An Introduction to Ethereum and Smart Contracts: A Programmable Blockchain, Part 3

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An Introduction to Ethereum and Smart Contracts: A Programmable Blockchain, Part 3

In this installment, we look at some real world of examples of how Ethereum users can use this blockchain technology to stay secure.

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Welcome back! This is Part 3 of this article series. If you missed the first two installments, check out Part 1 and Part 2 here. 

Current and Potential Uses

What we just saw with our simple example gave us a taste of what is possible with Ethereum. Do note it has nothing to do with exchanging money! Although ether is necessary to perform mutations on the network, our contract is strictly concerned with securely establishing a series of claims connected to an Ethereum address. Nothing more. Not only is the result mathematically verifiable (no other person other than the owner of the address can set claims), but is also very hard to erase: it is recorded in a globally distributed database with no central node!

Having access to a distributed, Turing-complete computing engine with verifiable semantics opens a world of possibilities. Let's take a look at interesting ideas already implemented or under implementation in Ethereum.

The Decentralized Autonomous Organization (DAO)

The DAO is, literally, an organization. It has members, it has a central authority (the owner), members can cast votes, and the organization itself can perform any operations any other account could do. Members can create proposals, in the form of transactions, and voting members of the organization can cast votes to either approve the proposal or dismiss it. Proposals have a limit of time after which votes are counted and a decision is taken. The decision to perform or dismiss the proposal is carried by the contract of the DAO. In other words, no central authority can decide the fate of a proposal, and this is certified by the contract and the nature of the blockchain. The owner can be changed by a proposal. The only privilege the owner has is the ability to add or remove voting members.

In fact, the DAO we have just described is only one of the possible implementations. There are many improvements or modifications that can be performed to create whatever type of hierarchy. A Congress, a shareholder association, a democracy, these are all possibilities.

To learn more about DAOs, the main Ethereum website has a whole area dedicated to them.

A Central Bank or Your Own Coin

Although ether has real value and can be traded for other coins, other coin systems can be implemented on top of Ethereum. For instance, you could design your own coin with a central authority that can create money, authorize transactions, or arbitrate disputes. Take a look at a possible implementation by following this tutorial.

A Crowdfunding System

Crowdfunding lets donors send money for a project that has not been completed or even started. In this way, funding for projects of different sizes is possible. The amount of money donated for the project is what usually decides the fate of the project. The usual problem with crowdfunding is the need for a central figure to hold founders responsible in case a project is not satisfactorily completed after funding, or to make sure all the money donated actually arrives at the hands of the founders. In other words, crowdfunding requires a considerable amount of trust to be placed in both the founder of a project and the central authority. But with Ethereum this needn't be so.

With Ethereum, it is possible to design a contract that takes a certain amount of money from donors and stores it in an account. The funds in this account can be kept away from the hands of the founders until they provide proof of their progress. When a certain milestone is achieved, the funds can be released. On the other hand, if the founders fail to provide proof of their progress in a reasonable timeframe, donated funds can be automatically returned to the donors. All of this logic of handling funds can be performed without trust in a central authority. Donors can be sure their money won't be spent until proof-of-work is provided, and they can be sure they will always get their money back otherwise. They can also be 100% certain each donor's money will go into the right hands.

An example implementation of a crowd sale is available in the Ethereum page.

Prove That You Said Something in the Past

An interesting aspect of the blockchain is that its mere existence is proof that every transaction in it happened at some point in time. Although a certain variance in the timestamp of a transaction is expected (as it will get set by the node that creates the block that contains it), anything recorded in the blockchain happened at some point in the past. In fact, it is possible to assert it happened before or after other events also recorded or linked in some way to the blockchain. Since the blockchain allows for an arbitrary state to be stored in it, it is possible to link an arbitrary message to an address. Anyone can confirm by looking at the blockchain that that message was produced at some point in the past by the owner of an address. All the owner needs to do is prove he is the owner of the address that produced the same message in the past. This can simply be done by performing a transaction using the same address as before.

Suppose you wrote a book. Before sending copies to your friends and editors, you decide to prove it was you who wrote it by storing its proof of existence in the blockchain. If your book gets plagiarized before getting published (by one of the editors, for instance), you can prove it was you who wrote it by showing you linked its hash to an Ethereum address. When anyone wants to confirm you own the address, you can show it to them through any transaction of their choice. The blockchain ensures any person in doubt can see the association between the hash of the book and your address, proving you had access to the full copy of the book at some point in the past.

Proof of Existence for Digital Assets

The concept of the previous example can be extended to a proof of the existence of anything that can be hashed. In other words, anything with a single digital representation can be hashed and stored in the blockchain, just like the arbitrary message from above. Later, any user can query whether the element was hashed and added to the blockchain.

Here is one working example of this concept.

There are many more examples of things that can be implemented with Ethereum, check them out!

That's it for Part 3. Tune in tomorrow for the fourth and final part of this portion of our Ethereum series, and learn how to make a simple login system using Ethereum! 

blockchain, ethereum, security

Published at DZone with permission of Sebastián Peyrott , DZone MVB. See the original article here.

Opinions expressed by DZone contributors are their own.

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