Blockchain

and its applications

Somil Bhandari
April 10th 2020
© 2016 VMware Inc. All rights reserved.
What is Blockchain

The greatest innovation

since internet ?

OR

A solution
looking for a problem !

2
Blockchain – A storage
technology
• Immutable
• Distributed
• Decentralized
• Permissionless
• Verifiable
• Private/ Public
• P2P
Inventor – Satoshi Nakamoto

SAmsung + TOSHIba + NAKAmichi + MOTOrola

Bitcoin

First digital currency to solve Double Spending problem

without trusted central server
Double Spending

Spending same digital currency more than once.

Implementation
pays Rs. 300Rs.
1 Alice contributes to 10000
Bob for dinner 10010101010

pays Rs. 10000

2 Bob contributes Rs. to Charlie for Rent
10000 00010111011

3
3 Charlie
Charlie contributes
pays Rs. 300Rs.
to 10000
Bob for Movie 11101111010
4 Alice pays Rs. 300 to Bob for Dinner 10010101010

5 Bob pays Rs. 10000 to Charlie for Rent 00010111011

6 Charlie pays Rs. 300 to Bob for Movie 11101111010

7 Bob pays Rs. 500 to Alice for Grocery 01100001001

Distributed Ledger
Bob
1 Alice
Alicecontributes
contributesRs.
Rs.10000
10000

2 Bob
Bobcontributes
contributesRs.
Rs.10000
10000

3 Charlie
Charliecontributes
contributesRs.
Rs.10000
10000

4 Alice
Alicepays
paysRs.
Rs.300
300to
toBob
Bobfor
forDinner
Dinner 10010101010
10010101010

Alice 5

6
Bob
Bobpays
paysRs.

Charlie
Rs.10000

Charliepays
10000to

paysRs.
Rs.300
toCharlie

300to
Charliefor

toBob
Bobfor
forRent
Rent

forMovie
Movie
00010111011
00010111011

11101111010
11101111010

11 Alice contributes Rs. 10000 7 Charlie pays Rs. 300 to Bob for Movie 11101111010

22 Bob contributes Rs. 10000

33 Charlie contributes Rs. 10000

44 Alice pays Rs. 300 to Bob for Dinner 10010101010

55

66
Bob pays Rs. 10000 to Charlie for Rent

Charlie pays Rs. 300 to Bob for Movie

00010111011

11101111010
Charlie
7 Charlie pays Rs. 300 to Bob for Movie 11101111010

11 Alice contributes Rs. 10000

22 Bob contributes Rs. 10000

33 Charlie contributes Rs. 10000

44 Alice pays Rs. 300 to Bob for Dinner 10010101010

55 Bob pays Rs. 10000 to Charlie for Rent 00010111011

66 Charlie pays Rs. 300 to Bob for Movie 11101111010

7 Charlie pays Rs. 300 to Bob for Movie 11101111010

Proof of Work

0000000000000000000010100111101110
00000000000000000000
1110000101001000100000011101010110
0011011101010100000010111101110111
1001010011111
Proof of Work

100101001111101100
Proof of Work

10010100111110
Block Reward

101011101 gets 50 BTC

100101001111101100

Total amount of Currency in the system increases

This process of finding Nonce to create new blocks is also
called as Mining
Resolving conflicts

• Choose the longer chain

• In case of a tie, wait till one
of the chains becomes
longer
• Don’t accept a block
immediately
Fooling the system
Privacy

• The transactions are credited to a user’s public key

• Only the owner can ’unblock’ those funds
• No identifier is included, so its impossible to find out identity
behind the public key
Bitcoin mining difficulty and Block rewards

• Mining difficulty is continuously regulated

• Block generation time ~10 mins
• Block reward halved every 210,000 blocks (~4 years)
• Current reward – 12.5 BTC
• Total amount of BTC is capped at 21 M
• Transaction fee to incentivize miners
Disadvantages

• Immense power requirements

• 1MB block size ~ 2400 transactions/block in 10 mins
• VISA – 1700 transactions/ sec, capacity 24,000
transactions/sec
• Ledger is public, everyone has knowledge of all the transactions
• Trustless system, no one to sue
• Forgotten key = lost money
• 4 millions bitcoins are gone forever
Deflation

• Bitcoin are limited in number

• No government or company can create more than 21 M bitcoins
• Number of bitcoins are gradually decreasing
• Value of bitcoin is ever increasing
• Deflationary Economy
Fork
Ethereum – Decentralized computer

• Bitcoin – stack-based script

• Ethereum uses a Turing complete language
• A platform for executing Smart Contracts
• Once added, they can’t be modified
• Code is Law!
• Uses Ether as the token for its operation
• Aims for true decentralization of Internet
Example - Crop insurance

X ETH/ hectare
premium
Y ETH/day late fee
•Failure
Premium to pay by with user’s public key –
input to smart contract
10th – lapse
•Draught
Sensors –M – rainfall data in various
areas
ETH/hectare claim
• Low rainfall for long period in an area – payout via ETH
• Eliminates middlemen, low premium, no fraud
DAO

• Decentralized Autonomous Organization

• Complex legal rules
• Completely transparent
• Rules to override/ change existing rules based on consensus
Potential applications

• NSDL/ CDSL, Exchanges, Brokerage firms

• Uber/ Ola/ Lyft
• AirBnB
• DropBox
• YouTube
• Land Registry Records
• Car ownership records
Interesting projects

• Video sharing platform - Viewly, Viuly, Flixxo

• Potential Youtube replacement
• Directly connects content creators with viewers
• Demonetization, Algorithm changes etc. issues with Youtube
• No Ads
• Some platforms pay users for watching content
CryptoKitties

• Most popular online game based on

Ethereum
• Buy, Sell and Breed cats online
• All transactions are carried out using
cryptocurrency
• No central control, everything is
based on smart contracts
• Almost brought down entire
Ethereum network
TransActiv Grid

• Members can locally produce

and distribute electricity
• Users with surplus power
supply to grid
• Users with high consumption
draw power from the grid
Smart Dubai

• City built on blockchain

• Paperless
• Financial transactions
• PII (Passport, Visa, Bank accounts)
• Health records
• Business registrations
• Approximately 1.5 Billion USD in annual savings
Further Reading

• Side chains
• Proof of Stake
• Cardano
• Solves scalability issues
• Interoperability
• Uses proof of stake
• Low transaction costs
• IOTA – Tangle
• Highly scalable
• No transaction fee
• Offline transactions
• No miners
References

• https://bitcoin.org/bitcoin.pdf
• https://en.wikipedia.org/wiki/Bitcoin
• https://en.wikipedia.org/wiki/Proof_of_work
• https://www.youtube.com/watch?v=bBC-nXj3Ng4&t=1019s
• https://www.youtube.com/watch?v=Lx9zgZCMqXE
• https://www.youtube.com/watch?v=jxLkbJozKbY&t=335s