Blockchain - Things you need to know

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CHAPTER II BLOCKCHAIN BASICS
BY. ABHISHEK NIRMAL JAIN FCA, ISA, FAFD, CBE
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Lets Recapitulate

• Blockchain is a cryptography based software
  technology which functions as a distributed
  ledger
• that is heavily secured due to its attributes of
  peer to peer verification and authentication.
• Blockchain is a decentralized computation and
  information sharing platform which enables
  multiple authoritative domains which do not trust
  each other to cooperate, coordinate and
  collaborate in a rational decision making
  process.
• The Public Blockchain systems task is to ensure
  that all this individual copies are consistent
  with each other, that the local copies every
  node has are
• information.

identical, and are updated based on the global
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Features
Decentr- alised
Transpa- rency
Security
Anonym- ity
Immuta- bility
Trust Building
Irrevers- ible
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Potential Benefits
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Working of Cryptocurrency
A Verified Transaction can involve Crypto-
currency, Contracts, Records or any other
Information
Validation The Network Nodes Validates the
Transactions and the User Status using known
Some one request the Transaction
The requested transaction is broadcasted to a
P2P network nodes
Algorithms
Once verified, the transaction is combined with
other transactions, to create a new block of
data in the
The new block is then added to the existing
blockchain, in a way that is permanent and
unalterable
ledger.
Transaction is Complete
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Public Ledgers

• The local information is a public ledger. It is
  something like everyone possesses his or her own
  copy of data.
• Public ledger work like a data base, Public
  Ledger contains the historical information which
  is available to everyone and can be utilized for
  future computation.
• The ledger which is available in an environment
  to everyone containing the information of all the
  transactions.
• The parties in the network by looking into their
  local public ledger will be able to understand
  that the particular transaction is valid or not
  valid.

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Much more than public ledger

• Blockchain works like a public ledger however
  requires ensuring of different aspects such as
  protocol for commitment, Consensus, Security and
  privacy authenticity.

Consensus / Validity
Protocol for commitment
Privacy and Authenticity
Security
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Network Architecture
CENTRALISED NETWORK
DECENTRALISED NETWORK
DISTRIBUTED NETWORK
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Continue.

• Centralized Architecture Network The Complete
  reliance for the information is on the Single
  point/ Node. The entire information get lost or
  denied if the main node collapses
• Decentralized Architecture Network The Reliance
  for the Information is on multiple points, which
  are again connected to their Individual nodes,
  these points acts as Mediators for individual
  nodes.
• Distributed Architecture Network In a
  complete distributed architecture you have all
  the nodes participating in the information
  sharing process where nodes coordinate with each
  other.
• Conclusion Blockchain is a platform which helps
  you to support this kind of decentralized
  platform or a distributed platform where you can
  share the information among yourselves in a very
  custody manner.

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Hashing -

• Hash function is a function that map
• any sized data to a fixed size.
• One advantage of this hash function is one way
  function, that means, for given a x and n, H(x)
  can be computed. But if H(x) is given then the
  corresponding value of x cannot be uniquely
  identified.
• It can be said blockchain is nothing, but data
  structures which are built upon the concept of
  hash function.

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Conti

• This hash function concept is used widely in
  cryptographic context and this is called as
  cryptographically secured hash function. The
  properties of this cryptographically secured hash
  function are
• Function is one way that means, given a x, you
  can compute H(x), but given H(x) you cannot
  compute x with any deterministic algorithm.
• For any two different x1 and x2, the H(x)1 and
  H(x)2 will be different.
• The cryptographically secured hash function have
  an important property which is called avalanche
  effect. The avalanche property of this
  cryptographically secured hash function - given
  an input whenever computing the digest, if you
  make little change in the input you will see
  significant change in the digest.
• Link for Demo http//www.sha1-online.com/

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Harber and Stornetta

• The first use of this concept of
  cryptographically secured chain or blocks it came
  in 1991 in a paper by Harber and Stornetta.
• What they did? They have taken parameters like
  the initial number in order the people have
  accessed the document, it started from 0 1 2 3,
  then corresponding change value constructed.
• This particular architecture looks like something
  similar to blockchain, where you have multiple
  blocks of data and these blocks of data are
  connec
• This was the first use of this concept of the
  chain o in securing this digital document.

ted by hash value. f blocks which was a earlier
version blockchain
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Merkle tree

• Merkle Tree is widely used and is also the
  foundation for blockchain concept. Lets
  understand what is a Merkle tree? Merkle tree is
  a tree structure, where the leaf nodes will
  contain the hash of the document and every
  individual node and intermediate node will
  contain the hash of the combination of the
  Childs.

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A Chain of Blocks
The Longest Chain Rule ensures that network will
recognise the chain with most work as the main
chain. The chain with the most work is typically
the longest of the Chain.
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Working of Bitcoins

• Satoshi Nakamoto through his Bitcoin paper
  digital currency or crypto currency, which is
  completely Decentralised where no central
  authority (bank or a government) will have
  control over the currency.

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Continue.
The Wallet constructs the transactions, sign
using Senders Private Key, and broadcasts it
to the Network
The network nodes validates transactions based
on existing Blockchain and propagate the
transactions to the miners
The miners adds the transactions to the next
block to be mined within the time duration as
per the mining procedure
Once the Mining is done and the harsh is
obtained the block is included in the existing
blockchain in the network.
Network
Miners
Updation
Wallet
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Building Blocks
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Continue.
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Blockchain 2.0

• The concept of blockchain gradually applied to
  multiple other sectors like Healthcare industry,
  Banking and Finance, Government, Supply chain and
  many more, it is some times termed as blockchain
  2.0.
• Satoshi Nakamoto in 2010 envisioned that "the
  blockchain design supports a tremendous variety
  of possible transaction types. Escrow
  transactions, bonded contracts, third party
  arbitration, multiparty signatures, etc.
• Blockchain 2.0 expands the scope of the
  technology to enable the decentralisation of
  markets more generally, and the transaction
  involving variety of assets by providing
  registers for certificates and rights and
  obligations.
• As blockchain 2.0 is code the new application is
  said to be running on a new set of protocols
  ("blockchain 2.0 protocol"). Blockchain 2.0
  applications would be akin to browsers, social
  networks and file sharing services

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Continue.

• The main idea behind Ethereum was to
  use blockchain in applications which were
  not limited to cryptocurrency, though it started
  with Crypto.
• Architecture of Ethereum is more
  developer-friendly and allows more use-cases
  and applications.
• Few of the applications made with the (https//
  www.dapp.com/) Ethereum Platform Dapps

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