Introduction
Blockchain technology is robust like the Internet, but unlike the web2 Internet of today, it stores identical blocks of information across its network. For this reason, a blockchain cannot be controlled by any single entity nor does it have a single point of failure. By storing data across its network, the blockchain eliminates the risks that come with data being held centrally. Blockchain networks lack centralized points of vulnerability that computer hackers can exploit easily.
Today’s Internet has security problems that are familiar to everyone. We all rely on username and password credentials to access our assets online. Blockchain uses encryption technology to improve security. By allowing data and information to be widely distributed, blockchain technology has created the backbone of the new Internet, web3. Though it was originally devised for the digital currency Bitcoin, the business and technology communities are finding many uses for blockchain. Knowledge of this new technology will be required by not only programmers but by all businesses. In the next five to ten years, blockchain will change the business models in all types of industries—and perhaps change the way people work and live.
We have been involved in computing technology since its first practical use on Wall Street circa 1974. We have used and written about the evolving technology tools starting with IBM Assembler, Fortran, COBOL, and data access methods like QSAM, BDAM, and VSAM, all the way to present-day REST web services, Java, and SQL and everything in between (including client/server tools like PowerBuilder). We have been fortunate in that our passions for learning and becoming proficient in each new and emerging technology have served us well in the business community. We recognized blockchain technology as an ingenious invention, as it combines the best of what came before it in database design, cryptography, and virtual machine containers with the very capable distributed computing environment of today. Our passion for the technology was based on love at first sight. We have brought together a robust network of blockchain entrepreneurs, fellow blockchain technologists, and others who have made critical contributions to the coverage and text of this book.
Target Audience
The target audience for this book includes anyone interested in blockchain technology as well as its use cases. It is also for anyone developing a blockchain application—what is required to build solutions in this space. Additionally, web and application developers of all levels as well as tech-savvy businesspeople and even attorneys who want to stay current with technology in general and blockchain specifically would find the discussions in this book of interest.
What This Book Covers
The book covers blockchain definition, use cases, distributed technology, and especially blockchain development, with a good deal of code snippets and best practices. It targets the Ethereum blockchain, introducing Solidity and other aspects of the Ethereum framework. Additionally, there are two chapters devoted to setup, coding, validation, and deployment of a complete and comprehensive blockchain betting application.
How to Use This Book
Each chapter in the book can stand alone, describing a particular aspect of blockchain technology and its use cases. That said, there is a sequence whereby each chapter builds on the previous chapters to provide a solid conceptual understanding of blockchain. This is coupled with a comprehensive treatment for getting started as a designer and developer of blockchain applications. This includes the Ethereum technology stack and code, and deployment techniques and examples, including an entire application from code start to deployment finish.
How This Book Is Organized
In Chapter 1, we provide an overview of everything blockchain. We introduce it as a distributed database technology with the capability to execute smart contracts. The expanding universe of blockchain application is covered. The efficiencies and cost savings provided by blockchain technologies—especially the private blockchains adopted by the financial community—are also briefly examined. In parallel, the use of blockchain is shown to affect global transactions, and this will push it forward toward maturity. Blockchain and its timing are critical to maintaining global transactions and providing trust in the integrity of those transactions. For these reasons and more, we argue that blockchain is here to stay, and the chapters herein will provide you with a comprehensive map and toolset with what you need as a designer or developer to successfully make the trip.
While blockchain technology is at the heart of cryptocurrencies like Bitcoin and Ethereum, it clearly is a technology with widespread applicability in many sectors of business. Chapter 2 gives some depth to real-world use cases in the financial services industry, including sections on cryptocurrency and digital tokens. We then show how common business use cases ultimately lead to faster throughput, reduced costs, improved accuracy, greater transparency, and quality, reliability, simplicity, and traceability.
The chapter also discusses smart property and smart contracts and how they can be used in conjunction in the not-too-distant future of blockchain technology. Chapter 2 closes with how blockchain and the Internet of Things (IoT) will have a consortium of startups and companies to help define and refine security and interoperability, management, and coordination between connected devices. While IoT is still in its early stages of evolution and currently comprises mostly technologies that either collect data or allow remote monitoring and control, this will change as devices become smarter and artificial intelligence is added. This network of things will transition toward becoming a network of autonomous devices that talk to each other and (hopefully) make smart decisions without the need for human intervention or interpretation. In short, we live in exciting times for blockchain technology.
Chapter 3 introduces some of the components of the Web 3.0 architecture. Distributed networking and storage are happening now and promise solutions that could save the global economy trillions annually. The Web today needs a new security model and an architecture designed around contemporary use cases. The technology stack is just beginning to emerge. It includes Swarm, IPFS, Storj, Golem, and Whisper, just to mention a few of a growing number of components that represent the most ambitious solutions to this problem.
As the global infrastructure adapts to the new demands we are putting on it, unforeseen opportunities will open before us. New tools will change not only the way we work and use web conveniences but also the way we organize ourselves in groups. We are living in an interesting time in history, where the Web begins to bring more knowledge and action capacity for its users, resulting in considerable changes in several aspects of daily life. This new Web is moving fast toward a more dynamic environment, where the democratization of the capacity of action and knowledge can speed up business in almost all areas. Imagine a future with hundreds of real decentralized applications—for example, one in charge of registering land titles and mortgages and handling local taxes, and a more general application in charge of managing the supply chain of registered tenants, their monthly lease payments, as well as mortgage and expense payments. One could easily link information from properties registered in the first application with the tenants and their use of the properties registered in the second application. All this in an easy way using the whole stack of semantic web technology and—something that is not possible to date—ensuring that all data is 100 percent true, guaranteed by the smart contracts. The real questions we must ask are: How will the world of Web 3.0 differ from the world of Web 2.0? How will this technology penetrate beyond the cultures that created it? One thing is for sure: blockchain will be at the center of this new world.
Chapter 4 is primarily about blockchain and the law. We show that smart contracts may be the most transformative current blockchain component, especially for lawyers. We explore why Professors Marco Iansiti and Karim R. Lakhani of the Harvard Business School said:
“The implications are fascinating… . If contracts are automated, then what will happen to traditional firm structures, processes, and intermediaries like lawyers and accountants? … Their roles would all radically change… . [W]e are decades away from the widespread adoption of smart contracts… . A tremendous degree of coordination and clarity on how smart contracts are designed, verified, implemented, and enforced will be required. We believe the institutions responsible for those daunting tasks will take a long time to evolve. And the technology challenges—especially security—are daunting… . [L]aw firms will have to change to make smart contracts viable. They’ll need to develop new expertise in software and blockchain programming.”
The chapter also explores how blockchain provides new possibilities for the way we interact and exchange information, and as such brings forth challenging and complex legal issues and pushes the boundaries of existing laws. We see that blockchain technology is something that our laws will have to adapt to, just as they adapted to the Internet, medical technology, e-discovery, and social media. There is a huge change before us as lawyers and as developers to embrace it and be part of its evolution.
We show how regulation around blockchain is still up in the air, not only globally but also in each state here in the United States. Businesses operating in regulated industries should seek guidance from their regulators before integrating critical, customer-facing, or data-handling processes with platforms like Ethereum. We examine the large strides made in the financial services arena with private and consortium varieties of blockchain. We see clearly that this is an indication that financial institutions are playing in and watching this space very closely.
Chapter 5 covers terminology (including block attributes) and concepts as well as the technology stack, blockchain development platforms, and APIs. It also covers the Ethereum Virtual Machine and Ethereum dapps, DAOs, and autonomous smart contracts.
In Chapter 6, we introduce the Solidity smart contract programming language and the tools that make it simple and easy to fast-track deploy a smart contract to the Ethereum blockchain. In this chapter, you get to create your first simple smart contract.
In Chapter 7, we introduce tools and techniques that are a little more complicated and support a workflow to handle the development of more complex solutions.
In Chapter 8, we look into use cases for private and consortium blockchain solutions. We review private blockchain technology such as Hyperledger, Monax, Ethereum, Hyperledger Fabric, Quorum, and the Hyperledger tools Cello, Composer, and Explorer. We explore the many options for permissioned private blockchains and show why the list is likely to grow. In many cases, government/industry regulation dictates that private control will be needed. That being said, the freedom, neutrality, and openness that started Bitcoin on the public blockchain are important to keep in mind. The focus of decentralizing control and consensus on the public platform is clearly something to think about. There is a great deal of chatter and concern around privacy, identity, speed, and cost of the public blockchain solutions. It is important to note that by creating privately administered smart contracts on public blockchains, or cross-chain exchange layers that sit in between public and private blockchains, it is possible to deliver some degree of the properties of private blockchains on the public platforms. Time will tell if these types of capabilities and properties ever get built into the public blockchain.
While blockchains are heralded as a technological breakthrough that will solve many problems, it’s clear that they face a large number of unique challenges. Chapter 9 reviews these challenges and why they are not insurmountable, though they require a lot of work to develop infrastructure and safety mechanisms to overcome them.
In Chapter 10, we introduce the development life cycle of a fully functioning betting application built on Ethereum. While the focus was primarily on coding with Solidity, we made sure to provide the reader with an entire application and explain each line of code and every setup move required to build the application.
In Chapter 11, we show the reader how to deploy the application built in Chapter 10. We also step through the development of a simple front end to run the application. If you have read, understood, and tried some of the code in this chapter, you can now write new scripts to deploy and test your own smart contracts. You can create a contract, and you can create a front end to interact with it. In short, once you get through this whole book, you will be ready to design, code, test, and deploy an Ethereum blockchain application.