Prof. Pooja Khot.

– Crypto Currency with Ethernet

Ethereum

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• Ethereum is like a decentralized computing network. It allows

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developers to create and run applications on its blockchain using

smart contracts.
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• Blockchain technology gained public notice with the advent of

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Bitcoin in 2009. Bitcoin is a cryptocurrency that runs on

blockchain technology and is by far, the most popular and most
ranked cryptocurrency.
• Ethereum was initially released in 2015. Within two years of its
release, it was ranked the second-best blockchain network,
Bitcoin is the first. The Ethereum network acquired more global
interest when China stated that it is the best blockchain network
ever created.
• Ethereum is a Blockchain network that introduced a built-in
Turing-complete programming language that can be used for
creating various decentralized applications(also called Dapps).

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The Ethereum network is fueled by its own cryptocurrency called

‘ether’.
• The Ethereum network is currently famous for allowing the
implementation of smart contracts. Smart contracts can be
thought of as ‘cryptographic bank lockers’ which contain certain
values.
• Ethereum is often called Blockchain 2.0 since it proved the
potential of blockchain technology beyond the financial sector.
• The consensus mechanism used in Ethereum is Proof of
Stakes(PoS), which is more energy efficient when compared to
that used in the Bitcoin network, that is, Proof of Work(PoW). PoS
depends on the amount of stake a node holds.

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# History of Ethereum
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2013: Ethereum was first described in Vitalik Buterin’s white
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paper in 2013 with the goal of developing decentralized
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applications.

• 2014: In 2014, EVM was specified in a paper by Gavin Wood, and

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the formal development of the software also began.

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• 2015: In 2015, Ethereum created its genesis block marking the

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official launch of the platform.

• 2018: In 2018, Ethereum took second place in Bitcoin in terms of

market capitalization.

• 2021: In 2021, a major network upgrade named London included

Ethereum improvement proposal 1559 and introduced a
mechanism for reducing transaction fee volatility.

• 2022: In 2022, Ethereum has shifted from PoW( Proof-of-Work )

to PoS( Proof-of-State ) consensus mechanism, which is also
known as Ethereum Merge. It has reduced Ethereum’s energy
consumption by ~ 99.95%.

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# Features of Ethereum

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1. Smart contracts: Ethereum allows the creation and deployment

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of smart contracts. Smart contracts are created mainly using a

programming language called solidity. Solidity is an Object
Oriented Programming language that is comparatively easy to
learn.

2. Ethereum Virtual Machine (EVM): It is designed to operate as a

runtime environment for compiling and deploying Ethereum-
based smart contracts.

3. Ether: Ether is the cryptocurrency of the Ethereum network. It is

the only acceptable form of payment for transaction fees on the
Ethereum network.

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4. Decentralized applications (Daaps): Dapp has its backend code

running on a decentralized peer-to-peer network. It can have a
frontend and user interface written in any language to make calls
and query data from its backend. They operate on Ethereum and
perform the same function irrespective of the environment in
which they get executed.

5. Decentralized autonomous organizations (DAOs): It is a

decentralized organization that works in a democratic and
decentralized fashion. DAO relies on smart contracts for decision-
making or decentralized voting systems within the organization.

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# Type of Ethereum Accounts
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Ethereum has two types of accounts: An externally owned account

(EOA), and a Contract account. These are explained as following below:

• Externally owned account (EOA): Externally owned accounts are

controlled by private keys. Each EOA has a public-private key pair.

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The users can send messages by creating and signing

transactions.

• Contract Account: Contract accounts are controlled by contract

codes. These codes are stored with the account. Each contract
account has an ether balance associated with it. The contract code
of these accounts gets activated every time a transaction from an
EOA or a message from another contract is received by it. When
the contract code activates, it allows to read/write the message to
the local storage, send messages and create contracts.

# How Does Ethereum Work?

Ethereum implements an execution environment called Ethereum

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Virtual Machine (EVM).

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When a transaction triggers a smart contract all the nodes of the
network will execute every instruction.
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• All the nodes will run The EVM as part of the block verification,
where the nodes will go through the transactions listed in the
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block and runs the code as triggered by the transaction in the

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EVM.
All the nodes on the network must perform the same calculations
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for keeping their ledgers in sync.

• Every transaction must include:
o Gas limit.
o Transaction Fee that the sender is willing to pay for the
transaction.
• If the total amount of gas needed to process the transaction is
less than or equal to the gas limit then the transaction will be
processed and if the total amount of the gas needed is more than
the gas limit then the transaction will not be processed the fees
are still lost.

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• Thus it is safe to send transactions with the gas limit above the
estimate to increase the chances of getting it processed.

# Real-World Applications of Ethereum

• Voting: Voting systems are adopting Ethereum. The results of
polls are available publicly, ensuring a transparent fair system
thus eliminating voting malpractices.

• Agreements: With Ethereum smart contracts, agreements and

contracts can be maintained and executed without any alteration.
Ethereum can be used for creating smart contracts and for
digitally recording transactions based on them.

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Banking systems: Due to the decentralized nature of the
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Ethereum blockchain it becomes challenging for hackers to gain
unauthorized access to the network. It also makes payments on
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the Ethereum network secure, so banks are using Ethereum as a
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channel for making payments.

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• Shipping: Ethereum provides a tracking framework that helps

with the tracking of cargo and prevents goods from being
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misplaced.
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• Crowdfunding: Applying Ethereum smart contracts to blockchain-

based crowdfunding platforms helps to increase trust and
information symmetry. It creates many possibilities for startups by
raising funds to create their own digital cryptocurrency.

# Benefits of Ethereum
• Availability: As the Ethereum network is decentralized so there is
no downtime. Even if one node goes down other computing nodes
are available.

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• Privacy: Users don’t need to enter their personal credentials while

using the network for exchanges, thus allowing them to remain
anonymous.

• Security: Ethereum is designed to be unhackable, as the hackers

have to get control of the majority of the network nodes to exploit
the network.

• Less ambiguity: The smart contracts that are used as a basis for
trade and agreement on Ethereum ensure stronger contracts that
differ from the normal traditional contracts which require follow-
through and interpretation.

• Rapid deployment: On Ethereum decentralized networks,

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enterprises can easily deploy and manage private blockchain
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networks instead of coding blockchain implementation from
scratch.
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# Drawback of Ethereum
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• Complicated programming language: Learning solidity from

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programming smart contracts on Ethereum can be challenging

and one of the main concerns is the scarcity of beginner-friendly
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classes.
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• Volatile cryptocurrency: Ethereum investing can be risky as the

price of Ether is very volatile, resulting in significant gains as well
as a significant loss.

• Low transaction rate: Bitcoin has an average transaction rate of

7TPS and Ethereum has an average speed of 15 TPS which is
almost double that of bitcoin but it is still not enough.

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Introduction to Ethereum Virtual Machine (EVM)

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Ethereum Virtual Machine (EVM) is designed as the runtime
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environment for smart contracts in Ethereum. It is sandboxed and
isolated from the other parts of the system. This means that any
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operation on EVM should not affect your data or programs in any way,
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no matter how many times you call a particular function on it.

An EVM is the runtime environment that executes Ethereum

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smart contracts.
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• Ethereum contains its own Turing-complete scripting language,

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called Solidity, and with this comes a need to execute this code.

• A program called the Ethereum Virtual Machine (EVM) can do this

task.

• It runs on top of the Ethereum network, meaning that all nodes

reach a consensus about what code should be executed at every
given time.

# Purpose of EVM
The Ethereum Virtual Machine (EVM) is a Turing complete
programmable machine, which can execute scripts to produce arbitrary

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outcomes. It has been built with the purpose of being a “world

computer” and has immense power.

• It is the computer that stores data on blockchain, like bitcoin, but it

also executes code in smart contracts on the Ethereum network.

• The machine is made to be able to run any kind of Crypto-contract

that can be built on Ethereum’s blockchain. It does this by using a
programming language called Solidity, which is compiled into the
EVM for execution.

• The intention behind writing code on the Ethereum network is to

create smart contracts and programs that automatically execute
things when certain conditions are met. If a terms or condition is

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not met, the system can execute it in an “exit” function as well.

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For example, if an account has been hacked, the hacker cannot
steal money from the system, because they don’t have the budget
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or authority to do so.
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# How Does EVM Works?

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Ethereum Virtual Machine (EVM) is a program which executes scripts

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used to implement certain operations usually in Ethereum blockchain.

The Ethereum Virtual Machine makes the process of creating new
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tokens on Ethereum Blockchain easy. Here, script means a set of

instructions or an algorithm which tells the computer what it needs to
do in order for something to work properly. The EVM requires that one
has access over any network node so as to be able to execute the
desired commands and create new tokens on the blockchain without
any difficulties.

• In Ethereum, there is something called a smart contract. These

contracts have some computer code which facilitates the
exchange of money and information.

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• These contracts are predefined by the creator of the smart

contract, in order to ensure that a certain outcome will happen
based on either what happens or doesn’t happen.

• Ethereum Virtual Machine provides Turing complete

environment for execution of scripts and smart contracts. This
means that anything that can be implemented with a computer
can be run on EVM.

In the Ethereum ecosystem, EVM plays a vital role by providing a

platform for decentralized applications (DApps) to be built on top of it.
Ethereum Virtual Machine ensures that all transactions and smart
contracts made on the Ethereum blockchain are executed in correct and

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expected manner as desired by the smart contract code.
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# Ethereum Virtual Machine (EVM) has two parts:
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• EVM (the part that runs solidity source code): The EVM is
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written in C++ and uses LLVM as its compiler. It is a full-featured

virtual machine with all the features that you would want in a
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general purpose. Smart Contract Virtual Machine, such as support

for multiple programming languages, security features, runtime
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environments and more. It also allows you to write custom EVM

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bytecode.

• Uncles: These are small pieces of smart contracts or data stored

on the blockchain. This is a useful feature because it allows for
you to store metadata about your program. EVM Assembly: This is
the bytecode of EVM, which you can use as your programming
language.

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# Benefits of EVM
• Execute untrusted code without risking data: One can execute
untrusted code without putting the data at risk. EVM guarantees
that its computations will not interfere with anything else
happening in the system or with the personal files.

• Can run complex smart contracts: One can run complex smart
contracts in EVM without worrying about how they interact with
each other. One can write them once and then run them on
multiple platforms, which allows for the creation of a single
contract that runs on multiple computing environments.

Deterministic processing: Smart contracts written on EVM have

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access to all of Ethereum’s states at any given time, allowing for

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processing to happen in a deterministic way and giving more
guarantees about their correctness. For example, one cannot make
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an infinite loop in EVM by calling the same function twice. It
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would stop executing and return a finite value.

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• Distributed consensus: One of the potential applications of

Ethereum is to allow for distributed consensus where everyone is
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running the same program but from their own computers.

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• Robust against failure: This is a complex process because the

network needs to be able to come to a consensus at any given
time. This way, the system becomes more robust against failures
of individual nodes and you can update several nodes
simultaneously without worrying that they might end up
disagreeing with each other because of how code was written.

# Downsides of EVM
• High cost of storing data: First is gas, which is what you need to
use in order to pay the fee to run a smart contract, and the other is
the high cost of storing data on the blockchain, which could take
up more than 3TB

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• High gas cost: In Ethereum, all transactions require a fee to

execute. These fees are called “gas”, and are paid in ETH tokens.
Gas is priced at the moment of execution, and depends on the
complexity of executing a transaction. The more difficult the
computation for a transaction, the higher its gas cost will be.

• High gas price during network congestion: During times when

there is high network congestion due to many transactions being
pushed onto the blockchain, gas prices rise because there are
fewer transactions that can go through (the same amount of
computational power has to service more transactions).

• Technical expertise required: Writing smart contracts and using

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EVM requires technical expertise. It’s a Turing-complete system,
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which allows programmers to write scripts in any programming
language they wish. This can be excellent or disastrous,
depending on the intention behind the code being written.
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Ethereum Wallet
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• An Ethereum wallet is a
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piece of software or
hardware that allows
users to interact with the
Ethereum blockchain.
• Wallets allow users to
manage their accounts on
the Ethereum network.
• An Ethereum account is a
type of account that can
send transactions and keep track of its balance, with as many
Ethereum addresses as it wants to send and receive funds, create

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smart contracts, interact with decentralized applications and

more.
• An Ethereum address is a public string of letters and numbers
starting with “0x.” The balance of every Ethereum address can be
seen on the blockchain, although who controls which address is
not known because an address on the network is represented
through a string of numbers and letters.
• Wallets are software or hardware that allow users to control as
many addresses as necessary.
• Ethereum wallets are controlled through a private key, or a
“password,” that allows users to move the funds within the
wallet. These private keys are only supposed to be known to the

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wallet’s creator, as anyone who knows them can access their
funds. Kh
There are several types of Ethereum wallets to choose from including
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some that are held on your desktop or mobile device and some that are
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held offline through a piece of paper, titanium, or hardware.

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# Ethereum accounts have four characteristics:

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a nonce, balance, codeHash and storageRoot -

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• Nonce: For externally owned accounts, this number represents the

number of transactions sent from the account’s address. For a
contract account, the nonce is the number of contracts created by
the account.

• Balance: This ETH address owns a certain number of Wei (an ETH
unit of denomination), with 1e+18 Wei (exponential notation) per
ETH. 1e+18 Wei means 1 ETH is equivalent to 1x1018 Wei.

• codeHash: This hash represents the code of an account on the

Ethereum Virtual Machine (EVM). Ethereum’s own virtual
computer, known as the EVM, is the part of the protocol that
actually performs transaction processing. The codeHash field for

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EOAs is the hash of the empty text. For contract accounts, the
code is hashed and stored as the codeHash.

• storageRoot: This hash is a Merkle Patricia tree’s root node (a tree

of hashes). This tree, which is empty by default, encodes the hash
of the storage contents of the ETH account.

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# Using your Ethereum wallet

To use your Ethereum wallet, you first need to have ETH to cover the
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network’s transaction fees. You can purchase ETH directly (e.g. with
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USD or your local currency) from a centralized crypto exchange or a

self-custody wallet that supports fiat-to-crypto purchases, like Brave
Wallet. Otherwise, if your Ethereum wallet doesn’t support purchasing
crypto with fiat currency, you’ll need to purchase ETH in another wallet
that does, then send it to your new Ethereum wallet.

If that’s the case, follow these general steps to send yourself ETH to the
appropriate wallet:

1. Find the send feature in your wallet and enter the recipient’s
wallet address (in this case your own).

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2. Select the type and amount of crypto you want to send (in this
case ETH) and confirm the transaction. If you’re new to sending
crypto, you might want to try a small test transaction first.

# Best Ethereum Wallets

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• Best for Security: Guarda Wallet

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• Best for Beginners: Exodus

• Best for Convenience: MetaMask

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Best for a Wide Variety of Assets: Trust Wallet

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• Best for Smart Contracts: Myetherwallet (MEW)

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Solidity
Solidity is a brand-new programming language created
by Ethereum which is the second-largest market of cryptocurrency by

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capitalization, released in the year 2015 and led by Christian

Reitwiessner. Some key features of solidity are listed below:
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• Solidity is a high-level programming language designed for

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implementing smart contracts.

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• It is a statically typed object-oriented(contract-oriented) language.

• Solidity is highly influenced by Python, c++, and JavaScript which

run on the Ethereum Virtual Machine (EVM).

• Solidity supports complex user-defined programming, libraries,

and inheritance.

• Solidity is the primary language for blockchains running

platforms.

• Solidity can be used to create contracts like voting, blind auctions,

crowdfunding, multi-signature wallets, etc.

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Smart Contracts in Blockchain

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• A Smart Contract (or cryptocontract) is a computer program that

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directly and automatically controls the transfer of digital assets

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between the parties under certain conditions.

• A smart contract works in the same way as a traditional contract
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while also automatically enforcing the contract.

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• Smart contracts are programs that execute exactly as they are set
up(coded, programmed) by their creators. Just like a traditional
contract is enforceable by law, smart contracts are enforceable by
code.

• The bitcoin network was the first to use some sort of smart
contract by using them to transfer value from one person to
another.

• The smart contract involved employs basic conditions like

checking if the amount of value to transfer is actually available in
the sender account.

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• Later, the Ethereum platform emerged which was considered

more powerful, precisely because the developers/programmers
could make custom contracts in a Turing-complete language.

• It is to be noted that the contracts written in the case of the

bitcoin network were written in a Turing-incomplete language,
restricting the potential of smart contracts implementation in the
bitcoin network.

• There are some common smart contract platforms like Ethereum,

Solana, Polkadot, Hyperledger fabric, etc.

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# History:
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In 1994, Nick Szabo, a legal scholar, and a cryptographer recognized
the application of a decentralized ledger for smart contracts.
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He theorized that these contracts could be written in code which can be

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stored and replicated on the system and supervised by the network of

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computers that constitute the blockchain.

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These smart contracts could also help in transferring digital assets

between the parties under certain conditions.
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# Features of Smart Contracts

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1. Distributed: Everyone on the network is guaranteed to have a

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copy of all the conditions of the smart contract and they cannot be
changed by one of the parties. A smart contract is replicated and
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distributed by all the nodes connected to the network.

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2. Deterministic: Smart contracts can only perform functions for

which they are designed only when the required conditions are
met. The final outcome will not vary, no matter who executes the
smart contract.

3. Immutable: Once deployed smart contract cannot be changed, it

can only be removed as long as the functionality is implemented
previously.

4. Autonomy: There is no third party involved. The contract is made

by you and shared between the parties. No intermediaries are
involved which minimizes bullying and grants full authority to the
dealing parties.

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5. Customizable: Smart contracts have the ability for modification or

we can say customization before being launched to do what the
user wants it to do.

6. Transparent: Smart contracts are always stored on a public

distributed ledger called blockchain due to which the code is
visible to everyone, whether or not they are participants in the
smart contract.

# Capabilities of Smart Contracts

1. Accuracy: Smart contracts are accurate to the limit a programmer
has accurately coded them for execution.

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2. Automation: Smart contracts can automate the tasks/ processes
that are done manually. Kh
3. Speed: Smart contracts use software code to automate tasks,
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thereby reducing the time it takes to maneuver through all the
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human interaction-related processes. Because everything is

coded, the time taken to do all the work is the time taken for the
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code in the smart contract to execute.

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4. Backup: Every node in the blockchain maintains the shared

ledger, providing probably the best backup facility.
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5. Security: Cryptography can make sure that the assets are safe
and sound. Even if someone breaks the encryption, the hacker will
have to modify all the blocks that come after the block which has
been modified. Please note that this is a highly difficult and
computation-intensive task and is practically impossible for a
small or medium-sized organization to do.

6. Savings: Smart contracts save money as they eliminate the

presence of intermediaries in the process. Also, the money spent
on the paperwork is minimal to zero.

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# Types of Smart Contracts

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1. Smart Legal Contract:
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• There are legal guarantees for smart contracts. They follow the
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format seen in contracts: “If this occurs, then this will occur.”
• Legal smart contracts provide more openness between
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contracting entities than traditional documents because they are

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stored on blockchain and cannot be altered.

• Contracts are executed by the parties using digital signatures. If
certain conditions are met, such as paying a debt when a
predetermined date is reached, smart legal contracts may operate
on their own. If stakeholders don’t comply, there may be serious
legal ramifications.

2. Decentralized Autonomous Organizations (DAOs):

• DAOs are democratic organisations with voting powers granted

by a smart contract.
• A decentralised autonomous organisation, or DAO, is a
blockchain-based entity with a shared goal under collective

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governance. There is no such thing as an executive or president.

Instead, the organization’s operations and the distribution of
assets are governed by blockchain-based principles that are
incorporated into the contract’s code.
• One example of this kind of smart contract is VitaDAO, which
uses technology to power a community dedicated to scientific
inquiry.

3. Application Logic Contracts:

• Application-based code that usually keeps up with multiple other

blockchain contracts makes up application logic contracts, or
ALCs.

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• It permits device-to-device interactions such as blockchain
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integration and the Internet of Things. These are signed between
computers and other contracts rather than between people or
organisations like other kinds of smart contracts.
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# How Do Smart Contracts Work?

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A smart contract is just a digital contract with the security coding of the
blockchain.
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• It has details and permissions written in code that require an exact

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sequence of events to take place to trigger the agreement of the

terms mentioned in the smart contract.
• It can also include the time constraints that can introduce

deadlines in the contract.

• Every smart contract has its address in the blockchain. The

contract can be interacted with by using its address presuming

the contract has been broadcasted on the network.
The idea behind smart contracts is pretty simple. They are executed
on a basis of simple logic, IF-THEN for example:
• IF you send object A, THEN the sum (of money, in cryptocurrency)

will be transferred to you.

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• IF you transfer a certain amount of digital assets (cryptocurrency,

for example, ether, bitcoin), THEN the A object will be transferred
to you.
• IF I finish the work, THEN the digital assets mentioned in the
contract will be transferred to me.

# Smart Contract Working

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• Identify Agreement: Multiple parties identify the cooperative

opportunity and desired outcomes and agreements could include
business processes, asset swaps, etc.

• Set conditions: Smart contracts could be initiated by parties

themselves or when certain conditions are met like financial
market indices, events like GPS locations, etc.

• Code business logic: A computer program is written that will be

executed automatically when the conditional parameters are met.

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• Encryption and blockchain technology: Encryption provides

secure authentication and transfer of messages between parties
relating to smart contracts.

• Execution and processing: In blockchain iteration, whenever

consensus is reached between the parties regarding
authentication and verification then the code is executed and the
outcomes are memorialized for compliance and verification.

• Network updates: After smart contracts are executed, all the

nodes on the network update their ledger to reflect the new state.
Once the record is posted and verified on the blockchain network,
it cannot be modified, it is in append mode only.

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# Applications of Smart Contracts Kh
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1. Real Estate:

2. Vehicle ownership

3. Music Industry

4. Government elections

5. Management

6. Healthcare

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# Advantages of Smart Contracts

1. Recordkeeping: All contract transactions are stored in
chronological order in the blockchain and can be accessed
along with the complete audit trail. However, the parties
involved can be secured cryptographically for full privacy.

2. Reduce fraud: Fraudulent activity detection and reduction.

Smart contracts are stored in the blockchain. Forcefully
modifying the blockchain is very difficult as it’s computation-
intensive. Also, a violation of the smart contract can be
detected by the nodes in the network and such a violation

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attempt is marked invalid and not stored in the blockchain.
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3. Fault-tolerance: Since no single person or entity is in control
of the digital assets, one-party domination and situation of
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one part backing out do not happen as the platform is
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decentralized and so even if one node detaches itself from

the network, the contract remains intact.
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4. Enhanced trust: Business agreements are automatically

executed and enforced. Plus, these agreements are
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immutable and therefore unbreakable and undeniable.

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5. Cost-efficiency: The application of smart contracts eliminates

the need for intermediaries(brokers, lawyers, notaries,
witnesses, etc.) leading to reduced costs. Also eliminates
paperwork leading to paper saving and money-saving.

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# Challenges of Smart Contracts

1. No regulations: A lack
of international
regulations focusing on
blockchain
technology(and related
technology like smart
contracts, mining, and
use cases like
cryptocurrency) makes

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these technologies
difficult to oversee. Kh
2. Difficult to implement: Smart contracts are also complicated
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to implement because it’s still a relatively new concept and
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research is still going on to understand the smart contract

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and its implications fully.

3. Immutable: They are practically immutable. Whenever there

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is a change that has to be incorporated into the contract, a

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new contract has to be made and implemented in the

blockchain.

4. Alignment: Smart contracts can speed the execution of the

process that span multiple parties irrespective of the fact
whether the smart contracts are in alignment with all the
parties’ intention and understanding.

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Turing completeness
Turing-completeness is a word defined by Alan Turing which it
describes the idea that some computing machines are capable of
performing any task a computer can perform.

• The concept of Turing-completeness is one at the heart of software

and application development, where it allows code to be written
without having to check beforehand if it will work or not.

• In other words, one can write your program without worrying about
what else is allowed for it to do.

• This is essential in determining usability as well as many other

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aspects of the software. It is also important to know what “Turing-
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complete” means and how it relates to Ethereum.

• In Turing’s paper, the concept of Turing-complete machines is used

ja

to disprove the possibility of true artificial intelligence.

oo

• For instance, whether a machine can eventually imitate the

.P

behaviors of a human. In practical terms, this means that “Turing-

complete” allows programmers to write code that can be used by
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any computer to achieve any result.

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• It is necessary for introducing new techniques and ideas into

software programming such as functional programming or even for
understanding ideas about universal computation with regard to
general computing.

# Impact of Turing Completeness On Cryptocurrency

One of the main obstacles that cryptocurrency runs into is reliance on a
third party, typically an entity such as a bank.

• These companies are responsible for ensuring that a

cryptocurrency can be used in everyday transactions because it

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 Prof. Pooja Khot. – Crypto Currency with Ethernet

must be compatible with traditional banking services. Turing

completeness is a characteristic of a programming language.

• A language is Turing complete if it can be used to simulate a

Turing machine, which means that an appropriately designed
program can solve any problem that a Universal Turing Machine
(UTM) can solve.

• In order for this to be feasible, programs must be free from

restrictions, such as halting and infinite loops.

• Theoretically, Turing’s completeness enables the development of

highly advanced programs in one language and allows other
projects or companies to create highly advanced applications

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using the same tools.
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# Does a System Have To Be Turing Complete To Be Useful
in Blockchain?
ja
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• A system has to be Turing complete in order to be useful in

blockchain, but it can have all the other desirable properties of a
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blockchain, such as decentralization and trustless transactions.

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• A system is Turing complete if it can simulate an arbitrary

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computer program. Turing complete systems have to be able to

run any possible computation, which includes the most complex
types of computation such as those found in blockchain. This type
of system also often has better performance than other systems
because it can use a set of rules which are more efficient when
solving problems with many steps.

• In addition to being Turing complete, a system must also be

decentralized and allow trustless transactions according to
consensus in order for it to be useful in the blockchain. These
properties are necessary for the security and consistency that a
blockchain needs in order for its data records or “blocks” to have
value and meaning.

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 Prof. Pooja Khot. – Crypto Currency with Ethernet

# Attacks on Smart Contract

Attacks on smart contracts exploit vulnerabilities in their code or the
blockchain environment, potentially leading to loss of funds,
unauthorized access, or system malfunctions. Here are some common
types of attacks:

1. Reentrancy Attacks: Exploit vulnerabilities where a contract calls

an external contract, which then calls back into the original
contract before the initial execution is complete. This can lead to
unexpected behaviors, such as draining funds. Example: The DAO
hack.

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2. Integer Overflow/Underflow: Occur when arithmetic operations
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exceed the storage limits of the data types used. For example,
adding two large numbers might result in an unexpected value,
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potentially allowing attackers to manipulate the contract’s logic.
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3. Denial of Service (DoS): Attacks that prevent the contract from

functioning properly by consuming excessive resources or
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exploiting bugs to halt execution. Example: Gas limit attacks that

force transactions to fail.
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4. Replay Attacks: Exploit transaction signatures that can be

replayed across different chains or environments, leading to
unintended actions. This often affects contracts if the same
transaction can be executed multiple times in different contexts.

5. Front-Running: Takes advantage of the transparency of pending

transactions to execute a transaction with better timing or pricing
before the original transaction is confirmed. This can manipulate
market conditions or exploit price discrepancies.

6. Phishing: Involves tricking users into revealing private keys or

other sensitive information through fake interfaces or social

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 Prof. Pooja Khot. – Crypto Currency with Ethernet

engineering. This is often targeted at individuals rather than the

contract itself.

7. Uninitialized Storage Pointers: Exploit contracts that use

uninitialized storage variables, which might default to unintended
values, leading to security issues or exploitation.

8. Oracle Manipulation: Exploits vulnerabilities in external data

sources (oracles) used by smart contracts to obtain off-chain data.
Attackers may manipulate or falsify data inputs, affecting contract
outcomes.

Ethereum Construction

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Ethereum is a decentralized, blockchain-based platform that enables
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the creation and execution of smart contracts and decentralized
applications (dApps). Its construction involves several key components:
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1. Blockchain Structure:
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o Ethereum's blockchain is a chain of blocks, each containing a list

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of transactions. Each block references the previous one, forming a

continuous and immutable ledger.
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Transactions on Ethereum can transfer Ether (ETH) or execute

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smart contracts. They are validated and included in blocks by

miners or validators.

2. Smart Contracts:

o Smart contracts are self-executing contracts with code that runs

when predefined conditions are met. They automate and enforce
agreements without intermediaries.

o Smart contracts are primarily written in high-level programming

languages like Solidity or Vyper. These contracts are deployed to
the Ethereum Virtual Machine (EVM).

3. Ethereum Virtual Machine (EVM):

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 Prof. Pooja Khot. – Crypto Currency with Ethernet

o The EVM is a decentralized computing environment that executes

smart contracts. It ensures that contracts run consistently across
all nodes in the Ethereum network.

o The EVM provides a sandboxed environment, where smart

contracts can execute code and interact with each other and the
blockchain state.

4. Consensus Mechanism:

o Initially, Ethereum used PoW, where miners solve complex

mathematical problems to validate transactions and create new
blocks.

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o Ethereum is transitioning to PoS with Ethereum 2.0, where
validators are chosen based on the amount of ETH they stake.
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This transition aims to enhance scalability and energy efficiency.
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5. Ether (ETH):
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o Ether is the native cryptocurrency of the Ethereum network. It is

used to pay for transaction fees (gas) and incentivize network
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participants.
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o Gas is a unit that measures computational work. Users pay gas

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fees to compensate for the computational resources required to

execute transactions and smart contracts.

6. Decentralized Applications (dApps):

o dApps are built on Ethereum's platform using smart contracts.

They run on the decentralized network, providing various services
from financial transactions to games and decentralized finance
(DeFi) applications.

7. Layer 2 Solutions:

o To address scalability issues, Ethereum incorporates Layer 2

solutions like rollups (Optimistic and zk-Rollups), which process

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 Prof. Pooja Khot. – Crypto Currency with Ethernet

transactions off-chain and settle them on the main Ethereum

chain.

8. Governance and Upgrades:

o Proposed changes or upgrades to the Ethereum network are

submitted as EIPs. They are discussed and, if accepted,
implemented through network upgrades (hard forks).

Decentralized Autonomous Organization

DAO stands for Decentralized Autonomous Organization. The concept
of a DAO was first proposed by Bit Shares, Steemit, and EOS (Block.

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one) founder Dan Larimer in the year 2015, and was further refined in
the year 2016 by Ethereum’s Vitalik Buterin. A decentralized
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autonomous organization is decentralized, autonomous, and an
organization- as the name already suggests. It is a whole organization
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that is automated. It stores rules and processes in code. DAOs are often
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stateless and distributed over millions of computers. No single

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government could decide to take it down.

# Components of DAO:
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1. No central legal entity: In DAO, there is no central legal entity,

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this means that no single entity is responsible for regulating the

project.

2. Self-enforcing code: Smart contracts are created and extensively

tested to make sure important details are not overlooked.

3. Token acts as an incentive for validators: Tokens are used in

DAO for validators to motivate them and to ensure active, fair, and
quick participation.

# Need of DAO
Beginning an association with somebody that includes financing and
cash requires a great deal of confidence in the individuals you’re

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 Prof. Pooja Khot. – Crypto Currency with Ethernet

working with. Yet, it’s difficult to believe somebody you’ve just at any
point associated with on the web. With DAOs you do not need to trust
the other individual within the gathering, simply the DAO’s code, which
is 100% straightforward and evident by anybody. This opens up
countless new freedoms for worldwide joint effort and coordination.

Traditional Organization Vs DAO

S
No. DAO Traditional Organizations

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Casting a ballot is needed by Depending on the structure,

1.
individuals for any Kh
changes can be requested from
progressions to be the sole party, or casting a ballot
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implemented. might be advertised.
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Votes were counted, and If casting a ballot is permitted,

results were carried out votes are counted inside, and the
2.
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consequently without a result of casting a ballot should

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believed intermediary. be taken care of physically.

3. Completely democratized. Usually progressive.

Requires human taking care of,

Administrations offered are
or halfway controlled
4. taken care of consequently in
mechanization, inclined to
a decentralized way.
control.

# Steps For Launching a DAO

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 Prof. Pooja Khot. – Crypto Currency with Ethernet

There are three major steps for launching a DAO:

1. Smart Contract Creation: In this step, a developer or a group of

developers create a smart contract behind the DAO. It is very
important for the developer to extensively test the smart
contracts before launching to make sure that they do not overlook
important details. After launch, only the rules set can be changed
through the governance system.

2. Funding: After smart contracts are created and launched, the

DAO needs to determine a way to receive funding. Sometimes,
the tokens are sold to raise funds. These tokens give holders
voting rights.

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3. Deployment: Once everything is set up and on track, the DAO
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needs to be deployed on the blockchain. From this point onwards,
stakeholders decide the future of the organization. The developers
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who created the smart contracts, no longer influence the project.
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# DAO Examples
Here are some examples illustrating how DAO can be utilized:

1. DASH: The well-known computerized money Dash is an

illustration of a decentralized independent association in light of
the manner in which it is represented and the manner in which its
planning framework is organized.

2. A cause: One can acknowledge enrollment and gifts from

anybody on the planet and the gathering can choose how they to
spend gifts.

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 Prof. Pooja Khot. – Crypto Currency with Ethernet

3. A consultant organization: One can make an organization of

workers for hire who pool their assets for office spaces and
programming memberships.

4. Adventures and awards: It is possible to make an endeavor store

that pools speculation capital and decisions on dares to back.
Reimbursed cash could later be rearranged among DAO
individuals.

# Advantages of DAO
1. Decentralization

2. Community Driven

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3. Principle-agent dilemma.

# Disadvantages of DAO
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1. Security
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2. Slow Decision Making

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3. The Bikeshedding Effect

4. No legitimate structure for circulating DAOs

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GHOST Protocol
The GHOST (Greedy Heaviest Observed Subtree) Protocol is a
consensus mechanism designed to improve the efficiency and security
of blockchain networks like Ethereum. It works by focusing on the
“heaviest” or most frequently seen version of the blockchain, even if
some blocks become “orphaned” or temporarily abandoned. This helps
ensure that the network processes transactions more quickly and
accurately, reducing delays and enhancing overall performance.

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 Prof. Pooja Khot. – Crypto Currency with Ethernet

GHOST Protocol is a method used to improve how a blockchain

network reaches consensus in the blockchain. It was proposed to
address some limitations of earlier consensus mechanisms, especially
those related to the handling of orphaned blocks and network latency.

1. Block Selection: In a blockchain, multiple blocks can be created

simultaneously, leading to forks where different chains compete
for inclusion in the blockchain. GHOST helps the network decide
which blocks to consider by focusing on the “heaviest” chain, the
one with the most accumulated work or the most endorsements
from other blocks.

2. Orphan Blocks: Sometimes, blocks that are not included in the

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main blockchain are referred to as orphaned or stale blocks.
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GHOST deals with these by ensuring they are still considered in
the consensus process. Instead of discarding these orphaned
blocks, GHOST incorporates them into the decision-making
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process to determine the most valid chain.

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3. Greedy Heaviest Observed Subtree: The “greedy” aspect of the

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protocol refers to the preference for the subtree (a portion of the

blockchain) that has the most accumulated work or the heaviest
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chain. This ensures that even if a chain temporarily diverges, the

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network will eventually converge on the most robust and well-

supported chain.

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 Prof. Pooja Khot. – Crypto Currency with Ethernet

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# Need For GHOST Protocol

1. Handling Orphaned Blocks: GHOST includes orphaned blocks in
the consensus process by considering them when determining the
“heaviest” chain. This reduces the waste of computational effort
and helps ensure that more transactions are processed and
validated.

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 Prof. Pooja Khot. – Crypto Currency with Ethernet

2. Reducing Forks and Latency: By focusing on the heaviest subtree

(the branch with the most accumulated work), GHOST helps the
network converge more quickly on the most valid chain. This
reduces the impact of forks and speeds up transaction processing.

3. Enhancing Network Security: GHOST improves security by

incorporating orphaned blocks into the consensus process, making
it more difficult for attackers to exploit temporary forks or gaps in
the blockchain. This makes the network more resilient to certain
types of attacks.

4. Optimizing Resource Utilization: By taking orphaned blocks into

account, GHOST ensures that the computational work done by

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miners is not wasted. This helps optimize the use of network
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resources and makes the system more efficient.

5. Improving Transaction Throughput: GHOST helps streamline the

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consensus process by rapidly converging on the most supported
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chain, improving transaction throughput, and reducing the time it

takes to confirm transactions
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# How Does the GHOST Protocol Work?

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1. Transaction Submission: Users submit transactions, which enter a

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pool of pending transactions (mempool).

2. Block Creation and Forks: Miners create new blocks, which can
lead to forks if multiple blocks are produced around the same
time. Some blocks may become orphaned.
3. Inclusion of Orphaned Blocks: GHOST includes orphaned blocks
(those not on the main chain) in its consideration for consensus.
This ensures transactions in these blocks are still considered for
final inclusion.
4. Heaviest Chain Calculation: GHOST prioritizes the chain with the
most accumulated work, including both the main chain and
orphaned blocks, to determine which transactions are valid.

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 Prof. Pooja Khot. – Crypto Currency with Ethernet

5. Consensus and Finalization: Transactions from the blocks in the

heaviest subtree (the part of the blockchain with the most total
work) are finalized. Orphaned blocks and their transactions are
included if they are part of this subtree.
6. Efficient Processing: By incorporating orphaned blocks, GHOST
reduces wasted work and speeds up transaction processing,
leading to faster confirmation times and improved efficiency.

# Advantages of GHOST Protocol

1. Reduced Wasted Work

2. Improved Transaction Throughput

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3. Faster Fork Resolution

4. Enhanced Security
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5. Efficient Use of Network Resources
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6. Increased Network Stability

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# Disadvantages of GHOST Protocol

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1. Increased Complexity
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2. Potential for Increased Network Overhead

3. Difficulty in Handling Large Forks

4. Transaction Reorganization Risks

5. Potential for Delayed Finality:

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 Prof. Pooja Khot. – Crypto Currency with Ethernet

Types of Blockchain

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There are 4 types of blockchain:
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• Public Blockchain.
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• Private Blockchain.
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• Hybrid Blockchain.
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• Consortium Blockchain.
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 Prof. Pooja Khot. – Crypto Currency with Ethernet

1. Public Blockchain

These blockchains are completely open to following the idea of

decentralization. They don’t have any restrictions, anyone having a
computer and internet can participate in the network.

• As the name is public this blockchain is open to the public, which

means it is not owned by anyone.
• Anyone having internet and a computer with good hardware can
participate in this public blockchain.
• All the computer in the network hold the copy of other nodes or
block present in the network
• In this public blockchain, we can also perform verification of

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transactions or records
Advantages:
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Trustable: There are algorithms to detect no fraud. Participants
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•

need not worry about the other nodes in the network

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• Secure: This blockchain is large in size as it is open to the public.

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In a large size, there is greater distribution of records

• Anonymous Nature: It is a secure platform to make your
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transaction properly at the same time, you are not required to

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reveal your name and identity in order to participate.

• Decentralized: There is no single platform that maintains the
network, instead every user has a copy of the ledger.
Disadvantages:

• Processing: The rate of the transaction process is very slow, due

to its large size. Verification of each node is a very time-
consuming process.
• Energy Consumption: Proof of work is high energy-consuming. It
requires good computer hardware to participate in the network
• Acceptance: No central authority is there so governments are
facing the issue to implement the technology faster.

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 Prof. Pooja Khot. – Crypto Currency with Ethernet

Use Cases: Public Blockchain is secured with proof of work or proof of

stake they can be used to displace traditional financial systems. The
more advanced side of this blockchain is the smart contract that
enabled this blockchain to support decentralization. Examples of public
blockchain are Bitcoin, Ethereum.

2. Private Blockchain

These blockchains are not as decentralized as the public blockchain

only selected nodes can participate in the process, making it more
secure than the others.

• These are not as open as a public blockchain.

They are open to some authorized users only.

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•

• These blockchains are operated in a closed network.

•
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In this few people are allowed to participate in a network within a
company/organization.
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Advantages:
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• Speed: The rate of the transaction is high, due to its small size.
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Verification of each node is less time-consuming.

• Scalability: We can modify the scalability. The size of the network
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can be decided manually.

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• Privacy: It has increased the level of privacy for confidentiality

reasons as the businesses required.
• Balanced: It is more balanced as only some user has the access to
the transaction which improves the performance of the network.
Disadvantages:

• Security- The number of nodes in this type is limited so chances of

manipulation are there. These blockchains are more vulnerable.
• Centralized- Trust building is one of the main disadvantages due
to its central nature. Organizations can use this for malpractices.
• Count- Since there are few nodes if nodes go offline the entire
system of blockchain can be endangered.

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 Prof. Pooja Khot. – Crypto Currency with Ethernet

Use Cases: With proper security and maintenance, this blockchain is a

great asset to secure information without exposing it to the public eye.
Therefore, companies use them for internal auditing, voting, and asset
management. An example of private blockchains is Hyperledger, Corda.

3. Hybrid Blockchain

It is the mixed content of the private and public blockchain, where some
part is controlled by some organization and other makes are made
visible as a public blockchain.

• It is a combination of both public and private blockchain.

• Permission-based and permissionless systems are used.
User access information via smart contracts

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•

• Even a primary entity owns a hybrid blockchain it cannot alter the

transaction
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Advantages:
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Ecosystem: Most advantageous thing about this blockchain is its

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hybrid nature. It cannot be hacked as 51% of users don’t have

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access to the network

Cost: Transactions are cheap as only a few nodes verify the
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transaction. All the nodes don’t carry the verification hence less
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computational cost.
• Architecture: It is highly customizable and still maintains integrity,
security, and transparency.
• Operations: It can choose the participants in the blockchain and
decide which transaction can be made public.
Disadvantages:
• Efficiency: Not everyone is in the position to implement a hybrid

Blockchain. The organization also faces some difficulty in terms of

efficiency in maintenance.
• Transparency: There is a possibility that someone can hide
information from the user. If someone wants to get access

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 Prof. Pooja Khot. – Crypto Currency with Ethernet

through a hybrid blockchain it depends on the organization

whether they will give or not.
• Ecosystem: Due to its closed ecosystem this blockchain lacks the
incentives for network participation.
Use Case: It provides a greater solution to the health care industry,
government, real estate, and financial companies. It provides a remedy
where data is to be accessed publicly but needs to be shielded
privately. Examples of Hybrid Blockchain are Ripple network and XRP
token.

4. Consortium Blockchain

It is a creative approach that solves the needs of the organization. This

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blockchain validates the transaction and also initiates or receives
transactions. Kh
• Also known as Federated Blockchain.
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• This is an innovative method to solve the organization’s needs.
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• Some part is public and some part is private.

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• In this type, more than one organization manages the blockchain.

Advantages:
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• Speed: A limited number of users make verification fast. The high

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speed makes this more usable for organizations.

• Authority: Multiple organizations can take part and make it
decentralized at every level. Decentralized authority, makes it
more secure.
• Privacy: The information of the checked blocks is unknown to the
public view. but any member belonging to the blockchain can
access it.
• Flexible: There is much divergence in the flexibility of the
blockchain. Since it is not a very large decision can be taken faster.
Disadvantages:

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 Prof. Pooja Khot. – Crypto Currency with Ethernet

• Approval: All the members approve the protocol making it less

flexible. Since one or more organizations are involved there can be
differences in the vision of interest.
• Transparency: It can be hacked if the organization becomes
corrupt. Organizations may hide information from the users.
• Vulnerability: If few nodes are getting compromised there is a
greater chance of vulnerability in this blockchain

Namecoin (NMC)

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Kh
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Namecoin is "a peer-to-peer naming system based on Bitcoin" created

in 2011 from a fork of the Bitcoin blockchain. It is designed to act as a
blockchain and token for a decentralized domain name system (DNS),
where token holders can claim a specific name for their websites.

The makers of Namecoin describe it as "an experimental open-source

technology which improves decentralization, security, censorship
resistance, privacy, and speed of certain components of the internet
infrastructure such as DNS and identities.

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 Prof. Pooja Khot. – Crypto Currency with Ethernet

# History of Namecoin (NMC)

• The idea for developing a tokenized domain name system was
first introduced in 2010 in an Internet Relay Chat (IRC) room,
#bitcoin-dev, where users discussed the merits of a bitcoin-like
DNS system that came to be known as bitdns. Namecoin was
then introduced in April 2011 by Vincent Durham (an anonymous
name) on the same Bitcoin Forum used to announce Bitcoin.
• DNS translates human-readable domain names (for example,
www.investopedia.com) to machine-readable IP addresses (for
example, 000.0.0.00). DNS is the mechanism by which domain
identities are linked with numerical IP addresses worldwide. The

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decentralization of this system was intended to end internet
censorship and enhance Internet-related security and privacy.
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• Namecoin has been continuously updated since its launch, with
summaries posted on the Namecoin website by Jeremy Rand, one
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of the most publicly present developers, and Robert Nganga, a

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later addition to the team. Other team members include Daniel

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Kraft (Chief Scientist), Brandon Roberts (Engineer), Andrew

Colosimo (Developer), and Joseph Bisch (Engineer). Many others
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have contributed to the project.

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• The project has received funding from the NLNet Foundation

through the Net Generation Internet (NGI) Assure Fund since
2017. The Namecoin project has received five grants from the
Foundation since 2017, the last of which started in 2023. This
NGI Assure Fund receives financial support from the European
Commission.

Namecoin vs. Bitcoin

• Namecoin uses the concept of data name/value pairs attached to a
coin. A name/value pair is a data value and a name used to
identify the value in a database.

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 Prof. Pooja Khot. – Crypto Currency with Ethernet

• In this case, the name/value pair is a computer-readable numeric

address with a human-readable name. A token for the name/value
pair is created, and the token holder owns the name/value pair.
Thus, a Namecoin is used to establish ownership of a domain
name.
• Namecoin has several similarities with Bitcoin, currently the top
digital currency by market capitalization. Its fork was initiated to
create a new way to establish ownership of the human-readable
addresses assigned to the machine-readable addresses used on
the web—domain names.

The main difference between Bitcoin and Namecoin is the purpose of

the technology. Bitcoin creators wanted a viable alternative currency;

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Namecoin creators wanted a domain naming system. Because of this,
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there are different consensus and protocol rules that exist within each
project. Certain features are necessary when conducting financial
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transactions that are not necessary when completing name
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registrations for new internet domains.

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# How to Mine Namecoin

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Because Namecoin utilizes the same proof-of-work (PoW) algorithm as

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Bitcoin, you can merge-mine Namecoins without additional hardware

(and without any extra electricity) if you are already mining Bitcoin.
Both Bitcoin and Namecoin are limited to a total of 21 million coins. The
critical difference in Namecoin is that tokens are used up as domain
names are registered. The cost of one domain name to Namecoin's
usable supply is .01 NMC. This means there are 2.1 billion domain
names (or other uses) available using Namecoin.

47