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For Beginners - Learn How To Use Blockchain Smart Contracts For Cryptocurrency Exchange In this growing and changing world, the concept of digital platforms is not commonplace. Although there was a time when these things were just an idea in someone’s head, they have now become such a reality that millions of people across the globe use them. But online platforms can be confusing, and with all the different people you meet on there, it can be hard to know how to stay safe. With little legal regulation, anyone can be on these sites at any time. Which is why smart contracts exist. These contracts are created to keep smooth interactions between individuals on these platforms, and with them, millions of dollars in currency are exchanged across the globe daily. But how do you create one of these smart contracts? And what on earth is a blockchain? That is where this book comes in. In it, you are going to learn everything you need to know about blockchains, smart contracts, and cryptocurrency. This book will answer all your questions, and get you started on the right track with your own smart contract.

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Crytocurrency is changing business

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Cryptocurrency is:


 A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Cryptocurrency is a paradigm shift in financial transactions.

Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the  system works well  enough for  most transactions, it still suffers from the inherent weaknesses of the trust based model. Completely non-reversible transactions are not really possible, since financial institutions cannot avoid mediating disputes. The cost of mediation increases transaction costs, limiting  the  minimum practical transaction size and cutting off the possibility for small casual transactions,  and there is a broader cost in the loss of ability to make non-reversible payments for non- reversible services.  With the possibility of reversal, the need for trust spreads.  Merchants must   be wary of their customers, hassling them for more information than they would otherwise need.   A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.

What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. Transactions that are computationally impractical to  reverse would protect sellers  from fraud, and routine escrow mechanisms could easily be implemented to protect buyers.  In  this paper, we propose a solution to the double-spending problem using a peer-to-peer distributed timestamp server to generate computational proof of the chronological order of transactions. The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes.

2.Transactions

We define an electronic coin as a chain of digital signatures. Each owner transfers the coin to the next by digitally signing a hash of the previous transaction and the public key of the next owner and adding these to the end of the coin. A payee can verify the signatures to verify the chain of ownership.

[ Box: Owner 1's Public Key Hash] [Box: Owner 2's Public Key Hash]

[Verify] [Verify] [Sign] [Sign] The problem of course is the payee can't verify that one of the owners did not double-spend  the coin. A common solution is to introduce a trusted central authority, or mint, that checks every transaction for double spending. After each transaction, the coin must be returned to the mint to issue a new coin, and only coins issued directly from the mint are trusted not to be double-spent. The problem with this solution is that the fate of the entire money system  depends  on  the company running the mint, with every transaction having to go through them, just like a bank.

We need a way for the payee to know that the previous owners did not sign any earlier transactions. For our purposes, the earliest transaction is the one that counts, so we don't care about later attempts to double-spend.  The only way to confirm the absence of a transaction is to  be aware of all transactions. In the mint based model, the mint was aware of all transactions and decided which arrived first. To accomplish this without a trusted party, transactions must be publicly announced [1], and we need a system for participants to agree on a single history of the order in which they were received. The payee needs proof that at the time of each transaction, the majority of nodes agreed it was the first received.
 
3.Timestamp Server

The solution we propose begins with a timestamp server. A timestamp server works by taking a hash of a block of items to be timestamped and widely publishing the hash, such as in  a newspaper or Usenet post [2-5].  The timestamp proves that the data must have existed at the  time, obviously, in order to get into the hash. Each timestamp includes the previous timestamp in its hash, forming a chain, with each additional timestamp reinforcing the ones before it.

4.Proof-of-Work

To implement a distributed timestamp server on a peer-to-peer basis, we will need to use a proof- of-work system similar to Adam Back's Hashcash [6], rather than newspaper or Usenet posts.    The proof-of-work involves scanning for a value that when hashed, such as with SHA-256, the hash begins with a number of zero bits. The average work required is exponential in the number  of zero bits required and can be verified by executing a single hash.

For our timestamp network, we implement the proof-of-work by incrementing a nonce in the block until a value is found that gives the block's hash  the required zero bits.  Once the CPU  effort has been expended to make it satisfy the proof-of-work, the block cannot be changed without redoing the work. As later blocks are chained  after it, the work to change the block  would include redoing all the blocks after it.

The proof-of-work also solves the problem of determining representation in majority decision making. If the majority were based on one-IP-address-one-vote, it could be subverted by anyone able to allocate many IPs. Proof-of-work is essentially  one-CPU-one-vote.  The  majority  decision is represented by the longest chain, which has the greatest proof-of-work effort invested in it. If a majority of CPU power is controlled by honest nodes, the honest chain will grow the fastest and outpace any competing chains.  To  modify a past block, an attacker would have to  redo the proof-of-work of the block and all blocks after it and then catch up with and surpass the work of the honest nodes. We will show later that the probability of a slower attacker catching up diminishes exponentially as subsequent blocks are added.

To compensate for increasing hardware speed and varying interest in running nodes over time, the proof-of-work difficulty is determined by a moving average targeting an average number of blocks per hour.  If they're generated too fast, the difficulty increases.


 6.Incentive

By convention, the first transaction in a block is a special transaction that starts a new coin owned by the creator of the block. This adds an incentive for nodes to support the network, and provides  a way to initially distribute coins into circulation, since there is no central authority to issue them. The steady addition of a constant of amount of new coins is analogous to gold miners expending resources to add gold to circulation.  In our case, it is CPU time and electricity that is expended.

The incentive can also be funded with transaction fees. If the output value of a transaction is less than its input value, the difference is a transaction fee that is added to the incentive value of  the block containing the transaction. Once a predetermined number of coins have entered circulation, the incentive can transition entirely to transaction fees and be completely inflation free.

The incentive may help encourage nodes to stay honest. If a greedy attacker is able to  assemble more CPU power than all the honest nodes, he would have to choose between using it   to defraud people by stealing back his payments, or using it to generate new coins. He ought to find it more profitable to play by the rules, such rules that favour him with more new coins than everyone else combined, than to undermine the system and the validity of his own wealth.

8.Simplified Payment Verification

It is possible to verify payments without running a full network node.  A user only needs to keep    a copy of the block headers of the longest proof-of-work chain, which he can get by querying network nodes until he's convinced he has the longest chain, and obtain the Merkle branch    linking the transaction to the block it's timestamped in. He  can't  check  the  transaction  for himself, but by linking it to a place in the chain, he can see that a network node has accepted it,  and blocks added after it further confirm the network has accepted it.

 Longest Proof-of-Work Chain

Merkle Branch for Tx3

As such, the verification is reliable as long as honest nodes control the network, but is more vulnerable if the network is overpowered by an attacker. While network nodes can verify transactions for themselves, the simplified method can be fooled by an attacker's fabricated transactions for as long as the attacker can continue to overpower the network. One strategy to protect against this would be to accept alerts from network nodes when they detect an invalid block, prompting the user's software to download the full block and alerted  transactions  to confirm the inconsistency. Businesses that receive frequent payments will probably still want to run their own nodes for more independent security and quicker verification.

10. Privacy

The traditional banking model achieves a level of privacy by limiting access to information to the parties involved and the trusted third party. The necessity to announce all transactions publicly precludes this method, but privacy can still be maintained by breaking the flow of information in another place: by keeping public keys anonymous.  The public can see that someone is sending   an amount to someone else, but without information linking the transaction to anyone. This is similar to the level of information released by stock exchanges, where the time and size of individual trades, the "tape", is made public, but without telling who the parties were.

 [Box: Public]
Traditional Privacy Model

[Box: Identities]
New Privacy Model

 As an additional firewall, a new key pair should be used for each transaction to keep them  from being linked to a common owner. Some linking is still unavoidable with multi-input transactions, which necessarily reveal that their inputs were owned by the same owner.  The risk   is that if the owner of a key is revealed, linking could reveal other transactions that belonged to   the same owner.


We have proposed a system for electronic transactions without relying on trust. We started with  the usual framework of coins made from digital signatures, which provides strong control of ownership, but is incomplete without a way to prevent double-spending. To solve this,  we proposed a peer-to-peer network using proof-of-work to record a public history of transactions  that quickly becomes computationally impractical for an attacker to change if  honest  nodes control a majority of CPU power. The network is robust in its unstructured simplicity. Nodes  work all at once with little coordination.  They do not need to be identified, since messages are  not routed to any particular place and only need to be delivered on a best effort basis. Nodes can leave and rejoin the network at will, accepting the proof-of-work chain as proof  of  what  happened while they were gone. They vote with their CPU power, expressing their acceptance of valid blocks by working on extending them and rejecting invalid blocks by refusing to work on them.  Any needed rules and incentives can be enforced with this consensus mechanism.

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MULTI-CURRENCY : Nano S supports Bitcoin and Ethereum blockchains: hold different assets and spend them from the same hardware wallet.
SECURE DISPLAY : Check transactions on the OLED display and confirm using the physical buttons (anti-malware second factor).
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Ledger Nano S supports the FIDO® Universal Second Factor authentication standard on Google, Dropbox, GitHub or Dashlane

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