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Create cryptocurrency and blockchain applications by examining the key algorithms and concepts pertaining to blockchains, transaction processing, mining, distributed consensus, and anonymous currencies. In this book, you'll develop a fully functional cryptocurrency from scratch in the Python language. Practical Blockchains and Cryptocurrencies is a reference for development of blockchain applications and provides you with rigorous information on cryptography and the theory underlying blockchains.

This book consists of small chapters that focus on particular topics. You'll start with a short history of money. Next, you will survey the bitcoin and altcoin ecosystem before delving into cryptographic hash functions, symmetric encryption, public key cryptography, and digital signatures. All the mathematics required to develop blockchain applications is covered. The emphasis is on providing a lucid and rigorous exposition on the nature and working of these constructs.

The next major segment of the book discusses the key concepts and algorithms required to develop blockchain and cryptocurrency applications. There are expositions on blockchain construction, Merkle trees, peer-to-peer networks, cryptocurrency addresses, transactions, and mining. You'll take a deep dive into the formation of consensus in distributed systems.

In this book you'll develop a fully functional cryptocurrency called Helium from scratch in Python. The language requirements are modest since it is presumed that most readers will not be acquainted with Python. The entire source code and unit test code is included in this book.

Practical Blockchains and Cryptocurrencies interleaves theory and Helium program code chapters in order to demonstrate the practical application of theory in working Helium program code.      

What You Will Learn    

• Gain the mathematical foundations as well as the concepts and algorithms of blockchains and cryptocurrencies
• Implement a cryptocurrency from scratch in Python
• Master the design of distributed blockchain applications    

Who This Book Is For    

Anyone interested in creating cryptocurrency and blockchain applications

Practical Blockchains and Cryptocurrencies: Speed Up Your Application Development Process and Develop Distributed Applications with Confidence

Chapter 1:  The History of Money and Alternate Currencies

Chapter Goal: Explain the historical evolution of money and alternate currencies prior to bitcoin

Sub-Topics

1. Characteristics of money

2. Gold and silver backed currencies

3. Gold standard and fiat currencies

4. Alternate currencies prior to bitcoin (Liberty coin, etc.)

5. Bitcoin

6. The Darknet

7. Future evolution of cryptocurrencies

Chapter 2:  Bitcoin and Altcoins

Chapter Goal: Discussion of bitcoin and altcoins in circulation and their properties and their raison d'etre.

Sub-Topics

1. Introduction

2. Bitcoin

3. Ethereum

4. Monero

5. Ripple

6. Stellar, Tron, and other cryptocurrencies

Chapter 3: Cryptographic Hash Functions 

Chapter Goal: Explain cryptographic hash functions, their characteristics, and why they are important in blockchain and cryptocurrency application development.

Sub-Topics         

1. Introduction

2. Cryptographic hash functions

3. The collision free property of cryptographic hash functions

4. Proving the tamper free property

5. The irreversible property

6. The unique range property

7. Hash pointers and data structures

8. Proving authenticity with crytpographic hashes

9. The SHA-256 cryptographic hash

10. Common cryptographic hash functions 

Chapter 4:  Symmetric Encryption

Chapter Goal: Explain what symmetric encryption is and it's deficiency in secure key distribution

Sub-Topics:        

1.     Introduction

2.     How symmetric encryption works

3.     The key distribution problem

4.     Common symmetric encryption algorithms

Chapter 5: Public Key Cryptography

Chapter Goal: Explain what public key cryptography is and how it works

Sub-Topics:

1. Introduction

2.  Algorithms to generate public private key pairs

3.  RSA and elliptic curve cryptography

4.  Using public-private key pairs for encryption and decryption

5.  Identity formation and proof with public keys

6.  Generating globally unique IDs

Chapter 6:  Digital Signatures

Chapter Goal: Show how the digital signature algorithm is implemented and how it can be used to prove authorship and authenticity of documents

Sub-Topics:

1. Introduction

2. Creating digital signatures

3. Proving authorship and authenticity of documents

Chapter 7:  Blockchain Construction

Chapter Goal: Discuss properties of a blockchain and how to create a blockchain

Sub-Topics:

1.  Introduction

2.  Properties of blockchain

3.  How to create a blockchain

4.  The bitcoin blockchain

5.  Scalability issues in blockchain

6.  Blockchain databases

7.  The genesis block

8.   Creating a simple cryptocurrency

Chapter 8:  The Merkle Tree Algorithm

Chapter Goal: A discussion of the Merkle tree algorithm along with source code implementations

Sub-Topics:

1.  Introduction

2.  Implementation of the Merkle tree algorithm

 

Chapter 9:  Topology of Cryptocurrency Networks

Chapter Goal: What is a peer-to-peer network and the use of such P2P networks in blockchain applications to broadcast and verify transactions.

Sub-Topics:

1.  Introduction

2.  Peer-to-peer networks

3.  Node identity and supernodes

4.  The bitcoin blockchain

5.  Block and transaction propagation

 

Chapter 10:  Cryptocurrency Parameters and Configuration

Chapter Goal: Enumerate some common configuration parameters that are used when creating a cryptocurrency and their implications.

Sub-Topics:

1.  Introduction

2.  Common cryptocurrency parameters

 

Chapter 11:  Cryptocurrency Addresses

Chapter Goal: Creating and using cryptocurrency addresses

Sub-Topics:

1.  Introduction

2.  How to make a cryptocurrency address

3.  How bitcoin uses addresses

4.  Key generation algorithms

5.  Hierarchical deterministic key generation

 

Chapter 12:  Cryptocurrency Transactions

Chapter Goal: How transactions are implemented and broadcast in a cryptocurrency network.

Sub-Topics:

1.  Introduction

2.  Transaction mechanics

3.  Canonical transaction structures

4.  Broadcasting transactions

5.  Transaction validation

6.  How bitcoin implements transactions

7.  Locking and unlocking transactions

8.  Transaction fees

 

Chapter 13:  Cryptocurrency Storage

Chapter Goal: Discuss methods for storing cryptocurrencies

Sub-Topics:

1.  Introduction

2.  Cold storage and hot storage

3.  Wallets and local storage

4.  Storage on the blockchain

5.  Online wallets

6.   Exchanges

 

Chapter 14:  Mining

Chapter Goal: Explain how blocks are mined in a cryptocurrency network 

Sub-Topics:

1.  Introduction

2.  How mining works

3.  Incentives for block formation

4.  Bitcoin mining

5.  Chainstate database

6.  Proof of work and the difficulty number

7.  Energy consumption

8.  ASIC resistant mining

9.  Mining attacks

10.  Proof of stake and virtual mining

11.  Hash power computations

 

Chapter 15:  The Bitcoin Distributed Consensus Algorithm

Chapter Goal: Discussion of the distributed consensus algorithm in bitcoin

Sub-Topics:

1.  Introduction

2.   Consensus formation in bitcoin

3.   Blockchain forks

4.   Double spend resolution in the bitcoin network

 

Chapter 16:   Alternate Distributed Consensus Algorithms

Chapter Goal: Discussion of distributed consensus algorithm that is not based on bitcoin's proof of work algorithm

Sub-Topics:

1.  Introduction

2.  Proof of stake distributed consensus

3.  Delegated proof of stake

4.  Proof of weight algorithms

5.  The Byzantine Generals problem

6.   Byzantine Fault tolerance

7.   Federated Byzantine agreement algorithm

8.    Proof of weight, DAGs, and other algorithms   

 

Chapter 17:   Working at Scale

Chapter Goal: How to build blockchain and cryptocurrency applications that scale

Sub-Topics:

1.  Introduction

2.  Scalability in the bitcoin network

3.  Subchains

4.   The lightening network

5.   Sharded networks

6.   Other solutions

 

Chapter 18:   Anonymous Cryptocurrency Networks

Chapter Goal: Discussion of anonymity in cryptocurrency networks

Sub-Topics:

1.  Introduction

2.  Why bitcoin is not an anonymous currency

3.  Some simple precautions for bitcoin transactions

4.  Mixers

5.  Implementing anonymity for a cryptocurrency

6.   Using Tor

 

Chapter 19: Designing a Cryptocurrency  

Chapter Goal: Architecture and logical design principles in cryptocurrency creation

Sub-Topics:

1.  Introduction

2.  Network architectures

3.  Blockchain specification and implementation

4.  Database implementation

5.  Transaction specification

6.  Selecting a distributed consensus algorithm

7.  The mining algorithm

8.  The money supply

9.   The velocity of money

10.  Creating the genesis block

11.  Founder's reserve

12.  Language selection

13.  Bon voyage

 

Appendix:  Installing and Using a Bitcoin Node

Chapter Goal: Install a full Bitcoin node on a Linux machine