1 Introduction

29

1.1 What Is Blockchain?

29

1.1.1 Challenges of the Internet

29

1.1.2 The Blockchain

32

1.1.3 The Blockchain as a Problem Solver

35

1.2 History of Blockchain

36

1.2.1 Pioneers of Blockchain

36

1.2.2 Bitcoin

37

1.2.3 Altcoins

41

1.2.4 Blockchain 2.0

43

1.2.5 The Present and the Future

46

1.3 Application of Blockchain Technology

47

1.3.1 Decision Criteria for the Blockchain

47

1.3.2 Blockchain Variants

49

1.3.3 Industries with Blockchain Potential

52

1.3.4 Real-Life Examples of Blockchain Applications

57

1.4 Summary

66

2 The Basics: How Blockchain Works

69

2.1 Cryptography Basics

69

2.1.1 Introduction to Cryptography

69

2.1.2 Elliptic Curve Cryptography

73

2.1.3 Cryptographic Hash Functions

76

2.2 The Blockchain

81

2.2.1 Transactions

82

2.2.2 From Block to Blockchain

87

2.2.3 The Blockchain System

90

2.2.4 Evolution of the Bitcoin Blockchain

103

2.3 Alternative Consensus Models

111

2.3.1 Proof-of-Stake

112

2.3.2 Delegated Byzantine Fault Tolerance

114

2.3.3 Proof-of-Activity

115

2.3.4 Proof-of-Importance

115

2.3.5 Proof-of-Authority

116

2.3.6 Proof-of-Reputation

116

2.3.7 Proof-of-Capacity or Proof-of-Space

117

2.3.8 Proof-of-Elapsed-Time

118

2.3.9 Proof-of-Burn

118

2.4 Blockchain Security

119

2.4.1 Blockchain and Information Security

119

2.4.2 Attack Scenarios

121

2.5 Summary

128

3 Ethereum: Blockchain 2.0

131

3.1 Basics of Ethereum

132

3.1.1 State Machine

132

3.1.2 Merkle Patricia Trie

132

3.1.3 Accounts and State Trie

135

3.1.4 Transactions and the Transaction Trie

138

3.1.5 Receipts and Receipts Trie

142

3.2 From Blocks to Blockchain 2.0

144

3.2.1 Execution Payload and Execution Payload Header

144

3.2.2 Beacon Block Body

147

3.2.3 Beacon Block and Beacon Block Header

149

3.3 The Blockchain System 2.0

152

3.3.1 The Node

152

3.3.2 The Ethereum Virtual Machine

155

3.3.3 The Network

157

3.3.4 Proof-of-Stake: The Consensus Mechanism

160

3.4 Further Development of the Ethereum Platform

170

3.4.1 Vulnerabilities and Problems

170

3.4.2 Additional Services: Swarm and Ethereum Name Service

171

3.4.3 Layer 2: Bringing Ethereum to the Next Level

173

3.4.4 Danksharding: A Scalable Future

175

3.4.5 Is the Future Stateless?

176

3.5 Summary

177

4 Fundamentals of Creating Your Own Blockchain

179

4.1 Transactions: The Smallest Units of a Blockchain

181

4.2 Block Header: Calculating the Block ID

183

4.3 Chaining Blocks

184

4.4 Storing the Blockchain State Persistently

186

4.5 The Genesis Block: Initializing a Blockchain

188

4.6 Pending Transactions

189

4.7 The Difficulty of a Blockchain

191

4.8 Let’s Mine: The Miner Thread

192

4.9 Summary and Outlook

196

5 Implementing a Web API for the Blockchain

199

5.1 The Endpoints of the Web API

200

5.1.1 Implementing the Endpoint for Blocks

202

5.1.2 Implementing the Endpoint for Transactions

204

5.2 Deploying the Web API

205

5.2.1 Creating the Configuration for Resources

205

5.2.2 Preparing an Embedded Tomcat Server

207

5.2.3 Verifying the JSON Representations

207

5.3 Sending Transactions via a Web Interface

209

5.4 Implementing Your Own Block Explorer

212

5.4.1 Exploring Transactions

213

5.4.2 Exploring Blocks

214

5.4.3 Implementing a Landing Page with Search Bar

217

5.5 Summary and Outlook

219

6 Implementing a Peer-to-Peer Network

221

6.1 Configuration of the Peer-to-Peer Framework

222

6.2 Broadcasting Transactions to the Network

225

6.3 Broadcasting Blocks to the Network

228

6.4 The Longest Chain Rule

229

6.4.1 Storing and Switching Chain Forks

229

6.4.2 Synchronizing Pending Transactions after Switching Chains

232

6.5 Adding New Nodes to the Network

233

6.6 Summary and Outlook

235

7 Introducing Accounts and Balances

237

7.1 Rewarding Miners

238

7.1.1 Assigning Accounts to Miners

238

7.1.2 Storing Accounts Persistently

239

7.1.3 Assigning Miners to Blocks

240

7.2 Managing Accounts

241

7.2.1 Storing Accounts

241

7.2.2 Initializing and Updating Accounts

243

7.2.3 Providing Account Data via the Web API

244

7.3 Integrating Accounts

245

7.4 Integrating Accounts into the Block Explorer

246

7.4.1 Account Lookup via Block Explorer

246

7.4.2 Generating Accounts via a Web Client

248

7.4.3 Linking and Searching Accounts via the Block Explorer

250

7.5 Summary and Outlook

251

8 Implementing Verification and Optimizations

253

8.1 Signing Transactions

253

8.1.1 Introducing Digital Signatures to the Web Client

254

8.1.2 Supporting Digital Signatures in the Backend

255

8.2 Enforcing Constraints

256

8.2.1 Verifying Transactions

257

8.2.2 Verifying Blocks

258

8.3 Locking and Unlocking Balances

258

8.4 Optimizing Performance via Merkle Trees

261

8.4.1 Creating the Structure of a Merkle Tree

261

8.4.2 Using the Merkle Tree via the Web API

263

8.5 Optimizing Storage by Shortening the Public Keys

264

8.6 Supporting Initial Balances in the Genesis Block

265

8.7 Additional Optimizations

266

8.8 Summary and Outlook

267

9 Smart Contract Development

269

9.1 Smart Contract Basics

270

9.2 Simple Smart Contracts with Bitcoin Script

272

9.2.1 Introduction to Bitcoin Script

272

9.2.2 Smart Contracts with Bitcoin Script

275

9.2.3 Higher Programming Languages for Bitcoin

278

9.3 Advanced Smart Contracts

279

9.3.1 Bitcoin Extensions

279

9.3.2 Smart Contracts with Ethereum

281

9.4 Contract-Oriented Programming

282

9.4.1 Similarities to and Differences from Object-Oriented Programming

282

9.4.2 Developing Meaningful Contracts

283

9.4.3 Composability of Smart Contracts

285

9.5 The Challenge of Random Number Generators

287

9.5.1 Using Block Variables

287

9.5.2 Using Sequential Numbers

288

9.5.3 Using Two-Stage Lotteries

288

9.5.4 Determining Randomness Off-Chain

289

9.6 Trusting Off-Chain Data

291

9.7 Time Dependencies

292

9.7.1 Checking Time Dependencies via the Block Time

292

9.7.2 Using Off-Chain Services

292

9.8 Summary and Outlook

293

10 Integrated Development Environments and Frameworks

295

10.1 Integrated Development Environments

295

10.1.1 Remix: The Official IDE

295

10.1.2 ChainIDE: A Cloud-Based, Multichain IDE

297

10.1.3 Tenderly Sandbox: An IDE for Fast Prototyping

297

10.1.4 Additional Web-Based IDEs

298

10.1.5 Desktop IDEs

298

10.1.6 Choosing Your IDE

299

10.2 Contract-Oriented Frameworks

300

10.2.1 The Truffle Suite

300

10.2.2 The Hardhat Development Environment

304

10.2.3 The Modular Toolkit Foundry

308

10.2.4 Local Blockchain Nodes

311

10.2.5 Choosing Your Framework

312

10.3 Summary and Outlook

313

11 An Introduction to Solidity

315

11.1 The Basics of Solidity

315

11.1.1 Structure of a Source File

316

11.1.2 Creating Your First Smart Contract

316

11.1.3 Deploying Your First Smart Contract Locally

317

11.2 Elements and Data Locations of a Contract

319

11.2.1 Understanding Data Locations

320

11.2.2 Specifying Visibility in Solidity

322

11.2.3 Using and Defining Modifiers

323

11.2.4 Declaring and Initializing State Variables

325

11.2.5 Creating and Destroying Contracts

325

11.2.6 Implementing Functions

326

11.2.7 Defining and Using Events for Logging

327

11.3 Available Data Types

331

11.3.1 Using Primitive Data Types

331

11.3.2 Defining Addresses

332

11.3.3 Creating and Using Arrays

333

11.3.4 Multidimensional Arrays and Their Limitations

335

11.3.5 Defining Structs and Enums

336

11.3.6 Understanding Mappings

338

11.3.7 Defining Storage Pointers as Function Parameters

339

11.3.8 Using Functions as Variables

339

11.4 Additional Features of Solidity

340

11.4.1 Understanding L-Values

340

11.4.2 Deleting Variables and Freeing Storage

340

11.4.3 Converting Elementary Data Types to Each Other

341

11.4.4 Utilizing Type Inference

342

11.4.5 The Fallback and Receive Functions

342

11.4.6 Checked versus Unchecked Arithmetic

344

11.4.7 Error Handling with Assert, Require, Revert, and Exceptions

345

11.5 Creating Inheritance Hierarchies of Smart Contracts

347

11.5.1 How Does Contract Inheritance Work?

348

11.5.2 Using Abstract Contracts

348

11.5.3 Defining Interfaces in Solidity

349

11.5.4 Applying Polymorphism Correctly

350

11.5.5 Overloading Functions

351

11.6 Creating and Using Libraries

352

11.6.1 Implementing Your Own Library

353

11.6.2 Using Libraries in Contracts

354

11.6.3 Extending Data Types with Libraries

356

11.7 Summary and Outlook

356

12 Digging Deeper into Solidity

359

12.1 Low-Level Functions in Solidity

359

12.1.1 Low-Level Functions for Address Payable

360

12.1.2 Low-Level Functions for Any Address Type

361

12.2 Using Assembly in Solidity Smart Contracts

363

12.2.1 Applying Inline Assembly

363

12.2.2 Transient Storage Opcodes

365

12.2.3 Accessing Variables in Inline Assembly

366

12.2.4 Using the Functional Style for Inline Assembly

367

12.2.5 Using Instructions for Inline Assembly

369

12.2.6 The Yul Intermediate Language

371

12.3 Internal Layouts of Data Locations

371

12.3.1 Internal Layout in Storage

371

12.3.2 Internal Layout in Memory

373

12.3.3 Internal Layout in Calldata

374

12.4 Understanding the Contract ABI

375

12.5 Understanding the Bytecode Representation of Smart Contracts

376

12.6 Summary and Outlook

378

13 Testing and Debugging Smart Contracts

381

13.1 Testing Contracts with Remix

382

13.1.1 Writing and Running Solidity-Based Unit Tests in Remix

382

13.1.2 Writing and Running JavaScript-Based Unit Tests in Remix

385

13.1.3 Using the Command Line Interface for Remix Tests

386

13.2 Implementing Tests with Foundry

386

13.2.1 Writing Common Unit Tests

387

13.2.2 Using Cheatcodes in Foundry

389

13.3 Implementing Tests with Hardhat

391

13.4 Debugging Smart Contracts

394

13.4.1 Debugging Contracts in Remix

394

13.4.2 Debugging Contracts in Foundry

395

13.5 Fork Testing Ethereum-Based Chains

396

13.6 Summary and Outlook

398

14 Understanding and Optimizing Gas Costs

401

14.1 Understanding Gas Costs in Ethereum

401

14.2 Understanding the Compiler Optimizer

405

14.3 Basic Guidelines for Gas Optimization

407

14.4 Optimizations Derived from Traditional Efficiency Rules

411

14.5 Advanced Gas Optimization

414

14.6 Expert Gas Optimizations

418

14.6.1 Use Access Lists

418

14.6.2 Implement Input Compression

420

14.6.3 Write Yul or Huff Contracts

422

14.7 Additional Optimizations for Different Use Cases

423

14.8 Helpful Tools for Gas Optimizations

424

14.9 Summary and Outlook

425

15 Protecting and Securing Smart Contracts

427

15.1 General Security Recommendations

427

15.1.1 Specify Visibilities Explicitly

428

15.1.2 Define Constructors Only Through the Keyword

428

15.1.3 Always Initialize Storage Pointers

428

15.1.4 Keep Race Conditions in Mind

429

15.1.5 Check Return Values of Low-Level Functions

429

15.1.6 Consider Manipulations by Miners

430

15.1.7 Don’t Expose Data

430

15.1.8 Stay Up to Date with the Smart Contract Security Field Guide

430

15.2 Example Attacks on Smart Contracts

431

15.2.1 Smuggling Ether into Contracts

431

15.2.2 Handling Arithmetic Overflows and Underflows

434

15.2.3 Manipulating State with Delegate Calls

436

15.2.4 Performing Reentrancy Attacks

439

15.2.5 Performing Denial-of-Service Attacks

442

15.2.6 Beware of Gas-Siphoning Attacks

444

15.2.7 Exploiting ABI Hash Collisions

447

15.2.8 Beware of Griefing Attacks

449

15.3 Auditing Smart Contracts via Slither

454

15.4 Summary and Outlook

455

16 Deploying and Managing Smart Contracts

457

16.1 Setting Up MetaMask and Using Accounts

458

16.2 Deploying Contracts with Remix and MetaMask

459

16.3 Deploying Contracts with Foundry

462

16.4 Deploying Contracts with Hardhat

465

16.5 Publishing and Verifying Code on Etherscan

469

16.6 Setting Up and Running Your Own Ethereum Node

472

16.7 Managing Contracts after Deployment

474

16.7.1 Managing Contracts via Remix

475

16.7.2 Managing Contracts via Foundry and Hardhat

476

16.8 Summary and Outlook

476

17 Standards, Libraries, and Design Patterns

479

17.1 ERC-173 Contract Ownership Standard

479

17.1.1 Motivations

480

17.1.2 Specifications

480

17.1.3 Implementations

480

17.2 ERC-165 Standardized Interface Detection

481

17.2.1 Motivations

482

17.2.2 Specifications

482

17.2.3 Implementations

483

17.3 ERC-20 Token Standard

485

17.3.1 Motivations

485

17.3.2 Specifications

486

17.3.3 Implementations

487

17.4 ERC-777 Token Standard

488

17.4.1 Motivations

488

17.4.2 Specifications

488

17.4.3 Implementations

489

17.5 ERC-721 Non-Fungible Token Standard

489

17.5.1 Motivations

490

17.5.2 Specifications

490

17.5.3 Implementations

494

17.6 ERC-1155 Multi-Token Standard

494

17.6.1 Motivations

495

17.6.2 Specifications

495

17.6.3 Implementations

495

17.7 Using OpenZeppelin Libraries

496

17.8 The Publish-Subscribe Design Pattern

496

17.8.1 Understanding the Structure of the Publish-Subscribe Pattern

497

17.8.2 Implementing the Publish-Subscribe Pattern

497

17.9 The Checks-Effects-Interactions Pattern

500

17.10 Summary and Outlook

500

18 Upgrading Smart Contracts

503

18.1 Basics of Upgrade Mechanisms

503

18.2 Performing Contract Migrations

504

18.2.1 Recovering and Preparing Data for Migrations

505

18.2.2 Writing Data and Initializing the State of the New Contract

506

18.2.3 Migrating an ERC-20 Token Contract as an Example

506

18.3 Separation of Data and Business Logic

508

18.4 The Proxy Pattern

513

18.5 The Diamonds Pattern

517

18.6 Additional Mechanisms and Considerations

520

18.7 The Metamorphic Smart Contract Exploit

521

18.8 Summary and Outlook

526

19 Developing Decentralized Applications

529

19.1 What Is a Decentralized Application?

529

19.2 The Development Process for a DApp

530

19.3 Developing the Smart Contracts of Your First DApp

533

19.4 Developing the Off-Chain Elements of Your First DApp

537

19.5 Hosting the Frontend of Your First DApp in a Decentralized Manner

543

19.6 Setting Up ENS Domains

545

19.6.1 Introduction to ENS Domains

545

19.6.2 Registering an ENS Domain

547

19.6.3 Linking an ENS Domain to an IPFS Content Hash

549

19.7 Summary and Outlook

550

20 Upgrading Your First DApp to a DAO

553

20.1 What Is a Decentralized Autonomous Organization?

553

20.2 Implementing a Governance Contract for Your DAO

554

20.3 Implementing the Frontend with Vue.js and Ethers.js

558

20.3.1 Introduction to Ethers.js

558

20.3.2 Implementing a Vue Frontend with Components

559

20.3.3 Additional Features of Ethers.js

567

20.4 Ideas for Additional Backend and Oracle Services

568

20.5 Deploying Your DApp and Assigning an ENS Domain

569

20.6 Additional Frameworks, Tools, and Libraries

569

20.7 Summary and Outlook

571

21 Reverse Engineering Smart Contracts

573

21.1 Why Reverse Engineer?

573

21.2 Manual Reverse Engineering

575

21.3 Manual Recovery of a Contract ABI

586

21.4 Tools for Reverse Engineering Smart Contracts

590

21.5 Summary and Outlook

594

22 Additional Contract-Oriented Programming Languages

595

22.1 Yul: The Intermediate Language for Different Backends

596

22.1.1 Implementing Yul Contracts

597

22.1.2 Compiling Yul Contracts

599

22.1.3 Deploying Yul Contracts

600

22.1.4 Testing Yul Contracts

602

22.2 Huff: Highly Optimized Smart Contracts

605

22.2.1 Implementing Huff Contracts

607

22.2.2 Compiling Huff Contracts

608

22.2.3 Deploying Huff Contracts

609

22.2.4 Testing Huff Contracts

610

22.3 Vyper: Smart Contracts for Everyone?

610

22.3.1 Goals of Vyper

610

22.3.2 Limitations of Vyper

611

22.3.3 The Syntax of Vyper

612

22.3.4 The Development Cycle

613

22.4 Comparison of Gas Costs

614

22.5 Summary and Outlook

615

23 Applying Blockchain Technologies

617

23.1 Decentralized Finance

617

23.1.1 Decentralized Finance Use Cases

618

23.1.2 Decentralized Exchanges

620

23.2 Developing and Minting NFTs

622

23.2.1 Creating NFTs on OpenSea

623

23.2.2 Generating Huge NFT Collections

624

23.3 Ethereum Layer 2 Solutions

629

23.3.1 Arbitrum

630

23.3.2 Optimism

630

23.4 Other Blockchain 2.0 Projects

631

23.4.1 Solana

631

23.4.2 Avalanche

632

23.5 A Different Blockchain Approach: Ripple

633

23.5.1 The Idea of Ripple

633

23.5.2 The Ledger and the Network

634

23.6 Summary

635

Appendices

637

A Bibliography

637

B The Authors

639