, and IT

service management He is also a member of Institute of Electrical and Electronics Engineers (IEEE) and British Computer Society (BCS) Imran has sixteen years of experience in the public

and financial sectors He worked on large scale IT projects for public sector before moving to

financial services industry Since then he has worked in various technical roles for different financialcompanies in Europe’s financial capital, London He is currently working for an investment bank inLondon as Vice President in the technology department

I would like to thank the talented team at Packt including Ajith Menon, Nilesh Sawakhande,

Sumeet Sawant, and Tushar Gupta, who provided prompt guidance and very valuable feedback throughout this project I am also extremely thankful to the reviewer, Daniel Kraft, who provided constructive and very useful feedback that helped tremendously to improve the material in this book.

I thank my wife and children for putting up with my all-night and weekend-long writing sessions Finally, I would like to thank my parents, whose blessings on me have made everything possible for me.

About the Reviewer

Daniel Kraft studied mathematics and physics, and holds a PhD in applied mathematics from the

University of Graz in Austria He has been involved in development with cryptocurrencies since

2013, has been the lead developer and chief scientist for both Namecoin and Huntercoin since 2014,and has published two research papers about cryptocurrency in peer-reviewed journals He works as

a software engineer and is a co-founder of Crypto Realities Ltd, a start-up that works on buildingdecentralised multi-player game worlds with blockchain technology

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It is recommended that readers have a basic understanding of computer science and basic

programming experience in order to benefit fully from this book However, if that is not the case thenstill this book can be read easily, as relevant background material is provided where necessary

What this book covers

Chapter 1, Blockchain 101, introduces the basic concepts of distributed computing on which

blockchain technology is based It also covers history, definitions, features, types, and benefits ofblockchains along with consensus mechanisms that are at the core of blockchain technology

Chapter 2, Decentralization, covers the concepts of decentralization and its relationship with

blockchain technology Various methods and platforms that can be used to decentralize a process orsystem have also been introduced

Chapter 3, Cryptography and Technical Foundations, introduces the theoretical foundations

cryptography, which is necessary to fully understand blockchain technology Concepts such as publicand private key cryptography, with practical examples, are included Finally, an introduction to

financial markets is also included as there are many interesting use cases for blockchain technology inthe financial sector

Chapter 4, Bitcoin, covers Bitcoin, the first and largest blockchain It introduces technical concepts

related to bitcoin cryptocurrency in detail

Chapter 5, Alternative Coins, introduces alternative cryptocurrencies that were introduced after the

invention of Bitcoin It also presents examples of different altcoins, their properties, and how theyhave been developed and implemented.Chapter 6, Smart Contracts, provides an in-depth discussion

on smart contracts Topics such as history, the definition of smart contracts, Ricardian contracts,

Oracles, and the theoretical aspects of smart contracts are presented in this chapter

Chapter 7, Ethereum 101, introduces the design and architecture of the Ethereum blockchain in detail.

It covers various technical concepts related to the Ethereum blockchain that explains the underlyingprinciples, features, and components of this platform in depth

Chapter 8, Ethereum Development, provides a detailed practical introduction to development of

decentralized applications and smart contracts using the Ethereum blockchain An introduction tosolidity and different relevant tools have also been included in this chapter

Chapter 9, Hyperledger, presents a discussion about the hyperledger project from the Linux

foundation, which includes different blockchain projects introduced by its members

Chapter 10, Alternative Blockchains, introduces alternative blockchain solutions and platforms It

provides technical details and features of alternative blockchains

Chapter 11, Blockchain – Outside of Currencies, provides a practical and detailed introduction to

applications of blockchain technology in fields others than cryptocurrencies, including Internet ofThings, government, media, and finance

Chapter 12, Scalability and Other Challenges, is dedicated to a discussion of the challenges faced

by blockchain technology and how to address them.

Chapter 13, Current Landscape and What’s Next, is aimed at providing information about the current

landscape, projects, and research efforts related to blockchain technology Also, some predictionsbased on the current state of blockchain technology have also been made

What you need for this book

All examples in this book have been developed on Ubuntu 16.04.1 LTS (Xenial) As such, it is

recommended to use Ubuntu However, any appropriate operating system, either Windows or Linux,can be used, but examples, especially those related to installation, may need to be changed

accordingly

Examples related to cryptography have been developed using the OpenSSL 1.0.2g 1 Mar 2016

command-line tool

Ethereum solidity examples have been developed using Browser Solidity, available online

at https://ethereum.github.io/browser-solidity/ Ethereum's homestead release is used to developEthereum-related examples At the time of writing, this is the latest version available and can bedownloaded from https://www.ethereum.org/

Examples related to IoT have been developed using a Raspberry Pi kit by Vilros, but any latest model

or kit can be used Specifically, Raspberry Pi 3 Model B V 1.2 has been used to build a hardwareexample of IoT Node.js V7.2.1 and npm V3.10.10 have been used to download related packages andrun Node.js server for IoT examples

The Truffle framework has been used in some examples of smart contract deployment, and is

available at http://truffleframework.com/ Any latest version available via npm should be

appropriate

Who this book is for

This book is for anyone who wants to understand blockchain technology in depth It can also be used

as a reference by developers who are developing applications for blockchain In addition, this bookcan also be used as a textbook for courses related to blockchain technology and cryptocurrencies Itcan also be used as a learning resource for various examinations and certifications related to

cryptocurrency and blockchain technology

In this book, you will find a number of text styles that distinguish between different kinds of

information Here are some examples of these styles and an explanation of their meaning

Code words in text, database table names, folder names, filenames, file extensions, pathnames,

dummy URLs, user input, and Twitter handles are shown as follows:

"This line of code simply uses console.log to print the coinbase by calling web3.eth.coinbase

method."

A block of code is set as follows:

function difference(uint x) returns (uint y)

Any command-line input or output is written as follows:

$ geth datadir ethereum/PrivateNet/ networkid 786 rpc rpccorsdomain 'http://192.168.0.17:9900'

New terms and important words are shown in bold Words that you see on the screen, in menus or

dialog boxes for example, appear in the text like this: "Clicking the Next button moves you to the next

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