BLOCKCHAIN

UNIT 1

Tutor: Dr Prasanna B T
Associate Professor
Dept. of CS&E
Sri Jayachamarajendra College of Engineering
JSS Science and Technology University
Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
Blockchain is a system of recording
information in a way that makes it difficult
or impossible to change, hack, or cheat the
system.

Prasanna B T, Assoc Prof, CSE, SJCE

Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
A blockchain is essentially a digital ledger of
transactions that is duplicated and distributed
across the entire network of computer systems
on the blockchain. Each block in the chain
contains a number of transactions, and every
time a new transaction occurs on the
blockchain, a record of that transaction is added
to every participant’s ledger. The decentralised
database managed by multiple participants is
known as Distributed Ledger Technology (DLT).

Prasanna B T, Assoc Prof, CSE, SJCE

Blockchain is a type of DLT in
which transactions are recorded
with an immutable cryptographic
signature called a hash.

Prasanna B T, Assoc Prof, CSE, SJCE

Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
This means if one block in one chain was
changed, it would be immediately apparent
it had been tampered with. If hackers
wanted to corrupt a blockchain system,
they would have to change every block in
the chain, across all of the distributed
versions of the chain.

Prasanna B T, Assoc Prof, CSE, SJCE

Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
Blockchain Hash Function:
A hash function takes an input string (numbers, alphabets,
media files) of any length and transforms it into a fixed length.
The fixed bit length can vary (like 32-bit or 64-bit or 128-bit or
256-bit) depending on the hash function which is being used.
The fixed-length output is called a hash. This hash is also the
cryptographic byproduct of a hash algorithm. We can
understand it from the following diagram.

Prasanna B T, Assoc Prof, CSE, SJCE

Prasanna B T, Assoc Prof, CSE, SJCE
The hash algorithm has certain unique
properties:
It produces a unique output (or hash).
It is a one-way function.

Prasanna B T, Assoc Prof, CSE, SJCE

In the context of cryptocurrencies like Bitcoin,
the blockchain uses this cryptographic hash
function's properties in its consensus
mechanism. A cryptographic hash is a digest or
digital fingerprints of a certain amount of data.
In cryptographic hash functions, the
transactions are taken as an input and run
through a hashing algorithm which gives an
output of a fixed size.

Prasanna B T, Assoc Prof, CSE, SJCE

http://blockchain.mit.edu/hash

Prasanna B T, Assoc Prof, CSE, SJCE

•Anatomy of a Block
•Nodes and Network -Full Nodes & Light Nodes
•Miners : -Nodes (find the valid block, store a copy
and distribute it to other nodes) –Powerful Computers
•Basic Operations
Validation of Transactions
Gathering transactions for a Block
Broadcasting a valid transaction and block
Consensus on next block creation
Chaining of blocks
Role of participants : Transaction,Miner

Prasanna B T, Assoc Prof, CSE, SJCE

Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
In a permissionless blockchain, the consensus
allows all nodes to have equal rights such as
data access, creating transactions, validating
transactions and producing new blocks.

In a permissioned blockchain, the consensus

does not allow all nodes to have equal rights to
access data, creating transactions, validating
transactions and producing new blocks. For
example, a permissioned chain might select a
few nodes to produce new blocks only.
Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
A fundamental problem in distributed computing and
multi-agent systems is to achieve overall system reliability in
the presence of a number of faulty processes. This often
requires processes to agree on some data value that is needed
during computation.¹
These processes are described as Consensus

Prasanna B T, Assoc Prof, CSE, SJCE

• Whenever a new transaction gets broadcasted
to the network, nodes have the option to
include that transaction to their copy of their
ledger or to ignore it. When the majority of
the actors which comprise the network decide
on a single state, consensus is achieved.

Prasanna B T, Assoc Prof, CSE, SJCE

Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
1. Public Blockchain
A public blockchain is a non-restrictive, permission-less distributed
ledger system. Anyone who has access to the internet can sign in
on a blockchain platform to become an authorized node and be a
part of the blockchain network. A node or user which is a part of
the public blockchain is authorized to access current and past
records, verify transactions or do proof-of-work for an incoming
block, and do mining. The most basic use of public blockchains is
for mining and exchanging cryptocurrencies. Thus, the most
common public blockchains are Bitcoin and Litecoin
blockchains. Public blockchains are mostly secure if the users
strictly follow security rules and methods. However, it is only risky
when the participants don’t follow the security protocols sincerely.
Example: Bitcoin, Ethereum, Litecoin

Prasanna B T, Assoc Prof, CSE, SJCE

2. Private Blockchain
A private blockchain is a restrictive or permission blockchain
operative only in a closed network. Private blockchains are usually
used within an organization or enterprises where only selected
members are participants of a blockchain network. The level of
security, authorizations, permissions, accessibility is in the hands
of the controlling organization. Thus, private blockchains are
similar in use as a public blockchain but have a small and
restrictive network. Private blockchain networks are deployed for
voting, supply chain management, digital identity, asset
ownership, etc.
Examples of private blockchains are; Multichain and Hyperledger
projects (Fabric, Sawtooth), Corda, etc.

Prasanna B T, Assoc Prof, CSE, SJCE

3. Consortium Blockchain
A consortium blockchain is a semi-decentralized type
where more than one organization manages a
blockchain network. This is contrary to what we saw in a
private blockchain, which is managed by only a single
organization. More than one organization can act as a
node in this type of blockchain and exchange
information or do mining. Consortium blockchains are
typically used by banks, government organizations, etc.
Examples of consortium blockchain are; Energy Web
Foundation, R3, etc.

Prasanna B T, Assoc Prof, CSE, SJCE

4. Hybrid Blockchain
A hybrid blockchain is a combination of the private and public
blockchain. It uses the features of both types of blockchains that is
one can have a private permission-based system as well as a
public permission-less system. With such a hybrid network, users
can control who gets access to which data stored in the
blockchain. Only a selected section of data or records from the
blockchain can be allowed to go public keeping the rest as
confidential in the private network. The hybrid system of
blockchain is flexible so that users can easily join a private
blockchain with multiple public blockchains. A transaction in a
private network of a hybrid blockchain is usually verified within that
network. But users can also release it in the public blockchain to
get verified. The public blockchains increase the hashing and
involve more nodes for verification. This enhances the security
and transparency of the blockchain network.
Example of a hybrid blockchain is Dragonchain.
Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
Some of the benefits of public blockchains are:
Open Read and Write
Anyone can participate by submitting transactions to the blockchain,
such as Ethereum or Bitcoin; transactions can be viewed on the
blockchain explorer.
Ledger Is Distributed
The database is not centralised like in a client-server approach, and
all nodes in the blockchain participate in the transaction validation.
Immutable
When something is written to the blockchain, it can not be changed.
Secure Due to Mining (51% rule)
For example, with Bitcoin, obtaining a majority of network power
could potentially enable massive double spending, and the ability to
prevent transaction confirmations, among other potentially malicious
acts.

Prasanna B T, Assoc Prof, CSE, SJCE

Some of the benefits of private blockchains are:
Enterprise Permissioned
The enterprise controls the resources and access to the blockchain,
hence private and/or permissioned.
Faster Transactions
When you distribute the nodes locally, but also have much less nodes
to participate in the ledger, the performance is faster.
Better Scalability
Being able to add nodes and services on demand can provide a great
advantage to the enterprise.
Compliance Support
As an enterprise, you likely would have compliance requirements to
adhere to, and having control of your infrastructure would enable this
requirement more seamlessly.
Consensus More Efficient (less nodes)
Enterprise or private blockchains have less nodes and usually have a
different consensus algorithm, such as BFT vs POW.
Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
Characteristics of Permissioned Blockchain:
• Permissioned
• Regulatory Compliant
• Clear Governance Structure
• Semi Decentarlized
• Ex: Hyperledger, Libra,Quorum

Prasanna B T, Assoc Prof, CSE, SJCE

Characteristics of Permissionless Blockchain
• Open
• Public
• Borderless
• Neutral
• Censorship Resistant
• Ex: Bitcoin, Ethereum,zcash

Prasanna B T, Assoc Prof, CSE, SJCE

Consensus: To ensure records are true and honest
• Agree on one state of blockchain
• PoW: Computing Power
• PoS: Investment, ex:Cardano Ouroboros, EOS
• PoET: Intel
• PoD:
• PoC: Harddrive Space
• PoA: Ex: Ethereum Kovantestnet, Hyperledger
Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
Prasanna B T, Assoc Prof, CSE, SJCE
Here are the 10 effective applications of blockchain technology
Money Transfer and Payment Processing
Potentially the most ideal and rational application of blockchain
technology is using it as a means to accelerate the transfer of funds
from one party to another. Most transactions carried over via
blockchain can be settled within a matter of seconds, while banks
take 24hours a day and even seven days a week.

Supply Chains Monitoring

Blockchain technology is easy to apply when it comes to
monitoring supply chains. By eradicating paper-based trials,
enterprises are able to spot inefficiencies within their supply chains
rapidly, as well as to detect items in real-time. Blockchain also
enables enterprises, and even consumers, to perceive how
products perform from a quality-control point of view as they move
from their place of origin to the retailer.

Prasanna B T, Assoc Prof, CSE, SJCE

Retail Programs Based on Loyalty Rewards
Blockchain also helps in transfiguring the retail experience by becoming
the go-to for loyalty rewards. By designing a token-based system that
rewards consumers, and storing these tokens within a blockchain, would
encourage consumers to return to a certain store or chain to do their
shopping. It would also terminate the fraud and waste that are
commonly associated with paper- and card-based loyalty rewards
programs.

Digital IDs
More than 1 billion people around the globe face challenges related to
identity issues. Microsoft is looking to alter that. It’s designing digital IDs
within its Authenticator application that are currently used by millions
of people, which would give users a way to control and manage their d
igital identities. This would enable users in indigent regions to get access
to financial services or begin their own business.

Prasanna B T, Assoc Prof, CSE, SJCE

Sharing of Data
Cryptocurrency IOTA has introduced a beta version of its Data
Marketplace in November, explaining that blockchain could be used as a
marketplace to share or sell data that are unused. Since most enterprise
data goes unused, blockchain could act as a mediator to store and move
this data to enhance a mass of industries.

Protection of Royalty and Copyright

Copyright and royalty laws on music and other content have grown
claggy in a world that has growing internet access. Blockchain can be
applied to beef up those copyrights for digital content downloads which
will ensure that the creator of the content being purchased gets their
legitimate share.

Prasanna B T, Assoc Prof, CSE, SJCE

Digital voting
Blockchain provides the ability to vote digitally, and it is transparent
enough that any regulators would be able to see if something was
altered on the network. It integrates the ease of digital voting with the
immutability (i.e., unchanging nature) of blockchain to make the vote
really count.

Transfer of Real Estate, Land, and Auto Title

One of the foremost goals of blockchain is to take the paper out of the
equation since paper trails are often a route for confusion. If people are
buying or selling land, a house, or a car, they will need to transfer or
receive a title. Instead of operating this on paper, blockchain helps in
storing titles on its network, enabling for a transparent view of this
transfer, as well as exhibiting a crystal-clear picture of legal ownership.

Prasanna B T, Assoc Prof, CSE, SJCE

Food Safety
Another fascinating application of blockchain technology
enables tracing food from its origin to the plate. Since
blockchain data is unchangeable, one is able to track the
transport of food products from their origin to the
supermarket.

Unchangeable Data Backup

Blockchain technology is the ideal way to back up data. Even
though cloud storage systems are created to be a go-to source
for data safekeeping, they’re susceptible to hackers, or even
infrastructure problems. Using blockchain as a backup source
for cloud data centers or any data could settle this issue

Prasanna B T, Assoc Prof, CSE, SJCE