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Have you ever found yourself asking this question: "what would happen if the provider of this service or application disappeared? Ethereum is a platform to run decentralized applications: applications that do not rely on any central server. In this post we will explore how Ethereum works and build a simple PoC application related to authentication.

The Blockchain A blockchain is a distributed, verifiable datastore. It works by marrying public-key cryptography with the nobel concept of the proof-of-work. Each transaction in the blockchain is signed by the rightful owner of the resource being traded in the transaction. When new coins resources are created they are assigned to an owner. This owner, in turn, can prepare new transactions that send those coins to others by simply embedding the new owner's public key in the transaction and then signing the transaction with the owner's private-key.

In this way, a verifiable link of transactions is created; each new transaction, with a new owner, pointing to the previous transaction, with the previous owner. To order these transactions and prevent the double-spending problem , blockchains use the proof-of-work.

The proof-of-work is a procedure that establishes a cost for grouping transactions in a certain order and adding them to the blockchain. These groups of transactions are called blocks. Each block points to a previous block in the chain, thus the name blockchain. By making blocks costly to make and making sure each new block points to the previous block, any potential attacker wanting to modify the history of transactions as represented by the blockchain must pay the cost of each block modified.

Since blocks point to previous blocks, modifying an old block requires paying the cost for all blocks after it, making changes to old blocks very costly. A blockchain compounds the difficulty of modifying the blockchain by making the cost of creating blocks be of computational nature. In other words, to create new blocks, a certain amount of CPU power must be spent. Since CPU power is dependent on the advancement of technology, it is very hard for any single malicious entity to amass enough CPU power to outspend the rest of the network.

The bigger the network, the harder it is to perform. But, as we saw in our first post in this series, blockchains are more than just that. Transactions, by their very nature, can do more than just send resources from owner A to owner B. In fact, the very act of doing so can be described as a very simple program: the sender produces a computation transaction that can only be performed if the receiver produces, at some point in the future, the right inputs.

In the case of a standard monetary transaction, the right input would be the proof of ownership from the receiver. In other words, the receiver can only spend the coins he received if he proves he is the rightful owner of those coins.

It may seem a bit contrived but it really isn't. When you perform a wire transfer, you prove you are the owner of an account through some sort of authentication procedure. For a home-banking system that could simply be a username and a password.

At a bank, it would be your ID or debit-card. These procedures are usually hardwired into the system, but with blockchains it needn't be so. In our first post we also took a cursory look at this. We first showed how Bitcoin transactions are in fact small programs that are intepreted by each node using a simple stack-based virtual-machine. It is not Turing-complete and can only perform a limited number of operations.

Still, its flexibility opened up the possibility for many interesting uses. The small script above, a. It describes a small program that allows a sender to send coins to a receiver by verifying his identity with a public-key: the standard A to B monetary transaction, with ID cards substituted with public and private-keys. However, there's nothing preventing other uses, as long as you stick to the available operations supported by the virtual-machine.

We took a look at a possible use in our previous post, where we created a perpetual-message system: immutable messages timestamped and forever embedded in the blockchain. The older they get, the harder it is for them to ever be changed. Now, we'll take a look at how Ethereum amplifies these concepts. Ethereum: a Programmable Blockchain Although the concept of the blockchain was born out of the research into cryptocurrencies, they are much more powerful than just that.

A blockchain essentially encodes one thing: state transitions. Whenever someone sends a coin in Bitcoin to someone else, the global state of the blockchain is changed. Moments before account A held 50 coins, now account A is empty and account B holds 50 coins. Furthermore, the blockchain provides a cryptographically secure way of performing these state transitions. In other words, not only the state of the blockchain can be verified by any outside party, but any state transitions initiated by blockchain users can only be performed in a secure, verifiable manner.

An interesting way to think of a blockchain is as a never-halting computation: new instructions and data are fetched from a pool, the pool of unconfirmed transactions. Each result is recorded in the blockchain, which forms the state of the computation. Any single snapshot of the blockchain is the state of the computation at that point.

All software systems deal in some way or another with state transitions. So what if we could generalize the state transitions inside a blockchain into any software we could think of. Are there any inherent limitations in the blockchain concept that would prevent state transitions from being something different than sending coins? The answer is no. Blockchains deal with reaching consensus for decentralized computations, it does not matter what those computations are.

And this is exactly what the Ethereum network brings to the table: a blockchain that can perform any computation as part of a transaction. It is easy to get lost in the world of cryptocurrencies and simple exchanges of value between two users, but there are many other applications where distributed, secure computations make sense. It is this system that allows for things like: Secure deposits that get returned to the payer if conditions are met or not Money that cannot be spent unless a certain number of users agree to spending it Money that can only be spent after producing external data that satisfies rules set in the script Given a Turing-complete system for computations associated to a blockchain, many more applications are possible.

This is Ethereum. Take a look at the things the community is working on to get a sense of the many useful ideas that can be run as decentralized applications. Ether Although Ethereum brings general computations to the blockchain, it still makes use of a "coin".

Its coin is called "ether", and, as any coin, it is a number that can be stored into account addresses and can be spent or received as part of transactions or block generation. To run certain transactions, users must spend Ether. But why is this the case?

A Turing-complete language is a language that, by definition, can perform any computation. In other words, if there is an algorithm for something, it can express it. Ethereum scripts, called smart contracts, can thus run any computation. Computations are run as part of a transaction. This means each node in the network must run computations. Any machine capable of running a Turing-complete language i. The halting problem essentially states that no Turing machine can determine beforehand whether a program run in it will either terminate halt or run forever.

In other words, the only way of finding out if a piece of code loops forever or not is by running that code. This poses a big problem for Ethereum: no single node can get caught up in an infinite loop running a program. Doing so would essentially stop the evolution of the blockchain and halt all transactions. But there is a way around that. Since computation is costly, and it is in fact rewarded by giving nodes that produce blocks ether like Bitcoin , what better way to limit computations than by requiring ether for running them.

Thus Ethereum solves the problem of denial of service attacks through malicious or bugged scripts that run forever. Every time a script is run, the user requesting the script to run must set a limit of ether to spend in it. Ether is consumed by the script as it runs. This is ensured by the virtual machine that runs the scripts. If the script cannot complete before running out of ether, it is halted at that point.

In Ethereum the ether assigned to an script as a limit is known as gas as in gasoline. As ether represents value, it can be converted to other coins. Exchanges exist to trade ether for other coins. This gives ether a real money valuation , much like coins from Bitcoin. Smart Contracts Smart contracts are the key element of Ethereum. In them any algorithm can be encoded. Smart contracts can carry arbitrary state and can perform any arbitrary computations.

They are even able to call other smart contracts. This gives the scripting facilities of Ethereum tremendous flexibility. Smart contracts are run by each node as part of the block creation process. Just like Bitcoin, block creation is the moment where transactions actually take place, in the sense that once a transaction takes place inside a block, global blockchain state is changed. Ordering affects state changes, and just like in Bitcoin, each node is free to choose the order of transactions inside a block.

After doing so and executing the transactions , a certain amount of work must be performed to create a valid block. In contrast to Bitcoin, Ethereum follows a different pattern for selecting which blocks get added to the valid blockchain. While in Bitcoin the longest chain of valid blocks is always the rightful blockchain, Ethereum follows a protocol called GHOST in fact a variation thereof. The GHOST protocol allows for stale blocks, blocks that were computed by other nodes but that would otherwise be discarded since others have computed newer blocks, to be integrated into the blockchain, reducing wasted computing power and increasing incentives for slower nodes.

It also allows for faster confirmation of transactions: whereas in Bitcoin blocks are usually created every 10 minutes, in Ethereum blocks are created within seconds. Much discussion has gone into whether this protocol is an improvement over the much simpler "fastest longest chain" protocol in Bitcoin, however this discussion is out of scope for this article.

For now this protocol appears to run with success in Ethereum. An important aspect of how smart contracts work in Ethereum is that they have their own address in the blockchain. In other words, contract code is not carried inside each transaction that makes use of it. This would quickly become unwieldy.

Instead, a node can create a special transaction that assigns an address to a contract. This transaction can also run code at the moment of creation. After this initial transaction, the contract becomes forever a part of the blockchain and its address never changes. Whenever a node wants to call any of the methods defined by the contract, it can send a message to the address for the contract, specifying data as input and the method that must be called.

The contract will run as part of the creation of newer blocks up to the gas limit or completion. Contract methods can return a value or store data. This data is part of the state of the blockchain. State An interesting aspect of contracts being able to store data is how can that be handled in an efficient way.

If state is mutated by contracts, and the nature of the blockchain ensures that state is always consistent across all nodes, then all nodes must have access to the whole state stored in the blockchain. Since the size of this storage in unlimited in principle, this raises questions with regards to how to handle this effectively as the network scales.

In particular, how can smaller and less powerful nodes make use of the Ethereum network if they can't store the whole state? How can they perform computations? To solve this, Ethereum makes use of something called Merkle Patricia Trees. A Merkle Patricia Tree is a special kind of data structure that can store cryptographically authenticated data in the form of keys and values.

A Merkle Patricia Tree with a certain group of keys and values can only be constructed in a single way. In other words, given the same set of keys and values, two Merkle Patricia Trees constructed independently will result in the same structure bit-by-bit. A special property of Merkle Patricia Trees is that the hash of the root node the first node in the tree depends on the hashes of all sub-nodes.

This means that any change to the tree results in a completely different root hash value. Changes to a leaf node cause all hashes leading to the root hash through that and sister branches to be recomputed. What we have described is in fact the "Merkle" part of the tree, the "Patricia" part comes from the way keys are located in the tree. Patricia trees are tries where any node that is an only child is merged with its parent.

They are also known as "radix trees" or "compact prefix trees". A trie is a tree structure that uses prefixes of the keys to decide where to put each node. The Merkle Patricia Trees implemented in Ethereum have other optimizations that overcome inefficiencies inherent to the simple description presented here. For our purposes, the Merkle aspect of the trees are what matter in Ethereum.

Rather than keeping the whole tree inside a block, the hash of its root node is embedded in the block. If some malicious node were to tamper with the state of the blockchain, it would become evident as soon as other nodes computed the hash of the root node using the tampered data.

The resulting hash would simply not match with the one recorded in the block. At this point we should find ourselves asking a big question: why not simply take the hash of the data? Merkle Patricia Trees are used in Ethereum for a different, but very important reason: most of the time, nodes do not need a full copy of the whole state of the system.

Rather, they want to have a partial view of the state, complete enough to perform any necessary computations for newer blocks or to read the state from some specific address. Since no computations usually require access to the whole state stored in the blockchain, downloading all state would be superfluous.

In fact, if nodes had to do this, scalability would be a serious concern as the network expanded. To verify a partial piece of the state at a given point, a node need only download the data necessary for a branch of the tree and the hashes of its siblings.

Any change in the data stored at a leaf would require a malicious node to be able to carry a preimage attack against the hashing algorithm of the tree to find the values for the siblings that combined with the modified data produce the same root hash as the one stored in the block. All of this allows efficient operations on the state of the blockchain, while at the same time keeping its actual potentially huge data separate from the block, still the center piece of the security scheme of the blockchain.

History Much like Bitcoin, the blockchain can be used to find the state of the system at any point in time. This can be done by replaying each transaction from the very first block up to the point in question. However, in contrast to Bitcoin, most nodes do not keep a full copy of the data for every point in time. Ethereum allows for old data to be pruned from the blockchain. The blockchain remains consistent as long as the blocks are valid, and data is stored outside of the blocks, so technically it is not required to verify the proof-of-work chain.

In contrast to Bitcoin, where to find the balance of an account a node must replay all transactions leading up to that point, Ethereum stores state by keeping the root hash of the Merkle Patricia Tree in each block. As long as the data for the last block or any past blocks is available, future operations can be performed in the Ethereum network.

In other words, it is not necessary for the network to replay old transactions, since their result is already available. This would be akin to storing the balance of each account in each block in the Bitcoin network. There are, however, nodes that store the whole copy of the historical state of the blockchain. This serves for historical and development purposes. Though powerful, the Ethereum Virtual Machine works at a level too low to be convenient to directly program like most VMs.

For this reason, several languages for writing contracts have been developed. Of these, the most popular one is Solidity. The Solidity compiler turns this code into Ethereum Virtual Machine bytecode, which can then be sent to the Ethereum network as a transaction to be given its own address. An owner claims contract is a contract that lets any address owner to record arbitrary key-value data. The nature of the blockchain certifies that the owner of certain address is the only one who can set claims in connection to that address.

In other words, the owner claims contract allows anyone who wants to perform transactions with one of your addresses to know your claims. For instance, you can set a claim called "email", so that anyone that wants to perform a transaction with you can get your email address. This is useful, since an Ethereum address is not bound to an identity or email address , only to its private-key. The contract is as simple as possible. First there is the contract keyword that signals the beginning of a contract.

Then comes OwnerClaims, the contract name. Inside the contract there are two types of elements: variables and functions. Among variables there are two types as well: constants and writable variables. Constants are just that: they can never be changed. Writable variables, however, save state in the blockchain.

It is these variables that encode the state saved in the blockchain, nothing more. Functions are pieces of code that can either read or modify state. Read-only functions are also marked as constant in the code and do not require gas to run. On the other hand, functions that mutate state require gas, since state transitions must be encoded in new blocks of the blockchain and these cost work to produce.

Values returned from functions are returned to the caller. The owners variable in our contract is a map , also known as associative array or dictionary. It matches a key to a value. In our case, the key is an address. Addresses in Ethereum are the identifiers of either normal accounts usually managed by users or other contracts.

When an owner of an address decides to set a claim, it is this mapping from address to a claim that we are interested in. In fact, we are not simply mapping an address to a claim, but to a group of key-values that constitute a group of claims in the form of another map. This is convenient because an address owner might want to make several details about himself known to others.

In other words, address owners might want to make their email address and their cellphone number available. To do so, they might create two claims: one under the "email" key, and the other under the "phone" key. The contract leaves to each owner to decide what entries to create, so the names of the keys are not known in advance.

For this reason, a special "default" key is available, so any reader might know at least one claim if he doesn't know what keys are available. In truth, this key is also in place for a different reason: Solidity does not make it practical to return bulk data from functions.

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