Assuming that you didn't live a secluded life as a hermit on a mountain in 2017, you would have heard all about cryptocurrency, especially Bitcoin. You didn't have to look far to hear about the soaring popularity of this topic, its terminology, and its growth in value. At this point, other cryptocurrencies also began to grow, making way for headlines such as Ethereum reaches $1,000! During this craze, people discussed everything about cryptocurrency, from the swinging price to the technology behind it, which is blockchain.

Blockchain was regarded as the technology that would bring the dawn of a new era of justice and prosperity for mankind. It would democratize wealth. It would take the power away from the oligarchy and give it back to the people. It would protect the data of the people. Then came 2018, and cryptocurrency went...

Most people know Bitcoin exists because of blockchain. But what is blockchain? It is an append-only database that consists of blocks that are linked by hashing. Here, each block contains many transactions of transferring value (but could be other things) between participants secured by cryptography; a consensus between many nodes that hold an identical database decides on which new block is to be appended next.

You don't have to understand the definition at this point; those are a lot of words to chew on! First, I'll explain blockchain to you so that you can adjust to this new knowledge as we move through this book.

Going back to the definition of blockchain, we can summarize the definition as an append-only database. Once you put something into the database, it cannot be changed; there is no Undo. We'll talk about the ramifications of this...

The most popular use of blockchain is to create a cryptocurrency. As the word crypto is in cryptocurrency, you would expect that you need to master cryptography in order to become a blockchain programmer. That is not true. You only need to know two things about cryptography:

• Private key and public key (asymmetric cryptography)
• Hashing

These two have been explained in the previous part of this chapter. You don't need to know how to design a hashing algorithm or private key and public key algorithm. You only need to get an intuitive understanding of how they work and the implications of these technologies.

The implication of private keys and public keys is that it enables decentralized accounts. In a normal application, you have a username and password. These two fields enable someone to access their account. But having a private key and public key enables someone...

Hashing is a function that takes an input of any length and turns it into a fixed length output. So, to make this clearer, we can look at the following code example:

>>> import hashlib
>>> hashlib.sha256(b"hello").hexdigest()
'2cf24dba5fb0a30e26e83b2ac5b9e29e1b161e5c1fa7425e73043362938b9824'
>>> hashlib.sha256(b"a").hexdigest()
'ca978112ca1bbdcafac231b39a23dc4da786eff8147c4e72b9807785afee48bb'
>>> hashlib.sha256(b"hellohellohellohello").hexdigest()
'25b0b104a66b6a2ad14f899d190b043e45442d29a3c4ce71da2547e37adc68a9'

As you can see, the length of the input can be 1, 5, or even 20 characters, but the output will always be the length of 64 hexadecimal numeric characters. The output looks scrambled and it appears that there is no apparent link between the input and the output...

As we can see, the hashing function makes history tampering hard, but not too hard. Even if we have a blockchain that consists of 1000 blocks, it would be trivial to alter the content of the first block and change the 999 parent hashes on the other blocks with recent computers. So, to ensure that bad people cannot alter the history (or at least make it very hard), we distribute this append-only database to everyone who wants to keep it (let's call them miners). Say there are ten miners. In this case, you cannot just alter the blockchain in your copy because the other nine miners who would scold, saying something like hey, our records say history A but your record says B. In this case, the majority wins.

However, consensus is not just a case of choosing which blockchain has been chosen by the majority. The problem starts when we want to add a new block to the blockchain...

As this book is being written, the two most popular cryptocurrencies are Bitcoin and Ethereum (once in a while, Ripple will take second place). If you ask a simple question to someone who knows a lot about cryptocurrencies, you may get an answer: Bitcoin is just for sending money, but you can create a program on Ethereum. The program can be tokens, auction, or escrow, among many other things. But that is a half-truth. You can also create a program on Bitcoin. Usually, people call this program a script. In fact, it is a must to provide a script in a Bitcoin transaction. A transaction in Bitcoin can be mundane, so if I want to send you 1 BTC (a unit of currency in Bitcoin) and your Bitcoin address is Z, I need to upload a script like this into Bitcoin blockchain:

What's your public key? If the public key is hashed, does it equal Z? If yes, could you...

In this chapter, we looked into the technology behind cryptocurrencies such as Bitcoin and Ethereum. This technology enables the decentralization of storing values or code. We also covered cryptography by using private and public keys to secure the integrity of any data. Further on, we learned about hash functions, proof of work, consensus, and the basic concepts of blockchain programming.

In the next chapter, we will learn about a smart contract, a kind of program that lives in Ethereum. A smart contract is different than a kind of program that lives in a server, such as an application written with Ruby on Rails, Laravel, or Django. The differences are more than just the syntax; the concept is radically different than a normal web application.

• https://techcrunch.com/2018/06/25/andreessen-horowitz-has-a-new-crypto-fund-and-its-first-female-general-partner-is-running-it-with-chris-dixon/
• https://bitcoin.org/bitcoin.pdf
• https://bitcoin.org/en/development