8483/crypto

Overview

Hash = Unique string of characters representing any value
Wallet (Private/Public key) = Identity
Blockchain = Decentralized database
Ethereum = Infrastructure for runnig blockchain apps
Smart-contract = Self-executing code on a blockchain
IPFS = P2P protocol like torrents

Hashing

A hashing algorithm compresses ANY data into a single string of characters, called a hash.

The data can range from empty, to all the books in the world... and it would still result in the same length string.

It's impossible to convert a hash back to the original value.

The most popular hashing algorithm is SHA-256, which outputs a value 256 bits long.

# data
hello

# hash
2cf24dba5fb0a30e26e83b2ac5b9e29e1b161e5c1fa7425e73043362938b9824

A single different character completely changes the hash.

# data
hello!

# hash
ce06092fb948d9ffac7d1a376e404b26b7575bcc11ee05a4615fef4fec3a308b

Private/Public Key

These values are mathematically tied, where the public key is derived from the private, and not the reverse.

Private key

You don't need a central authority to get one. You can just make up your own. Only you know it, and protect it.

104919795919952275347884100610276964082252207442738227310480997395085948872695

Public key

Derived from a public key. Everyone knows it.

04ac3e5eeb3622baa743e3662f16d7552f20079f5daf7dde5bd58ea80495ef495966281ae2d7fe37fe749410e09fd8d315e6193ddb429c1f21af24688f4d7b7ee8

Signature

Used to verify the authenticity of something.

Let's say we want to send a message.

Hello world!

We use the message and the sender's private key to generate a signature.

3044022003d1dc8ee81f09a79979d9fd687deed50aaa4f5408c1359fd979b9baa2edd12f022037e5a69f82437ca7cb82c97012f1d297f3e57de335b90fd67e40cb3bac457b35

We then compare the signature to the sender's public key to verify that the one who signed/sent it had access to the private key i.e. is the author.

Blockchain

It's decentralized/P2P database that's:

• Distributed - Everyone has a copy
• Immutable - Past data can't be changed
• Permissionless - No single authority

Ideal for:

• Decentralized applications (DApps)
• Monetary transactions
• Transfer of value
• Voting systems
• Verification of trusted data (identity, property, reputation, credibility...)
• Public Key Verification

How it works

The hash of a block is derived from all the other info in it. The hash is then included in the next block.

To change anything in block 42, you will invalidate the current hash, which will invalidate the next block, and so on. Meaning, you'd have to redo all the intensive calculations.

+-------+-------------+       +-------+-------------+       +-------+-------------+
| block | 42          |       | block | 43          |       | block | 44          |
+-------+-------------+       +-------+-------------+       +-------+-------------+
| nonce | 26486       |       | nonce | 82590       |       | nonce | 40596       |
+-------+-------------+       +-------+-------------+       +-------+-------------+
| token | foo         |       | token | bar         |       | token | baz         |
+-------+-------------+       +-------+-------------+       +-------+-------------+
| prev  | 00006908f50 |   |---| prev  | 00008ccb2fc |   |---| prev  | 000029942f0 |
+-------+-------------+   |   +-------+-------------+   |   +-------+-------------+
| hash  | 00008ccb2fc |---|   | hash  | 000029942f0 |---|   | hash  | 0000f79349c |
+-------+-------------+       +-------+-------------+       +-------+-------------+

Ethereum

Infrastructure/Platform for runnig decetralized apps utilizing a blockchain, built with the Solidity language.

It provides a huge network of nodes running it, that you'd have to create otherwise.

It helps connect people directly without a private 3rd party, via a "decentralized super computer" comprised of all the nodes in the network.

The currency used to incentvize the network is called Ether (ETH)

Solidity

Contract-oriented, high-level, compiled language for building smart contracts, that runs on the Ethereum Virtual Machine (EVM).

pragma solidity ^0.5.1;

contract MyContract {
    string public value = "myValue";

    function set(string memory _value) public {
        value = _value;
    }
}

Exchange

Token

Smart Contract

Self-executing code on a blockchain, publicly accessible to anyone.

Transactions

"Money" never leaves the blockchain. It simply changes ownership i.e. wallets. The blockchain tells you how much money you have.

Proof of Work (POW) Steps:

1. Sender sends coins to address.
2. Wallet signs transaction using sender's private key.
3. Transaction is propagated and validated by network nodes.
4. Miners include the transaction in the next block to be mined.
5. Miners do proof of work by calculating hashes.
6. The miner who solves the hash propagates the new block to the network.
7. Nodes verify the result and propagate the block.
8. Receiver gets confirmations with each new block created.

Wallet

Anyone can create a wallet i.e. a public/private key pair (asymmetric encryption). You can derive the public key from the private, but not the reverse. Wallets can be created offline, and then accessed later with the private key.

Public key = wallet address = bank account number
Private key = proof of ownership

The blockchain only holds wallet transactions, it does not have all the wallets in existence, thus, wallets don't "exist" until they are written on the blockchain.

You can transfer coins to a wallet that doesn't exist, i.e. destroying them, unless someone can generate the private key for the wallet.

Wallets i.e. storing your public/private key pair can be:

• hot (app) least secure
• cold (hardware)
• paper (offline) most secure

Ex. Paper wallet:

1. Create public/private keys offline
2. Print them out
3. Destroy digital keys
4. Add coins to wallet i.e. public key

Mining

Mining is a byproduct of the transaction verification process.

IPFS - InterPlanetary File System

P2P filesystem protocol similar to torrents.

NFT - Non-Fungible Tokens

Other

coinbase = FIAT to crypto exchange

The bought crypto sits in the exchange, similar to money in a bank.

You can move the crypto to a wallet.

Bitcoin uses proof of work i.e. you get transaction verification based on spent electricity. Ethereum uses proof of stake i.e. you get transaction verification based on risked stake.