Ethereum Smart Contract Development: Build blockchain-based decentralized applications using solidity

Ethereum Smart Contract Development

Build blockchain-based decentralized applications

using solidity

Mayukh Mukhopadhyay

BIRMINGHAM - MUMBAI

Ethereum Smart Contract Development

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Dedicated to my wife, Mrittika, for loaning me her ACER laptop to complete this book.

And my daughter, Abriti, for keeping her mom super busy while

I was crashing it by mining ethers.

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Contributors

About the author

Mayukh Mukhopadhyay started his career as a BI developer. After the 2008-09 financial crisis, he was at Tata Consultancy Services for one of their Fortune 500 clients in the telecom sector. Holding a master's in software engineering from Jadavpur University, he is presently working as a data insight developer, where he focuses on applying data science and machine learning to raw telecom equipment logs to generate business insights. He has a varied list of academic interests, ranging from audio signal processing, structural bioinformatics, and bio-inspired algorithms to consciousness engineering. Apart from being an Oracle Certified Specialist, he is a Certified Bitcoin Professional, recognized by C4 (Crypto Currency Certification Consortium). He tries to apply blockchain as a technology to different business domains.

To my guide @JU Dr Parama Bhaumik —your lectures on distributed systems were my main inspiration while writing this book.

To my professional network connections Ivan Liljeqvist, Dug Campbell, Mahesh Murthy, Kaushik Sathupadi, Ravinder Deol, Narayan Prusty, and Thomas Wiesner—thanks for your blogs and vlogs. This book is as much your creation as it is mine.

About the reviewer

Daniel Kraft studied applied mathematics and theoretical physics in Graz, Austria, where he obtained his PhD from the University of Graz in 2015. After that, he started as a software engineer in Zurich, Switzerland. He has been very interested in Bitcoin and cryptocurrencies since 2011 and involved in Bitcoin development since 2013. Since 2014, he has been the main developer for Namecoin and Huntercoin, and has successfully reimplemented both on top of the modern Bitcoin Core code base. Wherever possible, Daniel also contributed improvements to the upstream Bitcoin Core. He has published multiple research articles in peer-reviewed journals, two of them directly related to cryptocurrency.

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Table of Contents

Title Page

Copyright and Credits

Ethereum Smart Contract Development

Dedication

Packt Upsell

Why subscribe?

PacktPub.com

Contributors

About the author

About the reviewer

Packt is searching for authors like you

Preface

Who this book is for

What this book covers

To get the most out of this book

Download the example code files

Download the color images

Conventions used

Get in touch

Reviews

Blockchain Basics

Understanding distributed systems

The Byzantine Generals' Problem

Losing strategy

Winning strategy

The CAP theorem

Consensus in distributed systems

Understanding the hash function and the Merkle tree

Understanding a blockchain–a developer and trader's perspective

Inside a block

Blockchain mining and forking

Blockchains – evolution, generations, and hype

Summary

Grokking Ethereum

Understanding Ethereum

The notion of decentralization

The Ethereum ecosystem

Mist

Decentralized applications

Middleware

Swarm

Whisper

EVM

Hardware clients and internet

Turing completeness and the magic sauce

Ethereum block, mining, and forking

The Ethereum wallet and client interface

Summary

Hello World of Smart Contracts

A smart contract in seven lines of code

Remix in a nutshell

Increment and decrement operations using Solidity

Coding a loop

Raising an issue on GitHub

Smart contract on a private blockchain

Writing the genesis block

Building a private blockchain

Connecting MIST browser using geth

Mining ethers in a private blockchain

Deploying smart contracts on our private chain

Summary

A Noob's Guide to DApps and DAO

Understanding DApps

Steps to develop a DApp

Architecture of a DApp

What is ethercast?

btcrelay.org

oraclize.it

the-pitts-circus.com

Understanding the design of DAO

The rise and fall of DAO

Summary

Deep-Diving into Smart Contracts

What makes a contract smart?

Definition and design

Role of code in a smart contract

Basic anatomy of a smart contract design

Smart contract optimization

Smart contract auditing and compliance

Designing a voting DApp

Summary

Solidity in Depth

Need for solidity

Nuances, syntax, and features of solidity

Pragma, import, and comments

Class properties of a contract

Functions

Events

Inheritance

Libraries

Expression and control structures

Units and variables

Optimizer and debugging options

Parity hack demystified

Summary

Primer on Web3.js

Web3.js in the Ethereum ecosystem

Running a smart contract using Web3.js

API structure of Web3.js

Designing an ownership contract

Summary

Developing a Cryptocurrency from Scratch

Token versus coin

ERC20 token development using Truffle

Arbitrage trading for cryptocurrencies

The ICO story

Fiat2Crypto and Crypto2Crypto exchange

Parity hack returns

Summary

Enterprise Use Cases

Banking and payments

Insurance

Supply chain management

Forecasting and prediction market

Charity

Public benefits

Energy management

Art and music

Retail

Real estate

Cyber security

Crowdfunding

Networking and the Internet of Things

Voting

Government

Private transport and ride sharing

Cloud storage

Healthcare

Smart contract use cases

Insurance

Trade finance

Derivatives

Securities

Accounts

Digital identity

Record-keeping

Loans and mortgages

Legal

Supply chain

Clinical trials

Terminal disease research

Decentralized microblogging

Administrative and security constraints

TwtAccount.sol

TwtRegistry.sol

Service setup on the private blockchain

Reading tweets

Summary

BaaS and the Dark Web Market

Playful privacy

Types of blockchain

Private blockchains

Public blockchains

Consortium blockchains

Blockchain-as-a-service

Enterprise platforms for BaaS

IBM Hyperledger

Microsoft Azure EBaaS

Amazon Eris

Dark web marketplace

Project smartCV

Summary

Advanced Topics and the Road Ahead

Common design patterns

Restricting access

Token systems

Factory pattern

Registries

Voting systems

DACs and DAS

Ethereum improvement proposal

Rational behind EIPs

Types of EIP

EIP life cycle

EIP template

Consortium blockchains

Case study on R3 Corda

Tangle beyond blockchain

Shortcomings of a blockchain

Tangle demystified

Iota GitHub analysis

Purchase and storage of Iota

Summary

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Preface

If you are reading this line, I want to congratulate you because you have already overcome the most difficult hurdle in the pursuit of the understanding blockchain, and specifically, Ethereum smart contracts. This hurdle is the overwhelming hype surrounding this promising yet premature technology and trying to know what is really going on under the hood.

I am a software developer, and through my book, which you are viewing in your electronic device or physically holding in your hand, we will together embark on a fascinating journey through this enigmatic and revolutionary technology.

The chapters in this book have been arranged in an incremental fashion. We start with a gentle introduction to blockchain using the familiar bitcoin, and quickly dive into the world of Ethereum and the major players in its ecosystem.

Then we proceed to do some hands-on coding of a typical Hello World smart contract. We then take on the subject of decentralized autonomous organizations, decentralized applications, and smart contract optimization. We also analyze two famous multi-million-dollar hacks that recently occurred in the Ethereum community, along with the preventive measures employed to avoid them in future.

We then move on to the intricacies of the solidity programming language and web3.js library.

The final chapters mainly deal with the development of standardized tokens, the concept of initial coin offering, potential enterprise use cases of smart contracts, designing a decentralized micro-blogging platform, and surfing the dark web marketplace.

We conclude the book by providing primers on advanced topics with promising future prospects such as graph-based DLTs and quantum secured blockchains.

At the onset, I want to have a clear understanding between us. Even though I am the author of this book and it is my sole responsibility to present the facts as accurately as possible in this book, in no possible way do I consider myself as the sole authority on this subject.

As my reader, I want you to realize that I am just another overenthusiastic fellow learner who will try to assist you with your pursuit of knowledge by introducing the optimal amount of information required to kick-start your journey. And I will make you aware of the hurdles and pitfalls I faced along the way so that you can learn from my mistakes.

Enough said. Let's start our journey to blockchain and get our hands dirty with Ethereum Smart Contract Development.

Happy reading!

Who this book is for

This book is dedicated to novice programmers, solution architects, and blockchain enthusiasts who want to build powerful, robust, and optimized smart contracts using solidity from scratch and in combination with other open source JavaScript libraries. If you want to build your own extensive, decentralized applications that can smartly execute on a blockchain, then this book is what you need! An open and inquisitive mind is a necessary and sufficient prerequisite. Some preliminary knowledge of data structures, object-oriented programming, networking concepts, and cryptography is a plus and will help  the reader to understand the concepts presented in this book.

What this book covers

Chapter 1, Blockchain Basics, will serve as a warm-up session about blockchain before we deep dive into Ethereum and smart contract development. To really appreciate blockchain, we must understand the two founding pillars on which blockchain as a technology is firmly grounded: distributed systems and cryptography. Once we have covered these two core concepts, we try to understand a blockchain from two different perspectives: as a software developer and as a trader of financial instruments. Then we probe into the internal logical architecture of a block in the blockchain, focusing the bitcoin block structure, and get a gentle introduction to the mining and forking process. We conclude the chapter by discussing how blockchain has evolved in recent years and clearly marking out its current position in the technological hype cycle.

Chapter 2, Grokking Ethereum, will help us to understand the meaning of decentralization and whether Ethereum is truly decentralized. We will also cover its core technological stack and get familiarized with various jargon, such as Mist, EVM, Swarm, Whisper, Ether, and Gas. We will briefly discuss the notion of a Turing-complete language. We'll then revisit forking, mining, and block architecture from the perspective of Ethereum. We'll end this chapter by getting a notion of Ethereum wallets and client interfaces, which will serve as a firm base for smart contract development.

Chapter 3, The Hello World of Ethereum Smart Contract, provides a hands-on guide to developing our first smart contract. As an unspoken tradition of a software developer, we start with a Hello World program. Then we try some basic arithmetic increment and decrement operations using a contract. We then learn how to code a loop inside a smart contract and how to raise an issue in GitHub. We end this chapter by creating our own private blockchain right from the genesis block, attach it with Geth, and use the Mist browser to deploy one of the smart contracts we studied in this chapter, after mining some ethers.

Chapter 4, A Noob's Guide to DApps and DAOs, develops our understanding towards decentralized applications from a developer's perspective. We introduce the high-level steps to develop a decentralized application. Then we explore a unique marketplace called ethercast, which serves as an aggregator of several DApps. We then move on to design a decentralized autonomous organization. We conclude this chapter with a retrospection of the infamous DAO hack, which led to the ETH/ETC split, from a purely technical perspective.

Chapter 5, Deep-Diving into Smart Contracts, digs deeper into smart contract designs. We start by understanding the textbook definition of a smart contract. Then we move on to understand different smart contract models and the role of code in a smart contract. We go through the basic anatomy of a smart contract and see how a smart contract works. Then we shift our focus to advanced topics such as smart contract optimization, auditing, and ERC20 compliance. We conclude the chapter with a hands-on drill of building a voting DApp.

Chapter 6, Solidity in Depth, is all about the Turing complete solidity language on the Ethereum blockchain. We will start by probing into the design decision of why we really need a new language like solidity. The next sections will cover the nuances of the solidity language and the basic syntax used in it. Specifically, we'll cover contract-oriented features, functions and events, inheritance, libraries, expressions, control structures, units, and variables. Then we'll look at the optimizer and debugging options. We will conclude this chapter by analyzing the code flaw that led to the recent parity wallet hack in the Ethereum blockchain, which stole around $30 million worth of ethers.

Chapter 7, Primer on Web3.js, introduces a special application programming interface library written in JavaScript. This interface connects our web browser with the Ethereum blockchain node. We will begin this chapter by understanding the difference between Geth, Web3.js, and Mist. Then we will learn how to import this API library and get connected with Geth. We will then explore the API structure inside the web3.js library. We'll conclude the chapter by studying the design of an ownership contract.

Chapter 8, Developing Cryptocurrency from Scratch, provides a hands-on tutorial to develop an ERC20 standardized token using the Truffle framework. We then dive in to the concepts of initial coin offering (ICO) and how to identify genuine ICOs among fake and Ponzi schemes. The chapter concludes by discussing various token conversion process and pair-trading concepts.

Chapter 9, Enterprise Use Cases, provides some exciting and promising use cases of Ethereum smart contracts. We also discuss the design of a decentralized micro-blogging platform using solidity.

Chapter 10, BaaS and the Dark Web Market, introduce us to the blockchain framework of Microsoft and IBM. We conclude this chapter by discussing the difference between the Conventional Web and the Dark Web (.onion website and TOR) and how to safely browse the Dark Web to find use cases of cryptocurrencies.

Chapter 11, Advanced Topics and the Road Ahead, deals with exciting topics such as graph-based DLTS with a focus on Tangle, quantum secured blockchain, Ethereum improvement protocols, consortium blockchains, distributed autonomous societies, and common design patterns for solidity.

To get the most out of this book

Inform the reader of the things that they need to know before they start, and spell out what knowledge you are assuming

Some preliminary knowledge of data structures, object-oriented programming, networking concepts, and cryptography