Understanding Blockchain and Cryptocurrencies: A Primer for Implementing and Developing Blockchain Projects

251 Pages·2022·4.126 MB·English

by  A. Summers

Understanding Blockchain and
Cryptocurrencies

Understanding Blockchain and
Cryptocurrencies
A Primer for Implementing and
Developing Blockchain Projects
Akira Summers
First edition published 2022
by CRC Press
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and by CRC Press
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ISBN: 9781032034065 (hbk)
ISBN: 9781032034072 (pbk)
ISBN: 9781003187165 (ebk)
DOI: 10.1201/ 9781003187165
Typeset in Sabon
by Newgen Publishing UK
This book is dedicated to my darling children, Dantai, Skyler
and Rayven; to Rei; to my partner, James Gordon; to my sisters
Donna Dixon and Shelley McCubbin; to the friends who have
supported me over the years, in no particular order, Melissa
Reddy, Damian Rourke, Helena Nouwens, Stacy O’Brien, John
Kelly, Avi Jawanda, Lianne Forbes, Valentina Ippolito, Cathy
Easthope, Sander Sarti, Ben Clempson and to my Granny and
Peter.

Contents
List of figures xiii
About the author xix
Preface xxi
Who is this book for? xxiii
Acknowledgement xxv
Notes xxvii
What should you know before reading this book? xxix
Key terms to know before reading xxix
Why learn about blockchains? xxxiii
1 What are blockchains for? 1
Provenance and trust 1
Downtime 2
Not for everything 3
2 Basic principles of blockchain 5
Block structure 5
Hashing 7
Hash represented as hexadecimal and decimal numbers 8
Collisions 11
Hashing in blockchains 14
Merkle tree 15
Difficulty and nonce 18
The nonce 18
3 Decentralized computing 25
Partial nodes 30
vii
viii Contents
4 Forks 33
Accidental forks 33
Example 37
Update fork 41
Soft fork 44
Hard fork 45
Relationship to hash power 46
5 Cryptocurrencies 49
What are the benefits of cryptocurrencies? 49
Fees 49
Control 49
More confidential transactions 50
Protection against fraud 50
Secure 50
Flexible 50
Transparency 50
Easy to carry 51
What are wallets? 51
Encryption 51
Shared key encryption 52
Asymmetric encryption 54
Signatures 57
Elliptic curve cryptography 61
Wallets and keys 68
Base- 58 69
Wallet types 74
Hosted wallets 75
Collisions 76
6 Coins and transactions 79
Fungible and non- fungible assets 80
UTXO model 80
Account model 90
Mixers 92
Mempool 95
Contents ix
7 Mining 99
Consensus mechanisms 99
Proof of Work (PoW) 100
Proof of Stake (PoS) 102
Delegated Proof of Stake (DPoS) 103
Other consensus mechanisms 104
Proof of Elapsed Time (PoET) 104
Practical Byzantine Fault Tolerance (PBFT) 104
Proof of Authority and Proof of Reputation
(PoA and PoR/PoRe) 104
Mixed methods 104
Miner capitulation 105
Miner capitulation by price drop 105
Miner capitulation through competition 109
Mining pools 110
Halvings and the halvening 111
Previous Bitcoin halvings 112
8 Summary of blockchain so far 115
In the previous chapters 115
9 Blockchain 2.0 119
Smart contracts 119
Virtual machines 120
Junk data, computational costs and gas 122
DApps 124
Summary of DApp structure 125
Smart contracts vulnerabilities and security 125
Overflow 127
Re- entrancy attack 131
Testnets 132
Local testing 133
Tokenization 135
Stable coins 137
Decentralized autonomous organizations (DAOs) 138