💲 💰 Blockchain and Cryptocurrency using Python 💰 💲

Create Virtual Environment

python -m venv <env_name>

Activate Virtual Env

<env_name>\scripts\activate

Install Required Packages

pip install -r requirements.txt

Run The Tests

Make sure virtural environment is activated

python -m pytest backend/tests

Run The application and API

Make sure virtural environment is activated

python -m backend.app

Run a peer instance

Make sure virtural environment is activated

Windows CMD

set PEER=True&& python -m backend.app

Seed backend with data

Make sure virtural environment is activated

Windows CMD

set SEED_DATA=True&& python -m backend.app

Start frontend

In the frontend directory:

npm run start 

Pubnub account

Create account at https://www.pubnub.com/ to get the

• Subscribe key
• Publish key

used in pubsub.py file

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Concepts

• The blockchain is list of blocks where each block represents a unit of storage for data. The list is called a chain because each block references the block before it, creating (chain) links between between blocks. In a blockchain that supports a cryptocurrency, blocks store transactions.

• Mining blocks refers to the process of running a computationally expensive algorithm in order to create new blocks for the blockchain. We'll expand on this in the section on Proof of Work.

• The genesis block is the first block in the blockchain. Since all blocks must reference the block that came before it, the genesis block serves as a hardcoded starter block for the chain.

• A hashing algorithm generates a unique output for every unique output. In the case of this project, we're using the sha-256 algorithm, which produces a unique 256 character hash in binary, and a 64 character hash in hexadecimal.

• Proof of work is a mechanism that requires miners to solve a computational puzzle in order to create valid blocks. Solving the puzzle requires a brute-force algorithm that demands CPU power (hence, the analogy of mining the block).

• The leading 0's requirement is the standard proof of work implementation for finding valid blocks. By adjusting a nonce value in the block, the miner has an infinite number of tries at generating new hashes. Once the miner finds a hash with a matching number of leading 0's as the block difficulty, the fields for valid new block have been found.

• Dynamic difficulty is a mechanism that increases or decreases the difficulty of the next block based on how long it's taking to mine the new block. If the time is exceeding an established mining rate for the system, the difficulty decreases. Likewise, if the time is still before the mine rate, the difficulty increases. This allows the blockchain to control the rate at which blocks are added.

• Chain validation is the process of ensuring that the data of an external blockchain is formatted correctly. For the blockchain to be valid, there are multiple rules to enforce. For starters, every block must be valid, with a proper hash based on the block fields, correctly adjusted difficulty, acceptable number of leading 0's in the hash for the proof of work requirement, and more. Likewise, in the blockchain itself must start with the genesis block, and every block's last hash must reference the hash of the block that came before it.

• Chain replacement is the process of substituting the current blockchain data for the data of an incoming blockchain. If the incoming blockchain is longer, and valid, then it should replace the current blockchain. This will allow a valid blockchain, with new blocks, to spread across the eventual blockchain network, becoming the true blockchain that all nodes in the blockchain network agree upon.

• The publisher/subscriber pattern, or pub/sub for short, is a networking pattern that exposes various communication channels. Publishers broadcast messages on those channels. And subscribers receive messages on those channels.

• A wallet keeps track of an individual's amount of currency. Each wallet has an address, and a pair of keys (a private and a public key).

• The private key of a wallet must be kept secret. It's used to generate signatures (see signatures below) on behalf of the wallet owner for based on objects of data. For example, a wallet owner will sign a generated transaction to make it official.

• The public key is the other half of the keypair, and it can be publicly shared with other entities.

• Signatures are unique data objects created using the private key of keypair and an original data object to sign. With the signature, public key, and the original data object, other entities can verify if the signature was generated by the true owner of the public key.

• A transaction consists of an input and output field. The input contains metadata, including the address, public key, and the balance amount of the sender. The input also includes a signature that's generated by the sender, using the transaction output as the underlying data. The output contains a series of entries where recipient addresses will receive certain amounts as a result of the transaction. The transaction can have any number of recipients. At least one of the recipients is the sender address itself, because this details how much currency the sender should have after the transaction is completed.

• Validating transactions involves checking that the total currency sent to the recipients is correct, and that the signature is correct according to the presented public key and transaction output.

• The transaction pool is an object that collects transactions that have been broadcasted across the network. It stores transactions according to their id. The idea is that this transaction pool will collect the transactions that miners will use as the basis of data for new blocks.

• The mining reward, a transaction with a standard amount of cryptocurrency, incentivizes miners to continue investing cpu power to mine new blocks. That way, the cryptocurrency's backing blockchain will grow at a steady pace, and continue to make transactions official.