Blockchain Advanced Learning Path - Smart contracts, Decentralized Applications and DAO
In this learning path, we are going to dig further into the topic of decentralization and blockchain; in the previous path, we described the principles behind a blockchain and presented it as a technology that allows to store data in a secure, transparent, verifiable, resilient and immutable way. However, mainly with the Ethereum platform, a blockchain has become also a decentralized platform able to run arbitrary code, in other word to execute tasks in a secure, automatic, unstoppable and verifiable way. This mechanism is called a Smart Contract. Based on that artefact, Decentralized Applications (DApps) and Decentralized Autonomous Organizations (DAOs) have appeared. Let’s dig into these exciting technologies that have the potential to completely modify the way we consider and perform many of our daily tasks and can question the role of traditional authorities. Although in this path we will mainly focus on the Ethereum blockchain, there are other blockchains that can be used to deploy DApps and DAOs.
Introduction to Smart contracts
This article introduces the concept of a smart contract, starting from a simple example. The terms ‘smart’ and ‘contract’ might not be the best chosen ones, since a smart contract refers to the translation of a kind of agreements between parties that can be translated into executable terms. By relying on the blockchain to run smart contracts and store their results, one alleviate the need for a trusted third party to follow through the contract execution. Everything runs automatically, from the triggering of the contract based on some conditions down to its final resolution. The terms of the contract are guaranteed to be executed correctly thanks to the principle sometimes translated as ‘Code is Law’.
What is a dApp? Decentralized Application on the Blockchain
A Smart contract is not meant to be directly used by an end-user; to be truly useful, it requires a frontend user interface to support interactions between the user and the code, as well as some kind of secure software used to store user credentials, like secret keys, the wallet. All these components together form a Decentralized Application or DApp.
There are many many DApps out there, in a wide variety of domains. NFT, DeFi, Identity Management, Gaming…
This video introduces the goal of DApps and how they relate to blockchain technologies. In complement to it, this page gives a few more details and pointers, and this website displays a catalogue of existing DApps in various domains.
Etherscan - The Ethereum Blockchain Explorer
To get a concrete view on how blockchain, contracts, tokens… work together, have a look at this Ethereum blockchain explorer website. In the first tab, you can view the list of transactions as well as blocks while they are built up. The next two tabs allow you to view and search for tokens, representing some kind of value, as well as NFT, a particular kind of tokens often used to represent digital work (more to come on this subject). Play around this website, try to figure the meaning of each piece of information and relate it to the concepts introduced previously. For instance, you may want to search for the 0x06012c8cf97bead5deae237070f9587f8e7a266d contract which is part of the cryptokitties dApp, a platform for breeding and exchanging virtual kittens.
What is a DAO & How Does it Work?
The third level of integrating smart contracts in daily activities is the creation of Decentralized Autonomous Organizations (DAOs). As you will see in this article, a DAO is an organization whose working does not rely on any central leadership, but rather relies on decision-making based on consensus established on the blockchain. Technically speaking, a DAO is making heavy use of smart contracts and DApps to automatize its processes, taking advantage of the benefits of decentralized environment. But just reducing DAO to a technical object would be a huge mistake, as this can have profound impact on the organization as well as on a company as a whole. On the same website, you can find tons of examples of DAOs.
The DAO Hack: Story of Ethereum Classic
‘Code is law’ is the principle that governs the execution of smart contracts on the blockchain. But what happens if the code is broken, or contains a flaw? This is what happened with “The DAO”, a decentralized autonomous organization that raised a substantial amount of money to launch its operation, and that saw a large part of that money being drained out by a malicious user who had found a flaw in the smart contract code. This led to a controversial debate on the governance of the blockchain, some willing to stick to the ‘Code is law’ rule, others willing to rollback before the breach. The conclusion was a split of the Ethereum blockchain.
What is An Ethereum Token: The Ultimate Beginner’s Guide
It is now time to look into one of the common use of blockchain and smart contracts: creation and exchange of tokens. But what is a token? When and how is it created? What does it take to get one? Can it be sold? What is an ICO?
This very comprehensive article starts with a reminder of the main blockchain concepts, and then goes into the presentation of a token, introducing the difference with the plain ETH cryptocurrency, and presenting the ERC-20 standard and the ICO mechanism. It finally presents in detail a few examples of existing tokens.
While this article focuses on the Ethereum eco-system, the description is perfectly transferable to any other blockchain environment.
Beginner's Guide to NFTs: What Are Non-Fungible Tokens?
Non-Fungible Tokens or NFT are a special kind of tokens that have the characteristic of being intrinsically unique; one cannot be swapped for another, like is the case with a banknote (a 1€ coin has the same value and is the same as any other 1€ coin). NFTs can be use for multiple purposes, among which proving ownership of a digital asset (artwork, crypto collectibles, tweet…), and being able to sell this asset, being subject to the market law.
This article goes in depth into the concept of NFT, how they can be used to create value, how they relate to blockchain, how they are created and exchanged. Several examples are provided and discussed.
As an illustration, read for instance this report about a Tweet that went on sale for $48M.
OpenSea: the largest NFT marketplace
Now that you have a good understanding of the blockchain and the working of NFT, it’s time to invest! Let’s start by looking into the huge catalog of NFT maintained by OpenSea and make a choice for a good value token. Are you more interested in art? Gaming? Music? Photography? Select a TOKEN, make an offer, and see what happens.
This shows the parallel between trading in the NFT world and trading in traditional stock exchanges.
As an example, you can search for the ‘CryptoKitties’ NFT we have seen before, and you will access its whole history since its creation on the Ethereum blockchain, just as if you went to the NYSE and looked for MSFT stock?
How to make and sell an NFT (Crypto Art Tutorial)
Let’s imagine you have created a nice piece of artwork, like a beautiful drawing, and you would like to sell it.
This video takes you through the process of putting a digital asset on sale on a market place; the process goes through 4 steps:
Create a digital wallet (if you don’t already have one), to store your actual currency and tokens
Buy some currency to pay for the fee required for putting an item on sale
Link you wallet with the marketplace on which you plan to sell your work
Create your NFT and make it available for sale on the marketplace
The video is very practical and makes the process visually concrete.
How to Turn Physical Art into NFT - A Complete Guide
So far, we have been focusing on digital assets, typically an file recording an image, a music… but can NFT also work in the case of physical assets, like a painting, a sculpture, a book, a game physical token? The answer is yes, and in this article, you will be told why it might be a good option to protect and sell your physical art production, and how to actually put it on sale.
Basically, it requires the creation of a digital copy of your work, and making this copy available on a market place. But how do you make sure the physical is authentic? How do you ensure one does not sell the digital token but not the physical one? These questions and others are explained in this article. And if you want to hear more about this topic, you can also watch this video that will tell you more about the various options to link an NFT and a physical work.