Almost all smart contract L1 blockchains(Solana, Ethereum L2s[Polygon, Optimism etc]) follow the account based model. Notable exceptions include Bitcoin and Cardano with follow a UTXO model.
- Externally-owned account (EOA) – controlled by anyone with the private keys
- Contract account – a smart contract deployed to the network, controlled by code. Learn about smart contracts
TLDR; Wallets are EOAs. Private key == wallet. Smart contracts are just wallets controlled by code.
Transactions: https://ethereum.org/en/developers/docs/transactions/
- Transactions are state changes:
- Basic: Send Ethereum
- Smart contract interaction: Change data in a smart contract(Update a variable or an array) e.g. Update array so that NFT “1” is owned by wallet xxx(Public wallet hash)
- Contract deployments: Publishing a smart contract so others can use
TLDR; Everything on the blockchain is a transaction. A transaction is just a data update.
**Blocks: ** https://ethereum.org/en/developers/docs/blocks/
- Blocks are just batches of transactions
- A block is a group of transactions every ~12s slot
- Validators check a block by checking the hash
- Magic computer science, lets you check 1 hash to verify the entire history(Merkle trees)
- Other validator attest that your validation is correct(attestations, Proof of stake) i.e. double-checking your work to keep you honest
- Block is “set in stone” after finality: https://ethereum.org/fil/roadmap/single-slot-finality/
- Blocks are like timestamps of the state of the chain at a certain point-in-time
TLDR; Blocks are groups of transactions that get verified together. The magic of blockchain is you can verify the entire history of the chain by checking a single hash. It keeps everyone honest.
- Bridges transfer assets across chains.
- Types of bridges:
- Lock and mint – Lock assets on the source chain and mint assets on the destination chain
- Burn and mint – Burn assets on the source chain and mint assets on the destination chain
- Atomic swaps – Swap assets on the source chain for assets on the destination chain with another party(Needs a 3rd party sometimes)
- Bridges can create additional risk and spread risk to other chains
**TLDR; ** Bridges can expand economic value to other blockchains but there is a innate risk
**Maximal Extractable Value(MEV): **https://ethereum.org/en/developers/docs/mev/
- Validators can maximize the value from a block by transaction ordering
- Arbitrage: Buy from one DEX sell to another DEX to take advantage of price differences
- Liquidations: Cash out gamblers that are over-leveraged. I.e. Margin call speculators borrowing too much against their assets to make more bets
- **Sandwich trading(Pump and dump in a single block): **
- Pump the price
- Let others buy at the higher prices
- Sell right after
- Occurs within a single block(So on one can react, it happens all at once)
- MEV is good AND bad for the ecosystem depending on how evil the validator is
TLDR; MEV helps optimize the DeFi Ecosystem but bad actor validators can take advantage of others
- Everything in a blockchain happens in a black box, a constrained environment(EVM) i.e. Smart contracts can’t natively pull info from outside the blockchain
- Everything transaction has to be repeatable(deterministic) by every other node using the same set of data i.e. Each node needs the same set of data to start
- Data from outside the blockchain, stock prices, weather, etc. needs to come from an oracle
- Oracles like chainlink verify and make data available to smart contracts
- Smart contracts rely on Oracles for price feeds and other external data
**TLDR; ** Blockchain based smart contracts are closed systems that can’t pull data from outside the chain without oracles. Oracles verify and make external data available to smart contracts.
- Sharding: Split up work so every node doesn’t have to process everything. https://ethereum.org/en/roadmap/danksharding/
- Layer 2 scaling: Have another chain process multiple transactions and batch them up into a single L1 transaction i.e. L2 Optimism processes 100 transactions and then commits it to L1 Ethereum Mainnet as a single transaction
- Optimistic vs ZK Rollups is a whole rabbit hole you can dig into.
- Both just roll up, or batch up multiple transactions into one
TLDR: There’s not enough throughput(transactions per second, TPS) for 8 billion people to use Ethereum. There are clever ways of batching up transactions, or reducing the total amount of work to increase TPS.
- https://ethereum.org/en/developers/docs/smart-contracts/languages/
- https://docs.soliditylang.org/en/latest/solidity-by-example.html
- https://medium.com/@austin_48503/%EF%B8%8Fethereum-dev-speed-run-bd72bcba6a4c
TLDR: Solidity is #1. Don’t learn Vyper or anything else unless you have a good reason
TLDR: Helps your development workflow like deploying to testnet and testing your smart contract
TLDR: Helps you talk to the blockchain like Goerli, Ethereum testnet, or Ethereum mainnet. Also, helps you talk to IPFS to store files and other things
Base Implementations: Don’t start from scratch. Use battle-tested smart contract templates as a starting point.
- OpenZeppelin is industry standard
- ERC-20: Basic token i.e. Basic Attention Token, BAT or any token on Ethereum
- ERC-721 or ERC-1155: Non-fungible Tokens, NFTs
TLDR: Industry standard, secure implementations of tokens and NFTs and other common contracts to build on.
- Manual Audits: Have experts review your contract: https://www.openzeppelin.com/security-audits
- Automated Tests: Test your codes functions as intended: https://trufflesuite.com/docs/truffle/how-to/debug-test/write-tests-in-solidity/
- Bug Finding Competition: Have the community compete to find bugs in your code: https://code4rena.com/
- Fuzzing: Automated testing of security vulnerabilities in your code: https://consensys.io/diligence/fuzzing/
**TLDR: **For advanced Smart contract developers that are ready to deploy to mainnet and risk real money.
Front-end UI frameworks: Ethereum dapps, decentralized applications use the same front-end technologies as other web apps. HTML, CSS, Javascript, ReactJS, Tailwind
- There are tons of existing tutorials on how to do front-end development for building UIs if that is your focus
- Learn this first if you are a new developer
Wallet: Browser plugin or mobile app that contains a browser to view dapps and also contains your private key to sign transactions
Basic building blocks(financial legos) for building DeFi applications.
Stablecoins: https://ethereum.org/en/stablecoins/
- ERC-20 token pegged to fiat currency like USD or EURO
- Can be pegged to a basket of currencies i.e. 25% USD, 25% EURO, 25% YEN, 25% YUAN
- Provides trading pair for cryptocurrencies on DEXs i.e. ETH/USDC or ETH/DAI
- Provides access to more stable fiat for citizens of countries with high inflation _e.g. Argentina _
- Provides opportunity to earn interest/yield by loaning, providing liquidity e.g. Loan USDC to traders that want leverage on their assets
- Can be used with prepaid cards to directly spend crypto with a swipe e.g. Coinbase Card
- You can borrow USDC against your crypto for leverage or other DeFi opportunities in exchange for additional risk
- International transfers and remittance
Fiat-backed
- Example: USDC
- 100% Backed by USD cash and Treasuries
- Monthly audits: https://www.circle.com/hubfs/USDCAttestationReports/2023/2023%20USDC_Circle%20Examination%20Report%20May%202023.pdf
- Centralized and run by Circle corporation
Crypto-Collateralized
- Example: DAI
- Overcollateralized i.e. if the price of ETH drops a lot there’s a big buffer that there’s still enough ETH to back the DAI
- Collateral is public domain on blockchain: https://daistats.com/#/
- Stats: https://dune.com/hagaetc/maker-dao---mcd
- Decentralized DAO run by MakerDAO holders
Don’t mess with algorithmic stablecoins. RIP TERRA & UST
Money Markets(Liquidity Protocols): https://docs.aave.com/hub/
- Examples: Aave, Compound
- Allow you to deposit crypto to earn interest(yield)
- Allows you to borrow against your deposited crypto as collateral for a fee(APR)
- No credit check, pseudo anonymous, just need a wallet
- **Example use case: **
- Deposit ETH
- Borrow USDC against ETH collateral
- Buy more ETH with USDC
- Gain increased exposure to ETH(leverage)
- Sell if capital increases in price to magnify gains(AND losses)
- Can pull USDC(fiat stablecoin) out to spend IRL without selling crypto collateral
- Can be integrated into other DeFi protocols
- Variable APR changes based on total amount borrowed in ecosystem. I.e. as more of a asset reserve is borrowed, interest rate increases to incentivize deposits
- If your crypto collateral drops dramatically, you may be liquidated
- **Advanced use case: ** Flash loans
Decentralized Exchanges(DEXs): https://docs.uniswap.org/concepts/overview
- Examples: Uniswap
- Allows swaps of asset pairs without centralized order box and matching engine
Next Page: Solidity Primitives