Professional Certification Program in

Blockchain

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 Introduction to Blockchain

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 Learning Objectives

By the end of this lesson, you will be able to:

Identify present business challenges

Analyze ledger system and peer-to-peer networks

Classify centralized, distributed, and decentralized systems

Identify the components of a Blockchain

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 Challenges Faced by Modern Businesses

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 Challenges Faced by Modern Businesses

Blockchain can help tackle the following business challenges:

Lack of Trust No Transparency Mediator Charges

Manual Processes Information Security

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 Lack of Trust

● In business, two or more untrusted parties might need to interact with each other or
transact in an untrusted medium.
● Hence a mechanism was required where people could do business with untrusted
parties.

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 Lack of Transparency

● Most organisations keep their data/systems private and this hinders their transparency.
● Lack of transparency eventually leads to lack of trust, which can stunt their growth.

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 Mediator Charges

● Mediators, also referred to as middle-men, form a crucial part of business today.

● They help various parties reach an agreement, but their drawback is that they charge
a hefty fee.

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 Manual Processes

● Though we live in the digital age, most of our important procedures such as property registration
and census registration are still manual.
● Manual procedures are error prone due to human intervention.
● This can be avoided using a neatly designed computer system.

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 Information Security

● Information/Data is an asset to business.

● Loss or leak of such data can lead to losing money and reputation.

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 What is Blockchain?

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 Blockchain Introduction

Blockchain is a peer-to-peer, decentralized, and distributed system. It is cryptographically

secure, append-only, immutable, and updateable via a consensus or agreement among all
the peers.

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 Components of a Block

Header

Consists of the version of

the block, hash of the
previous block, the merkle Header
root hash, and the
timestamp of creation

Body
Body
Consists of the list of
transactions recorded
by the nodes and the
nonce added by its
miner

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 Components of a Blockchain

Header Header Header Header

List of List of List of List of

Transactions Transactions Transactions Transactions

Block Chain

It is a container to store It is much like a continuous list

the encrypted transaction of blocks attached to each
details and the hash other. Every block has the
details of the previous hash value of its previous
block block and its next block (if
created)

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 History of Blockchain

Distributed Ledger Cryptocurrency

Technology and Digital transactions introduced
Currency are introduced in E-commerce

1990 2011-12

2009 2012-13

Satoshi Nakamoto Cryptocurrency

introduces Bitcoin, trading and digital
Blockchain payments system

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 History of Blockchain

Non-monetary Introduction of
applications of permissioned
Blockchain introduced Blockchain

2013-14 2015-16

2014-15 2016-17

Adoption of
Evolution of Smart
Blockchain in most
contract technology
other industries

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 Features of Blockchain

Transparency Immutability
Public ledger, consensus Data cannot be altered,
make data available to all only appended

High Availability Security

Distributed, P2P
Cryptographically secure
architecture makes it more
hashes to encrypt data
durable

Cost Efficiency
Transaction cost is
minimized by eliminating
mediators

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 Difference Between Blockchain and Database

Database Blockchain

Centralized network Decentralized and distributed (peer-to-peer) network

All CRUD operations are supported Only append operation possible

Data can be changed anytime with the correct

Data is completely immutable in an ideal scenario
privileges
Highly available as distributed network is
Difficult to scale for high availability
implemented
Data is not completely private. The database admin Only hashes of actual data are encrypted and stored
can read all the data present in the block

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 Building Blocks of Blockchain

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 Ledger

Ledger is a record keeping document where you keep track of all your transactions.

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 Evolution of Ledger

Papyrus
Simple arithmetic
transactions recorded on a
paper-like material
Ledger Book
Used scientific methods to store
transaction records in a book

Spreadsheet
A modern, electronic
version of a ledger book

Distributed Ledger
The ledger is replicated at
multiple nodes to maintain
high availability and
transparency

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 Peer-to-Peer Network

Peer-to-Peer (P2P) Network is a network architecture where multiple computers are connected
to each other, and all nodes have equal responsibilities and access to resources in the network

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 Centralized System

Centralized systems are those where one person or entity has full control and authority
over the system.

Central Server

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 Centralized System

Most notable establishments and services today have a centralized architecture.

A few examples are:

Banking Governance Hospitals Supply Chain

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 Drawbacks of Centralized System

May facilitate fraudulent

Easily prone to hacking
activities

Central Server

Leads to financial crisis High transaction cost

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 Drawbacks of Centralized System

Prone to Hacking Financial Crisis

● All the data is stored at one central place ● One person or entity has full control on
the data
● Easy to compromise one central server
● That one person or central authority can
● Easy to compromise the person who manipulate the data as needed for their
manages that central system financial gain

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 Drawbacks of Centralized System

Fraudulent Activities Transaction Cost

● Information can be hidden ● Involvement of middle man

● Back entries can be altered ● High transaction fee

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 Distributed and Decentralized System

In such systems, the resources and computation are shared among all the participating
nodes, and the decision-making responsibility is split equally among these nodes.

Node 2
Node 1

Node 3

Node 5
Node 4

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 Benefits of Decentralized and Distributed System

Increased trust Data privacy Negligible

High availability
and transparency and security transaction charges

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 Benefits of Decentralized and Distributed System

High Availability Increased Trust

● Network is still up and running even if 90% ● Due to high transparency

of nodes are down ● Anyone can see and validate the data
● Peers are distributed across the globe ● Nothing is hidden from users

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 Benefits of Decentralized and Distributed System

Data Privacy Low Transaction Cost

● Network is maintained by peers not by

● All the data stored on the network is central authority
encrypted ● There can be a minimal fee based upon
● Only the hashes of private data are stored the network size, security, and the
and not the personal data number of transactions but it is way less
than that of the centralized system

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 Types of Blockchain

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 Types of Blockchain

There are three general types Blockchain technology is categorized into:

Public Private Permissioned

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 Public Blockchain

● Transactions and data are viewable by all participants

● Participant identity can be kept anonymous

Bitcoin Ethereum Dash Factom

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 Private Blockchain

● Transactions are secret and are only visible to the admin

● All participants are known and belong to the same organization

MultiChain BlockStack

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 Permission/Consortium Blockchain

● Transactions are semi-secret and are visible to specific members

● All participants are known and their identities are linked to their real-life identities

Hyperledger R3 Ripple

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 Public Vs Private Vs Permissioned Blockchain

Public Private Permissioned

Consensus Any member with the

All participating members Only admins
Determination right access level

Restricted to certain
Data Access Public Restricted
degree
Almost impossible to
Immutability Can be mutated Can be mutated
tamper

Resource Required Low High High

Centralization No Yes Semi-centralized

Consensus Process Permissionless Needs permission Needs permission

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 Key Takeaways

Identifying business challenges such as lack of trust,

mediator charges, no transparency, and no privacy

Identifying the key components of a Blockchain: distributed public

ledger, decentralized system, cryptography, and consensus

Defining a Blockchain and block, and how they are linked to

one another

Understanding the three different types of Blockchain, their

applications, and differences

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