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Bitcoin
is a digital currency that can be transferred on a peer-to-peer (P2P) network without the need of any central authority. It was invented by a person or group of people with the name Satoshi Nakamoto in 2008. All the transactions are stored in an immutable distributed ledger.
Ethereum
is a blockchain-based distributed platform. The network currency of Ethereum is known as Ether (ETH). Here also, the transactions are stored in an immutable distributed ledger
BITCOIN vs ETH
Proof of Work vs Proof of Stake
1] A 51% attack
is an attack on a blockchain by a group of miners who control more than 50% of the network's mining hash rate. Attackers with majority network control can interrupt the recording of new blocks by preventing other miners from completing blocks.
2] Hash rate
is a measure of the total computational power being used by a proof-of-work cryptocurrency network to process transactions in a blockchain. It can also be a measure of how fast a cryptocurrency miner's machines complete these computations
ETH Ntwk
In the Ethereum universe, there is a single, canonical computer (called the Ethereum Virtual Machine, or EVM) whose state everyone on the Ethereum network agrees on.
Everyone who participates in the Ethereum network (every Ethereum node) keeps a copy of the state of this computer.
Additionally, any participant can broadcast a request for this computer to perform arbitrary computation. Whenever such a request is broadcast, other participants on the network verify, validate, and carry out ("execute") the computation. This execution causes a state change in the EVM, which is committed and propagated throughout the entire network.
Requests for computation are called transaction requests; the record of all transactions and the EVM's present state gets stored on the blockchain, which in turn is stored and agreed upon by all nodes.
Ethereum Virtual Machine (EVM)?
The Ethereum Virtual Machine (EVM) is a complex, dedicated software virtual stack that executes contract bytecode and is integrated into each entire Ethereum node.
Simply said, EVM is a software framework that allows developers to construct Ethereum-based decentralized applications (DApps).
All Ethereum accounts and smart contracts are stored on this virtual computer.
Contracts are usually authored in high-level languages like Solidity and then compiled into EVM bytecode. This implies that the machine code is separated from the host computer's network, disc, and other operations. Every node in the Ethereum network runs an EVM instance, allowing them to agree on the same set of instructions to be executed.
The EVM is Turing complete, which means that it can perform any logical step in a computational function. Before we proceed, let us understand more about Turing completeness.
What is Turing completeness?
- Alan Turing, a well-known computer scientist, coined the term “Turing machines.”
- He introduced concepts about what a hypothetical computer or thinking machine could do.
- Turing claimed that computers don't think like humans but solve problems using data processing principles.
- A Turing machine, also known as an automatic machine, represents Turing's concept of non-human or machine thinking.
- The cognitive process of this machine is guided by algorithms.
- Turing's idea involves a reel of tape with symbols or functions that the machine processes by moving back and forth.
- A read/write head would switch between functions, allowing the machine to modify symbols.
- The machine can only focus on one "state" at a time.
How does the Ethereum Virtual Machine (EVM) work?
- The EVM's goal is to determine Ethereum's overall state for each block on the blockchain.
- Ethereum uses a distributed ledger to track transactions and enforce specific rules for user interactions.
- Ethereum has its own native currency, ETH, and offers smart contract functionality.
- This smart contract functionality creates a "distributed state machine," an additional layer of the network.
- Ethereum's state consists of a large database with all ETH accounts and balances.
- Ethereum's state is also a machine state that can change with each new block, executing machine code based on specific rules.
- The EVM defines the rules for how the machine's state changes with each new block.
- The EVM is a crucial component of the Ethereum Protocol and consensus engine.
- It allows code to be run in a trustless environment, ensuring predictable outcomes, such as smart contract execution.
- A system tracks execution costs and assigns a Gas cost to each instruction executed on the EVM.
How is the Gas fee related to the performance of EVM?
- An ETH transaction represents every operation performed on Ethereum.
- Transactions require fees, which are called Gas on Ethereum.
- Gas powers decentralized apps and addresses two key issues:
- Validators are guaranteed to receive the pre-paid amount even if the execution fails.
- Execution cannot continue beyond the pre-paid amount, preventing endless loops; it stops when Gas runs out.
- The EVM achieves Turing Completeness by charging fees per software instruction rather than per transaction, as Bitcoin does.
- This means fees are associated with running programs instead of just processing transactions.
What are the benefits of EVM?
- The EVM allows anyone to create decentralized applications without security barriers or restrictions.
- NFTs (Non-Fungible Tokens), which have gained popularity in the cryptocurrency market, are created using the EVM.
- With NFTs, anyone can create digital art and sell it on a decentralized marketplace.
- This democratizes access to the art market, making it more accessible to people who previously couldn't participate.
What are the drawbacks of EVM?
- The EVM network is decentralized but not fully; most Ethereum nodes are hosted on centralized cloud servers like Amazon Web Services.
- If these service providers decide to shut down Ethereum nodes, the network could be damaged or destroyed, as seen before with some social networking apps.
- The EVM requires technical expertise, limiting access for those who cannot code.
- User-friendly interfaces for interacting with the EVM are still in development, though some GUIs allow almost anyone to create NFTs and use related markets.
- High gas fees during network congestion are a significant disadvantage, particularly for small transactions and decentralized apps (DApps).
- High gas prices can slow down or halt DApp operations when many users interact with smart contracts simultaneously.
- Despite higher costs, Ethereum's decentralized ecosystem, which uses Solidity and the EVM, is preferred in many use cases where decentralization is valued over cost.
- The discussion covered the EVM's definition, operation, benefits, and drawbacks.
What Are Tokens?
- Definition of Tokens: In the real world, tokens are tangible representations of various attributes, such as a hotel key card for proof of payment, an office ID card for proof of employment, or a driving license for proof of training.
- In the Crypto Space: A token represents a particular entity and can hold value, voting rights, stakes, or other functions. It is not restricted to one role and can address multiple roles within its native ecosystem.
- Types of Tokens:
- Fungible Tokens: These are interchangeable and identical to each other, like cryptocurrencies (e.g., Bitcoin, Ethereum) or tokens used for assets that are easily replaceable.
- Non-Fungible Tokens (NFTs): These are unique and cannot be replaced with another token of the same kind. They often represent unique assets or rights, such as digital art or collectibles.
- Uses of Tokens: Tokens can represent utility, ownership, or assets within a company's ecosystem. Companies may issue tokens to investors during public sales to raise capital.
What are the types of tokens? There can be tokens for any kind of service or product in the crypto space. Payment tokens, for example, are coins like Bitcoin or Litecoin (LTC), used to pay for transactions in the digital world
Utility tokens give holders access to products and services that are blockchainbased.
Security tokens are traditional assets like stocks and shares represented by digital tokens on the blockchain.
The most distinct types of tokens are fungible and non-fungible tokens.
What is a fungible and non-fungible token?
- Fungibility in Economics: Refers to assets that are divisible and non-unique. Examples include fiat currencies and cryptocurrencies.
- Fungible Tokens: Interchangeable and identical, like Bitcoin where 1 BTC is equivalent to 1 BTC, regardless of its origin.
- Non-Fungibility: Refers to unique and non-divisible assets.
- Non-Fungible Tokens (NFTs): Represent unique, indivisible items such as digital art or intellectual property. Examples include flight tickets, houses, or cars.
- Blockchain Technology: Used to prove ownership of intangible digital items.
- Difference:
- Fungible Tokens: Store value (e.g., Bitcoin).
- Non-Fungible Tokens: Store data related to unique items (e.g., academic titles, artwork).
What is a fungible and non-fungible token? - table
fungible and nonfungible tokens
Certainly! Let’s break down fungible and nonfungible tokens (NFTs) in a blockchain:
Fungible Tokens:
Definition: Fungible tokens are interchangeable and identical to each other. Each unit of a fungible token is indistinguishable from another.
Example Standard: The most common standard for fungible tokens is ERC-20 (developed on Ethereum).
Use Cases: Fungible tokens are used for various purposes, including transferring value (like cryptocurrencies), granting access to services or subscriptions, and voting in decentralized governance systems.
Nonfungible Tokens (NFTs):
Definition: NFTs are unique and non-interchangeable. Each NFT represents something distinct, such as a specific digital asset, collectible, or identity.
Example Standards: NFTs were first developed on Ethereum using the ERC-721 standard. Some NFTs also exist on other blockchains like Tron and EOS.
Applications:
Art and Collectibles: NFTs gained fame as digital art pieces, but they can represent any unique item, from music and virtual real estate to in-game assets.
Gaming: NFTs have been used in gaming since 2017 (e.g., CryptoKitties). They allow players to own and trade unique in-game items.
Digital Identity: NFTs can store verifiable information about a person or entity, making them useful for digital identity management.
Tickets and Access: NFTs can serve as event tickets or grant access to exclusive content or experiences.
Traceability and Provenance: NFTs provide a transparent record of ownership and history for physical and digital assets.
Misconception:
While NFTs are often associated with art due to their market growth, their utility extends beyond that. Gaming, identity, and other applications existed before the art boom.
Remember, fungible tokens are like identical dollar bills, while NFTs are like unique pieces of art or rare collectibles on the blockchain!
How do NFTs work, and how do you create one?
Nonfungible tokens can be created and stored in a public blockchain that is open and accessible to anyone. The items they represent are verifiable and traceable, while the owner can remain anonymous. From a technical perspective, NFTs are minted through smart contracts that assign ownership and manage the transferability of the NFTs. The minting process includes a few steps, from creating a new block to validating and recording the data on the blockchain.
How to buy or sell a nonfungible token
- NFT Transactions: NFTs can be bought or sold online, representing digital proof of ownership.
- Marketplaces: Transactions can occur on platforms like Rarible, Nifty Gateway, or OpenSea, with items sold at a fixed price or through auctions.
- Getting Started:
- Buy a cryptocurrency like Ether.
- Sign up for a compatible platform.
- Transfer cryptocurrency to a compatible crypto wallet (e.g., MetaMask, Trust Wallet, Coinbase Wallet).
- Blockchains for NFTs:
- Ethereum (ERC-721 tokens)
- Binance Smart Chain, Tezos, Polkadot, EOS, Tron
- Platform Compatibility: Ensure the selected platform is compatible with the chosen blockchain.
- Creating NFTs: Upload an image or file to the platform; some platforms like MakersPlace require registration as a listed artist to create NFTs.
- Celebrity Involvement: Celebrities like Grimes, Paris Hilton, and Snoop Dogg have contributed to the popularity of NFTs.
pros and cons of using nonfungible tokens (NFTs):
Royalties and Artist Compensation:
NFTs allow artists to claim royalties on future sales of their digital artwork. When an NFT changes ownership or is resold, a percentage of the sale price goes back to the original creator.
This breakthrough enables artists to monetize their work continuously, without relying on intermediaries like agents or galleries.
Monetization Opportunities:
Blockchain technology empowers content creators to directly monetize their production. By creating NFTs, artists can participate in the digital marketplace without traditional gatekeepers.
Physical art galleries and auctions are bypassed, making transactions more accessible and efficient.
Replicability and Copying:
Just as digital photos can be copied, NFTs can be replicated. Downloaded duplicates may appear identical to the original NFT.
The ease of creating infinite reproductions has led to confusion and skepticism. Why pay high amounts for the original if perfect copies exist?
Ownership and Authenticity:
Unlike physical art, where the original remains unique, digital artworks face challenges in proving ownership and authenticity.
The critical question is: What establishes ownership of the original asset in the crypto world?
NFTs address this by acting as cryptographic digital signatures. Each NFT uniquely identifies and assigns ownership of a specific piece of digital content.
Ownership can be verified and transferred transparently on a blockchain.
In summary, NFTs offer exciting opportunities for artists but also raise questions about authenticity and the value of digital art. Remember, while anyone can copy a Mona Lisa, only one NFT represents the true original on the blockchain! 🎨✨
The future of NFTs
- NFTs offer a solution for tokenizing ownership and property in the digital age.
- In the first half of 2021, the NFT market reached a value of $2.5 billion.
- High-profile sales include Beeple's artwork for $69.3 million and Jack Dorsey's first tweet for $2.9 million.
- NFTs are expected to revolutionize digital markets and enhance transactions and interactions.
- The value of NFTs is driven by demand rather than underlying fundamentals.
- Unlike NFTs, assets like Bitcoin and Ether are valued based on technological innovations and economic adoption, offering more stability.
"Token" and "Cryptocurrency" are often used interchangeably;
all cryptocurrencies are tokens, but not all tokens are cryptocurrencies. Tokens often represent assets and rights that are external to a blockchain. Token, in the context of ERC-20 compliance, simply means a blockchain representation of something that meets the standards set by the Ethereum community to be considered a smart contract standard-compliant token
ECR-20
Ethereum Request for Comment 20 (ERC-20) is the implemented standard for fungible tokens created using the Ethereum blockchain.
ERC-20 guides the creation of new tokens on the Ethereum blockchain so that they are interchangeable with other tokens used within smart contracts.
ERC-20 is the technical standard used in many new tokens created using the Ethereum ecosystem
ERC-20 vs ERC-721
What is Ethereum?
public, distributed, decentralized, and community-built technology that is designed to carry out smart contracts (a script that, when called with certain parameters, performs some actions or computation if certain events are triggered.
In the Ethereum blockchain, there is a single, canonical state of computer called the Ethereum Virtual Machine. As it is a public and decentralized platform, every node on the network agrees with the state of this virtual machine and keeps a copy of the state on this computer. Whenever a new block is added to the Blockchain, it will be added to the global copy of the network that exists within all the nodes of the network
What is Hyperledger?
open-source platform for building distributed ledger solutions, with a modular architecture that delivers high degrees of confidentiality, flexibility, resiliency, and scalability.
This enables solutions developed with this platform to be adapted for any industry.
This is a private and confidential blockchain framework managed by the Linux Foundation
ETH vs Hyperledger
ETH vs Hyperledger: usage
