Blockchain ≠ 𝐵𝑖𝑡𝑐𝑜𝑖𝑛
• The technology behind cryptocurrencies.
• Analogous to the internet
When we
have internet Why
BlockChain?
Problems which Internet failed to solve??
Trust
Intermediary
Origin of Blockchain
Short comings of current transaction system:
» Cash is useful only in local transactions and in relatively small amounts.
» The time between transaction and settlement can be long.
» Duplication of effort and the need for third-party validation and/or the
presence of intermediaries add to the inefficiencies.
» Fraud, cyberattacks, and even simple mistakes add to the cost and
complexity of doing business, and they expose all participants in the
network to risk if a central system, such as a bank, is compromised.
» Many people in the world don’t have access to a bank account and have had
to develop parallel payment systems to conduct transactions.
And transaction volumes will explode with the rise of Internet of Things
(IoT)
Emergence of BitCoin
Emergence of BitCoin
BITCOIN- A digital currency to address the complexities,
vulnerabilities, inefficiencies, and costs of current transaction
systems.
Advantages:
» Cost-effective: Bitcoin eliminates the need for intermediaries.
» Efficient: Transaction information is recorded once and is
available to all parties through the distributed network.
» Safe and secure: The underlying ledger is tamper evident.
A transaction can’t be changed; it can only be reversed with
another transaction, in which case both transactions are visible
The Birth of Blockchain
• Bitcoin is actually built on the foundation of blockchain, which
serves as bitcoin’s shared ledger.
• This shared ledger can be used to record any transaction and
track the movement of any asset whether tangible, intangible, or
digital
Bitcoin and blockchain are not the same. Blockchain provides the means to
record and store bitcoin transactions, but blockchain has many uses beyond
bitcoin. Bitcoin is only the first use case for blockchain
• Blockchains are Distributed Ledgers
• Ledgers are historically centralized and private
• Blockchains are Decentralized or Distributed
Open Ledger
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Distributed Ledger
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Synchronising Distributed Ledger
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Miner
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Blockchain Architecture
Blockchain Architecture
The blockchain is a decentralized, distributed ledger (public or private) of
different kinds of transactions arranged into a P2P network. This network
consists of many computers, but in a way that the data cannot be altered
without the consensus of the whole network.
Blockchain Architecture
Data structures used in blockchain:
• Pointers - variables that keep information about the location of another variable.
Specifically, this is pointing to the position of another variable.
• Linked lists - a sequence of blocks where each block has specific data and links to the
following block with the help of a pointer.
Blockchain Architecture
Blockchain Structure:
Blockchain Architecture
Block header
The head of the block have following components:
1. the hash of the previous block
2. the hash of the block
3. the root hash of the Merkle tree
4. the time in seconds
5. the goal of the current difficulty
6. the nonce
Block Hash = (Prev block Hash) Ɵ (Merkel Root) Ɵ Nonce
Proof of work
• A proof of work is a piece of data which is difficult (costly, time-
consuming) to produce but easy for others to verify and which
satisfies certain requirements.
• In order for a block to be accepted by network
participants, miner must complete a proof of work which covers all
of the data in the block.
• The difficulty of this work is adjusted so as to limit the rate at
which new blocks can be generated by the network to one every 10
minutes.
• Due to the very low probability of successful generation, this
makes it unpredictable which worker computer in the network will
be able to generate the next block.
Other Consensus Algorithm
• Proof of Stake
• Proof of Burn
• Proof of Capacity
• Proof of elapsed time
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summary video
Core Blockchain component
• User or computer within the blockchain architecture (each
Node
has an independent copy of the whole blockchain ledger)
• Smallest building block of a blockchain system (records,
Transaction
information, etc.) that serves as the purpose of blockchain
• a data structure used for keeping a set of transactions which is
Block
distributed to all nodes in the network
Chain • a sequence of blocks in a specific order
• specific nodes which perform the block verification process
Miners
before adding anything to the blockchain structure
• a set of rules and arrangements to carry out blockchain
Consensus
operations
Types of Blockchain
Public Private Consortium
• A public blockchain • As opposed to public • This blockchain
architecture means blockchain structure can consist
that the data and architecture, the of a few
access to the system private system is organizations. In a
is available to controlled only by consortium,
anyone who is users from a specific procedures are set up
willing to participate organization or and controlled by the
(e.g. Bitcoin, authorized users who preliminary assigned
Ethereum, and have an invitation users.
Litecoin blockchain for participation.
systems are public).
Consortium
Property Public blockchain Private blockchain
blockchain
Consensus determination All miners Selected set of nodes Within one organization
Read permission Public Public or restricted Public or restricted
Almost impossible to
Immutability level Could be tampered Could be tampered
tamper
Efficiency (use of resources) Low High High
Centralization No Partial Yes
Consensus process Permissionless Needs permission Needs permission
Ethereum
• Functions as a platform through which people can use tokens to create
and run applications and create smart contracts
• Ethereum allows people to connect directly through powerful
decentralized super computer
• Language- Solidity
• Currency- Ether
• Uses- POS
Smart Contracts
• A smart contract is an agreement or set of rules that govern a business
transaction;
• It’s stored on the blockchain and is executed automatically as part of a
transaction
• Their purpose is to provide security superior to traditional contract law
while reducing the costs and delays associated with traditional
contracts
Hyperledger
Hyperledger is an open source collaborative effort created to advance cross-industry blockchain
technologies. It is a global collaboration, hosted by The Linux Foundation, including leaders in
finance, banking, Internet of Things, supply chains, manufacturing and Technology.
Information consensus Across Multiple Parties: Sophisticated cryptographic
authorization and verification mechanisms enable trust in shared data across complex
multi-party networks
Time Stamping: Timestamped events are agreed upon across multiple, possibly
hostile or non-trusting entities
Security: Secure encryption and verification technologies enable untrusted
participants to securely share trustable information with a third party.
Authenticity: Digital signatures provide authenticity and non-repudiation
B2B Ownership: End-to end asset lifecycles including ownership, custody and
provenance can be tracked
Data Loss Protection: Universal data loss becomes a lesser issue
Applications of Blockchain Technology
Possible Verticals for blockchain technologies are
practically endless, including
