Note: This blog post is meant for beginners. If you have experience with web3 and blockchain, you might not find this as useful, but I encourage you to maybe stick around anyway.
Welcome to my new series of blog posts where I’ll be exploring Web3 and blockchain! The main reason I’m writing this is to learn more myself. I’ll be learning from various resources like blogs, YouTube videos, and reading whitepapers on the internet. I’m documenting this journey so I can better understand the concepts myself, and hopefully, publishing it will help others interested in the web3 space.
By the end of this series, I hope to have learned enough to find a valid web3 vulnerability even if of low severity in a contest or a bug bounty program. I have experience with bug bounties, so I know about the mental challenges and competitiveness involved, but with web3, I’m starting from scratch.
So let’s get started. Whether you’ve only heard about Bitcoin or are slightly familiar with Ethereum, this series of blogs aims to share everything there is to know about the space. We’re starting at the very basics, so even if you’re a complete novice, you’re in the right place.
My Journey into Crypto
Like many, my introduction to cryptocurrencies began with Bitcoin. Here’s a link to the Bitcoin whitepaper that started it all. But more than the technicalities, I was more into buying and trading them. After Bitcoin, Ethereum came into the picture, expanding the scope from mere trading to enabling decentralized applications through smart contracts. I’ve also completed some beginner’s tutorials like CryptoZombies a few years ago, which is a nice way to learn Solidity, and did a few Ethernaut challenges.
In this blog post, we’ll discuss some basic terminology, such as what a blockchain is, centralized agreements, smart contracts, NFTs, Layer 2 solutions, DEXs, CEXs, and all those fancy words you hear on Twitter, before moving on to hands-on walkthroughs
What is Blockchain?
Initially, I was confused if blockchain and web3 were the same. But I found out that web3 is just the next iteration of the web, using blockchain and smart contracts which are permissionless and open source. This reminds me of a web2.0 blog post by Paul Graham back in 2005. It’s amazing how far we have come both from a society and technology perspective, and it’s just the start of web3.
At its core, a blockchain is a type of database that allows multiple parties to have a synchronized record that’s secure, transparent, and immutable (unchanging over time or unable to be changed).
The best-known application of blockchain technology is Bitcoin, which many of us know as a digital store of value. But blockchain is much more than just Bitcoin. Bitcoin is a store of value while Ethereum is both a store of value and a way to allow decentralized agreements, which we will discuss in a moment.
What are Oracles in Blockchain?
Oracles are systems or third-party services that retrieve data from external sources to a blockchain, allowing smart contracts to operate based on information that isn’t inherently accessible within the blockchain. For instance, smart contracts can’t directly obtain data from external feeds such as stock market updates, sports results, or cryptocurrency prices. Additionally, verifying the reliability of this data poses a significant challenge.
To truly achieve decentralized applications that are robust and reliable, we need decentralized oracle networks, much like Chainlink, which can bring external data into the blockchain securely and without a central point of failure.
If you want to read more about Blockchain oracle you can visit blockchain-oracles
What are DEXs, CEXs, NFTs, and Layer 2 Solutions?
As we go deeper, we’ll explore various elements like decentralized exchanges (DEXs), centralized exchanges (CEXs), non-fungible tokens (NFTs), and Layer 2 scaling solutions. These components are important for enhancing the performance and utility of blockchains without compromising on decentralization.
DEXs (Decentralized Exchanges) – Imagine a marketplace where you can buy and sell things like cryptocurrencies without needing a store manager or a middleman. That’s what DEXs are. They’re like digital farmers markets for crypto, where buyers and sellers connect directly through technology. Uniswap is a popular example. It allows users to swap various cryptocurrencies directly with each other without the need for an intermediary, like a traditional exchange.
CEXs (Centralized Exchanges) – These are more like traditional shops or online stores for cryptocurrencies. Here, there’s a company running the show. They help you buy, sell, or trade your crypto, sort of like a bank or a stock exchange, but specifically for digital currencies. Coinbase is one of the most well-known centralized exchanges. Users can buy, sell, or store cryptocurrencies.
NFTs (Non-Fungible Tokens) – Think of NFTs as digital collectibles. Each NFT is unique, like an original painting or a signed jersey, but in digital form. You can buy, sell, or collect NFTs, which could be anything from digital artwork to music files, and they’re often used to prove ownership of a digital item. You might have heard of CryptoPunks and Bored Ape Yacht Club if not, you’re not missing out on much. 😄
NFTs can also be used for digital IDs and proving ownership of something.
Layer 2 Solutions – Layer 2 Solutions help make transactions faster and cheaper by taking some of the workload off the main blockchain. You can think of them as express lanes on a highway that help avoid traffic jams. For instance, the Ethereum network, which can get bogged down with high fees and slow processing times, benefits from these Layer 2 technologies. Examples include Polygon and Arbitrum, which operate on top of the main Ethereum blockchain (often referred to as Layer 1). These platforms process transactions separately and then record the final results back on the main blockchain, smoothing out transactions and reducing costs.
What’s Next? Hybrid Smart Contracts
Finally, we’ll touch upon hybrid smart contracts that include off-chain components for more complex operations. Hybrid smart contracts are agreements that combine on-chain code (running on a blockchain) with off-chain data provided by oracles.
A simple example of a hybrid smart contract is a sports betting contract. It uses blockchain technology to manage bets and payments automatically, while incorporating real-time game results from an external source via an oracle to determine winners.
I’m looking forward to continuing to write short blogs and share what I’ve learned. My interest in blockchain is fueled by advancements in AI. I believe that while AI can’t open a bank account, it can create a crypto wallet and interact with the financial world, making both fields go hand in hand. Stay tuned for more practical blog posts. We will be covering the basics of blockchain before moving on to hands-on Solidity, and eventually to blockchain security. Please feel free to share any feedback you might have.