Professional Certification Program in

Blockchain
Introduction to Blockchain
 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

Benefits of Decentralized and Distributed System

Challenges Faced by Modern Businesses
 Challenges Faced by Modern Businesses

Blockchain can help tackle the following business challenges:

Lack of Trust No Transparency Mediator Charges

Manual Processes Information Security

 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.
 Lack of Transparency

Most organizations keep their data or systems private, which hinders their transparency.

Lack of transparency eventually leads to a lack of trust, which can stunt their growth.
 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.
 Manual Processes

Even in the digital age, most of the important procedures, such as property registration and census
registration, are still manual.

Manual procedures are error-prone due to human intervention and can be avoided by using a
neatly designed computer system.
 Information Security

Information or data is an asset to a business.

Loss or leak of such data can lead to loss of money and reputation.
What Is Blockchain?
 Introduction to Blockchain

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

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

Block 1 Block 2 Block 3

Header Header Header

Hash of Previous Hash of Previous Hash of Previous

Block Header Block Header Block Header

Merkle root Merkle root Merkle root

Block 1 Block 2 Block 3

Transactions Transactions Transactions

Block Chain
It is much like a continuous list of blocks
It is a container to store the encrypted
attached to each other. Every block has the
transaction details and the hash details
hash value of its previous and next blocks (if
of the previous block.
created).
 History of Blockchain

Cryptocurrency
Distributed Ledger
transactions were
Technology and Digital
introduced in e-
Currency introduced
commerce

1990 2011-12

2009 2012-13

Cryptocurrency
Satoshi Nakamoto
trading and digital
introduces Bitcoin
payments system
and Blockchain
introduced
 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
 Tokens

A token is a collection of rules stored in a smart contract. Each token is associated with a
blockchain address, and it functions as a digital asset stored safely on the blockchain.
 Tokenization

The process of transforming tangible and non-physical assets into blockchain tokens is known as
tokenization.

Tokenization is slowly finding applications on the blockchain in traditional industries such as real
estate, stocks, and art.
 Features of Blockchain

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

High Availability Security

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

Anonymity

The transaction will remain

anonymous.
 Difference Between Blockchain and Database

Database Blockchain

Decentralized and distributed (peer-to-peer)

Centralized network
network

All CRUD operations are supported Only append operation is 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 Only hashes of actual data are encrypted and
admin can read all the data present stored in the block
Building Blocks of Blockchain
 Ledger

A ledger is a record-keeping document where you keep track of all your transactions.
 Evolution of Ledger

Papyrus
Recorded simple arithmetic
transactions 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
Replicated at multiple nodes
to maintain high availability
and transparency
 Peer-to-Peer Network

A peer-to-peer (P2P) network is a network architecture where multiple computers are

connected, and all nodes have equal responsibilities and access to resources in the network.

Peer

Peer Peer

Peer
 Centralized System

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

Central Server
 Centralized System

Most notable establishments and services today have centralized architecture.

A few examples are:

Banking Governance Healthcare Supply Chain

 Drawbacks of Centralized System

Can be easily hacked May facilitate fraudulent

activities

Central Server

Leads to financial crisis Has high transaction cost

 Drawbacks of Centralized System
Prone to Hacking
● All the data is stored in one central
place.
● It is easy to compromise one central
server.
● It is easy to compromise the person
who manages that central system.
Financial Crisis
● One person or entity has full control
over the data.
● One person or central authority can
manipulate the data as needed for
their financial gain.
 Drawbacks of Centralized System

Fraudulent Activities Transaction Cost

● There can be an involvement of a

● Information can be hidden.
middleman.
● Back entries can be altered.
● It has a high transaction fee.
 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
 Benefits of Decentralized and Distributed System

Increased trust Data privacy Negligible

High availability
and transparency and security transaction charges
 Benefits of Decentralized and Distributed System

High Availability Increased Trust

● The network is still up and running even if ● Due to high transparency, anyone can see
90% of nodes are down. and validate the data.
● Peers are distributed across the globe. ● Nothing is hidden from users.
 Benefits of Decentralized and Distributed System

Data Privacy Low Transaction Cost

● The network is maintained by peers, not

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

Blockchain technology is categorized into three general types:

Public Private Permissioned

 Public Blockchain

● Transactions and data are viewable by all participants.

● Participant identity can be kept anonymous.

Bitcoin Ethereum Dash Litecoin

 Private Blockchain

● Transactions are secret and only visible to the admin.

● All participants are known, and they are controlled by a single organization.

MultiChain BlockStack
 Security Auth’s Concept

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

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

Hyperledger R3 Ripple
 Public vs. Private vs. Permissioned Blockchain

Public Private Permissioned

Consensus All participating Any member with the

Only admins
Determination members right access level

Restricted to a 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

 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
Knowledge Check
Knowledge
Check
What is the key difference between a centralized and distributed ledger?
1

A. A distributed ledger cannot be backed up, whereas a centralized ledger can.

B. A centralized ledger is more resistant to hardware failure.

C. In a centralized ledger, all data is stored in a single location, whereas in a distributed ledger,
fragments of the full dataset are spread across multiple locations.
D. A centralized ledger is managed by a single, highly trusted entity, whereas a distributed
ledger is managed by multiple, independent nodes, each of which has a full copy of the
ledger.
 Knowledge
Check
What is the key difference between a centralized and distributed ledger?
1

A. A distributed ledger cannot be backed up, whereas a centralized ledger can.

B. A centralized ledger is more resistant to hardware failure.

C. In a centralized ledger, all data is stored in a single location, whereas in a distributed ledger,
fragments of the full dataset are spread across multiple locations.
D. A centralized ledger is managed by a single, highly trusted entity, whereas a distributed
ledger is managed by multiple, independent nodes, each of which has a full copy of the
ledger.

The correct answer is D

A centralized ledger is managed by a single, highly trusted entity, whereas a distributed ledger is managed by
multiple, independent nodes, each of which has a full copy of the ledger.
Knowledge
Check
High availability is a feature of which of the following options?
2

A. Centralized system

B. Distributed system

C. Database system

D. File system
 Knowledge
Check
2 High availability is a feature of which of the following options?

A. Centralized system

B. Distributed system

C. Database system

D. File system

The correct answer is B

Distributed system is a peer-to-peer network, so it is highly available.

Knowledge
Check
A block in Blockchain consists of ________.
3

A. Block Header

B. List of files

C. Set of transactions

D. Block header and set of transactions

 Knowledge
Check
A block in Blockchain consists of ________.
3

A. Block header

B. List of files

C. Set of transactions

D. Block header and a set of transactions

The correct answer is D

Every Blockchain block consists of a block header and a set of transactions.

Knowledge
Check
Which of the following statements is correct?
4

A. Blockchain is a centralized system

B. Blockchain is a distributed and decentralized system that stores transactions in blocks

C. Blockchain is a chain of blocks where data is stored in a centralized manner

D. Blockchain is a peer-to-peer network that is insecure

 Knowledge
Check
Which of the following statements is correct?
4

A. Blockchain is a centralized system

B. Blockchain is a distributed and decentralized system that stores transactions in blocks

C. Blockchain is a chain of blocks where data is stored in a centralized manner

D. Blockchain is a peer-to-peer network that is insecure

The correct answer is B

Blockchain is a distributed and decentralized system that stores transactions in blocks.

Knowledge
Check
Which of the following statements is true in the context of Blockchain?
5

A. Joe is sending $5 to his friend and is charged $1 as transaction fee

B. Mark can insert, update, and append the data in the storage

C. Craig is hesitant to do business with a partner as he does not trust him

D. Mary can validate six-month-old transactions with the trust that data is not altered
 Knowledge
Check
Which of the following statements is true in the context of Blockchain?
5

A. Joe is sending $5 to his friend and is charged $1 as transaction fee

B. Mark can insert, update, and append the data in the storage

C. Craig is hesitant to do business with a partner as he does not trust him

D. Mary can validate six-month-old transactions with the trust that data is not altered

The correct answer is D

Blockchain is immutable as data stored in Blockchain cannot be altered.