LEVEL 4

Testnets are crucial for blockchain development, providing a safe, cost-effective sandbox for developers. Deploying untested code on the mainnet, given blockchain's immutable nature, can lead to irreversible bugs or vulnerabilities, risking fund loss. On platforms like Ethereum, interactions, even during testing, entail real gas fees; these costs can accumulate. Testnets alleviate this by offering simulated test tokens for experimentation, ensuring that applications are both economically tested and primed for mainnet deployment without real-world consequences.

The application Layer is where decentralized applications (dapps) and smart contracts reside and execute. This layer interacts directly with end-users and is built on top of the more foundational layers of the blockchain, such as the consensus and data layers, which handle the core functionalities of the network.

A public blockchain is a type of blockchain that is open to anyone to participate in. Anyone can read from or write to a public blockchain i.e. it is open-source. Public blockchains are decentralized, meaning that they are not controlled by any single entity.

Public blockchains are secured by cryptography and consensus mechanisms. Cryptography is used to protect the data on the blockchain from unauthorized access. Consensus mechanisms are used to ensure that all nodes on the blockchain network agree on the state of the ledger at any given point in time

This is in contrast to private systems which are centralized. For instance, an OS like iOS or Android is more vulnerable to censorship and interference. Further, transactions on a private OS are not publicly visible, which makes it easier to commit fraud and manipulate the system. They are also permissioned, meaning that only authorized users can participate in the network with high costs.

EIP stands for Ethereum Improvement Proposal, and it's a design document that provides a concise technical specification of a feature or change and the rationale behind it for the Ethereum platform. ERC, which means Ethereum Request for Comments, is a subset of EIPs. ERCs specifically propose standards related to tokens. Notable examples include the ERC-20 standard, which has become the blueprint for creating fungible tokens (like many of the cryptocurrencies), and the ERC-721 standard, which is used for non-fungible tokens (NFTs). Thus, while all ERCs are EIPs, not all EIPs are ERCs.

While consensus mechanisms, hashing, validators, merkle tree plays an important role here, timestamp is the key architectural feature in blockchain that maintains chronological recording of transactions while at the same time helping to prevent double spending frauds.

Smart contracts are self-executing contracts that are stored on the blockchain. They can be used to automate a wide range of transactions, such as financial transactions, supply chain management, and voting. Smart contracts serve as the backend logic for decentralized applications (dapps), automating and ensuring consistent execution of predefined operations. By removing intermediaries and providing transparent, immutable processes, they enhance the efficiency, trustworthiness, and user experience of dapps.

Imagine a vast library with a tradition:

Global State: Every year, on December 31st, the library takes a detailed photograph of its entire collection. This photograph shows every book, manuscript, map, photograph, recording, etc., that the library holds on that specific day. Each year's photograph is stored in a special album, allowing anyone to see the exact contents of the library at the end of each year.

Current State: Now, when you walk into the library on any given day, you see the live scene of the library with people reading, new books being shelved, and some books being checked out. This live scene, which can change from minute to minute, represents the library's 'Current State'.

Account State: Every person who visits the library has a special card that tracks which books they've borrowed, how many times they've visited, and any fines they might owe. This card is like an 'Account State' - specific to an individual, detailing their interactions and status.

Contract State: There's a special section in the library where groups of people can create collaborative stories. Each group has rules (like a contract) about who can write, how often, and in what genre. As people contribute to these stories, the narrative evolves. The current version of each story, along with its associated rules, represents its 'Contract State'.

Blockchain standards or improvement proposals like EIP is a structured mechanism that allows individuals within the particular blockchain community to propose, discuss, and possibly implement enhancements or novel features for the network protocol. They not only provide technical roadmaps for proposed changes but also establish clear standards, guiding developers in creating interoperable and standardized tools, applications, and smart contracts. This cohesive framework ensures transparency in protocol evolution, promotes synergy in the ecosystem, and fosters community-driven development, ensuring that the network  remains adaptable and resilient.

Blockchain Virtual Machines serve as the backbone of blockchain. They guarantee the secure isolation of smart contracts preserving the integrity of blockchain networks. Additionally, they empower the decentralized and efficient execution of smart contracts and applications enabling trustless automation across the blockchain. Furthermore, Virtual Machines play a vital role in fostering interoperability by offering a standardized execution environment for smart contracts. This standardization promotes seamless interaction and the sharing of functionality among diverse blockchains within the broader blockchain ecosystem

Bitcoin, introduced in 2008, is a decentralized blockchain platform that operates on a peer-to-peer network. Central to its design is the Proof of Work (PoW) consensus algorithm, which requires participants to solve compute-intensive random puzzles to validate and record transactions. This mechanism not only ensures security and integrity but also incentivizes miners with rewards, fostering a self-sustaining system enabling peer-to-peer payments without middlemen.

Initiated in 2013, Ethereum emerged as a pioneering platform, elevating the potential of blockchain beyond Bitcoin's primary focus on peer-to-peer transactions and value storage. In 2022, in a pivotal industry event dubbed "The Merge," Ethereum transitioned from the energy-intensive Proof of Work (PoW) to the more sustainable Proof of Stake (PoS) consensus model. This shift not only showcased technological evolution but also addressed the broader perception of blockchain's environmental impact. Instead of miners in PoW,  validators are chosen to validate and propose blocks in PoS,  based on the amount of native coins they've staked or offered as collateral.