We often come across the terms fungible Tokens and non-fungible tokens in the blockchain. What are they? The following table explains what are they and how they differ.
Fungible Tokens
Non-fungible Tokens
Interchangeable A fungible token can be exchanged with any other fungible token of the same type. It is like exchanging a dollar bill with another dollar bill and the value is still the same.
Non-Interchangeable A non-fungible token cannot be exchanged with another non-fungible token of the same type. It is like your passport or ID, they cannot be exchanged.
Uniform Each fungible token is identical to all other fungible tokens of the same type. For example, your one-dollar bill is the same as John’s one-dollar bill.
Unique Each token is unique and different from all other tokens of the same type. For example, your bank account is not the same as John’s bank account
Divisible A fungible token can be divided into smaller units and the total value is still the same. For example, you can divide a dollar bill into two 50 cents or five 20 cents and the total value is still the same.
Non-divisible The non-fungible token cannot be divided into smaller units. The basic unit is one token and one token only. For example, your driving license.
ERC-20 Standard The Ethereum Standard is used for issuance tokens to be used as cryptocurrencies.
ERC-721 Standard The Ethereum Standard is used for the issuance of unique, non-fungible tokens. The most well-known case is CryptoKitties, which is a virtual collectibles marketplace where each kitty is unique.
Non-fungible tokens can be used in KYC (Know Your Customer) procedures, for academic degrees and other educational certificates, collectibles, badges, voting & elections, loyalty programs, in-game items, copyright, supply chain tracking, medical data, software licenses, warranties, and more.
Blockchain is the coolest and most innovative technology at the moment. Many people believe It has the potential to disrupt many technologies. However, the blockchain technology is still far from mature. It is still facing numerous issues, scalability is one of them. Therefore, it is advisable to conduct a thorough study before adopting the blockchain technology.
Adopting the blockchain technology is akin to business process re-engineering which might incur heavy costs. Besides that, an organization might face certain new risks. Therefore, businesses and other organizations must evaluate many factors before adopting the blockchain technology. They need to carry out an inventory analysis by asking the following questions like,
How many participants are in the system?
What is the geographical distribution of the participants?
What sort of performance requirements do they have?
On top of that, they need to specify the rules, risks, and responsibilities of each party in your blockchain ecosystem before transferring the present centralized database to a decentralized blockchain network. According to some expert opinions, blockchain is best suited for business applications where one or more of the following conditions apply:
There is a need for a shared common database
The parties involved with the process have conflicting incentives in a trustless environment.
There are multiple parties involved in the environment.
There are uniform rules governing participants in the system
Decision making of the parties is transparent, rather than confidential
There is a need for an objective, immutable history or log of facts for parties’ reference
Transaction frequency does not exceed 10,000 transactions per second.
When Not to Use Blockchain
Although blockchain is a powerful tool, it is not always the right tool. If a business is contemplating using blockchain technology, it needs to evaluate the issues fully. The following conditions are not currently well suited to blockchain-based solutions:
The process involves confidential data
The process stores a lot of static data, or the data is quite large
Setting up a private Ethereum blockchain network is not an extremely difficult task for the coders. However, it may be a bit of a challenge for the beginners. I will skip some technical details and avoid using some jargon so that everyone can understand the basic concepts.
Prerequisites
Before setting up the network, you need to install the following software:
Visual Studio Code
git
NodeJs
Ethereum Wallet
Geth
The go-ethereum client is commonly referred to as geth, which is the command line interface for running a full Ethereum node implemented in Go. By installing and running geth, you can run a private network or participate in the Ethereum main network. By running geth, you can perform the following tasks:
mine real ether
transfer funds between addresses
create smart contracts and send transactions
explore block history
and much much more
Creating the Genesis Block
To set up the private network, we need to create the Genesis block, the first block of the blockchain in our network. The code for the genesis block is written in JSON format. JSON stores data as a name/value pair. For example:
"name": "John" , "age": 30
It uses JavaScript syntax, but the format is text only. Therefore, JSON can be read and used as a data format by any programming language. You can use any text editor to write the JSON code(JSON: JavaScript Object Notation), I use Notedpad++. The sample code for the genesis block is as follows
I will not discuss the contents of the genesis block here. Copy the code in a text editor and save the file as
myGenesis.json
Now run the following command in the command prompt to initialize the genesis block
geth init myGenesis.json
The output is as follows:
Once the genesis block is successfully created, a folder name ‘Ethereum’ will be created in the following path:
“C:\Users\admin\AppData\Roaming\Ethereum”
This folder contains the details of the Private Blockchain.
Starting the Private Network
Once the genesis block is created, run the following command to start the private network:
geth — networkid=5
*“networkid=1” stands for the main Ethereum network. So any random number apart from 1 can be given as the network id. Also, “console” is appended to the command in order to enable us to write commands while the network is running.
The output is as follows:
Launching the Ethereum Wallet
The output is as shown in the following figure. Notice that the network name is Private net.
Creating a New Account Address
You can create an address in the Ethereum Wallet application. The address can be created on the Ethereum Wallet App. In the ‘Wallets’ section, click on ‘Add Account’ to create a new account address.
To create new account using the Geth Console, use the following command:
geth account new
The output
Start Mining
To start mining on the private network, Enter the geth console with the following command
Geth --rpc console
In the Geth Console type
miner.start()
The output is as follows
Now you can see that the mining process is generating Ethers , as shown in the following figure. Bear in mind that these are fake Ethers and can only be used for a private test net.
Stop Mining
Type Ctrl+C in the geth console and key in the following command:
In the blockchain network, a user can send some crypto money to another user in exchange for something of value where the transaction is executed automatically based on a smart contract. In another case, a smart contract is executed when a user acquires a unique virtual kitty from the Cryptokitties collectible marketplace via a bidding process, the highest bidder gets to own the digital asset.
On the other hand, a transaction can occur automatically between two smart devices using an integrated system of IoT technology and blockchain. For example, a smartphone A can top up data for another smartphone B after A received some money from B, the transaction occurs based purely on a smart contract without the awareness of the owners.
According to Investopedia, smart contracts are ,
“self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. Smart contracts permit trusted transactions and agreements to be carried out among disparate, anonymous parties without the need for a central authority, legal system, or external enforcement mechanism. They render transactions traceable, transparent, and irreversible.”
Definition of Smart Contract
Based on the aforementioned descriptions, we can define a smart contract as a computer code that can facilitate the exchange of money, content, property, shares, digital assets or anything of value among disparate and anonymous parties without a middle entity.
When a smart contract is installed in a blockchain system, it behaves like a self-operating computer program that automatically executes when some specific terms and conditions are met. Because smart contracts run on the blockchain, they run exactly as programmed without any possibility of censorship, downtime, fraud or third-party interference.
A Brief History of Smart Contracts
In contrary to popular belief, the smart contract is not invented by Vitalik Buterin, the founder of Ethereum. In actual fact, the idea of the smart contract was first conceived by computer scientist and cryptographer Nick Szabo in 1993 as a kind of digital vending machine. In his famous example, he described how users could input data or value, and receive a finite item from a machine, in this case, a real-world snack or a soft drink. Nick Szabo is so smart that some people believe that he could be Satoshi Nakamoto who invented bitcoin.
In addition, though Ethereum is the first blockchain system that has adopted the smart contract technology, it is not the only one using smart contracts. Many Non-Ethereum blockchain platforms such as Hyperledger Fabric, Hyperledger Sawtooth and Corda implement their own versions of smart contracts. The smart contract in Hyperledger Fabric is known as Chaincode that runs in a container known as docker(I will discuss Chaincode and how to install it in Docker in a future article).
Today, most blockchain platforms run on Ethereum Virtual Machine(EVM) implement Ethereum smart contract while a few enterprise blockchain platforms implement their own version of smart contracts. However, there could be interoperability between the Ethereum platform and the enterprise platforms. For instance, in the Sawtooth-Ethereum integration project, EVM (Ethereum Virtual Machine) smart contracts can be deployed to Sawtooth using the Seth transaction family. I will discuss Hyperledger technologies in another article.
Solidity
Solidity is a high-level programming language that is used to create and implement smart contracts on Ethereum platform. The smart contracts created using Solidity can be used for financial transactions, crowdfunding, voting, supply chain management, IoT implementation, ride sharing automation, smart city administration and more.
Solidity has Python, C++ and JavaScript influences. Therefore, it is fairly convenient and easy to grasp for those that are already familiar with the Python, C++ or JavaScript.
Writing and Deploying the Smart Contract
The Integrated Development Environment (IDE)
The best tool to write, compile, test and deploy smart contracts is Remix. Remix is a browser-based IDE that provides an inbuilt compiler as well as a run-time environment without server-side components. You can access Remix from the following link: https://remix.ethereum.org
Besides that, you need to install Visual Studio 2015. I shall skip the technical details for now. (I will discuss how to use Visual Studio Code in compiling and deploying smart contracts in another article).
The Smart Contract Code
A smart contract is a data, that can be referred to as its state, and code, which can be referred to as its functions, collection, that resides on a specific address in the Ethereum blockchain. Let us begin with the most basic example. It is fine if you do not understand everything right now, we will go into more detail later. Enter the follow codes in the Remix IDE and save the file as MyStorage.sol
pragma solidity ^0.4.25;
contract MyStorage { uint storedData;
function set(uint x) public { storedData = x; }
function get() public view returns (uint) { return storedData; } }
Understanding the Code
The first line simply tells that the source code is written for Solidity version 0.4.25 or anything newer that does not break functionality .This is to ensure that the contract does not suddenly behave differently with a new compiler version. The keyword pragma is called that way because, in general, pragmas are instructions for the compiler about how to treat the source code.
A contract in the sense of Solidity is a collection of code (its functions) and data (its state) that resides at a specific address on the Ethereum blockchain. The line uint storedData; declares a state variable called storedData of type uint(unsigned integer of 256 bits). You can think of it as a single slot in a database that can be queried and altered by calling functions of the code that manages the database. In the case of Ethereum, this is always the owning contract. And in this case, the functions set and get can be used to modify or retrieve the value of the variable.
To access a state variable, you do not need to use the prefix this that is commonly used in other programming languages. This is just a simple contract that does not do much yet apart from allowing anyone to store a single number. This number is accessible by anyone in the world without a feasible way to prevent you from publishing this number. Of course, anyone could just call set again with a different value and overwrite your number. However, the number will still be stored in the history of the blockchain. Later, we will see how you can impose access restrictions so that only you can alter the number.
The Remix IDE
Now enter the code in the Remix IDE, as shown in the following figure:
The Metamask Wallet
In addition, you need to install the Metamask wallet using the Chrome or Firefox extension plugin. After installing Metamask, create an account and connect it to Ropsten Test Network, as shown in the figure below:
Besides that, you need to get some free Ethers to run the test. You can get 1 free Ether for Rospten Testnet from https://faucet.ropsten.be/. Upon loading the website, copy and enter your Metamask wallet address, and click the send me test Ether button, as shown in the following figure:
After a while, you can see 1 Ether is deposited into your Metamask wallet, as shown in the figure below:
Next, in the Remix IDE, change the environment to Injected web3, the Ropsten Test Network. You can see that your wallet address appears in the account box, as shown in the first Figure. Now click on the Deploy button. After clicking this button, the Metamask wallet will pop up, prompting for confirmation, as shown in the following figure:
After clicking the CONFIRM button, you will see that some Ether had been deducted from your account which showed that the contract has been successfully deployed, as shown in the following Figure:
Besides that, you can also view the transaction on Etherscan, as shown in the following Figure:
Finally, you can also check the deployment of the smart contact in the Remix debug window, as shown in the following figure:
In addition, you can view some extra information on the right column on the Remix windows, like the name of the smart contract(Mystorage) , how much gas limit and how many transaction etc.
If you are sure the smart contract is bugs free, you may want to deploy it to the Ethereum Mainnet. In that case, change the Environment to Web3 Provider. You will be prompted with the following dialog:
Wait, you need to install Go Ethereum, the client commonly referred to as geth, which is the command line interface for running a full Ethereum node implemented in Go. Install Go Ethereum from the following link: https://geth.ethereum.org/downloads/
After installing Go Ethereum, there a few more windows system set up before you can run geth. I will not go through the steps here, a bit tedious, I have documented them in another document. If you are keen I can share it with you in the future. Let’s say your environment is ready, you can key in the following command in the command line:
Your computer will now link to the Ethereum mainnet via Remix, as shown in the following figure:
Now click OK on the Remix dialog and bring up the next dialog that prompts you to connect to the Web3 Provider Endpoint, as shown in the figure below:
Click OK and now you can deploy the contract to the Ethereum Main Network. Notice that now the Environment is Web3 Provider, which is the Ethereum Mainnet, as shown in the following Figure:
Before you can deploy the smart contract to the Ethereum mainnet ,you need to have the actual Ether to deploy the contract. I suggest you don’t do it here unless you have developed the actual use case and ready to go for ICO.
ICO is a hot topic in the crypto world today. In this article, I will attempt to explain how to create your own token for an ICO project.
First of all, you need to set up a private Ethereum network, before you can proceed to create the token. After setting up the private network, you need to run it.(The detail steps for setting up a private Ethereum network is discussed in another article)
Next, you need to install the Ethereum wallet before you proceed. Follow the steps below to install the Ethereum Wallet.
Create a folder Ethereum under the Program Files folder and extract the zip files there.
Launch the Ethereum wallet after successful installation. Also, create an account in the wallet.
Next, Open the Wallet app and then go to the Contracts tab as shown in the figure below:
Click on DEPLOY NEW CONTRACT and bring up the Solidity Contract Source code text editor as shown the following figure:
Now type the following smart contract code in the code editor.
pragma solidity ^0.4.24;
contract BestToken {
/* This creates an array with all balances */
mapping (address => uint256) public balanceOf;
string public name;
string public symbol;
uint8 public decimals;
/* Initializes contract with initial supply tokens to the creator of the contract */
constructor(
uint256 initialSupply,
string tokenName,
string tokenSymbol,
uint8 decimalUnits
) public {
balanceOf[msg.sender] = initialSupply; // Give the creator all initial tokens
name = tokenName; // Set the name for display purposes
symbol = tokenSymbol; // Set the symbol for display purposes
decimals = decimalUnits; // Amount of decimals for display purposes
}
/* Send coins */
function transfer(address _to, uint256 _value) public returns (bool success) {
require(balanceOf[msg.sender] >= _value); // Check if the sender has enough
require(balanceOf[_to] + _value >= balanceOf[_to]); // Check for overflows
balanceOf[msg.sender] -= _value; // Subtract from the sender
balanceOf[_to] += _value; // Add the same to the recipient
return true;
}
}
Don’t worry about the code first, I will explain them in another article.
If the code compiles without any error, you should see a “pick a contract” drop-down list on the right, as shown in the figure below:
Click Pick a contract button and select the “BestToken” contract. On the right column, you’ll see all the parameters you need to personalize your own token. You can tweak them as you like, I use the following parameters: 10,000 as the supply, BestCoin for the token name, “#” as the symbol and 2 decimal places. Your wallet should be looking like this:
Scroll to the end of the page and you’ll see an estimate of the computation cost of that contract and you can select a fee on how much Ether you are willing to pay for it. Any excess Ether you don’t spend will be returned to you so you can leave the default settings if you wish. Press “deploy”, type your account password and wait a few seconds for your transaction to be picked up.
Now click the DEPLOY button to deploy the smart contract, the output dialog is as follows:
Upon entering the password for your account and click send transaction, the contract is successfully deployed, as follows:
Now the new token Best Token is shown in your wallet, as follows:
Tokens are currencies and other fungibles built on the Ethereum platform. In order for accounts to watch for tokens and send them, you have to add their address to this list. Proceed to add BestCoin to the list, as shown in the following figure.
Now the new token BestCoin will be shown in the list, as shown in the figure below.
Now you can send some funds from BestCoin to a wallet, as shown in the figure below:
