Distributed Consensus

 In distributed environment , there need a way to

come to consensus
 All financial transactions need to agreed by a
community
 Unless community agrees on that transaction,
possibility exist that someone is doing some kind of
false transactions
 e.g. with 100rs it’s not possible to do two transactions 1.
Rs. 60/ -& 2. Rs.80/-
 Same node is used multiple times : double spending
 Distributed Consensus
Need to ensure that : double spending does not
happen
This is done through a consensus mechanism among
all participants
A way to verify that person who initiated transaction
has solved some kind of puzzle.
Other participants can see, verify this transaction by
checking whether puzzle is solved correctly
Major requirement of crypto currency: open network
 Requirements of cryptocurrency
 Any one can use for financial transaction
 Free from central authority like bank, govt.
 All transactions should be valid
Challenging Problem!!
• Nobody to monitor that financial transactions are correct
• Network is open
Consensus algorithm is based on message passing
– Need identity of others(works only within closed system)
– As network is open, don’t know identity of others,
message passing does not work
 Bitcoin proof of work: open consensus
• Bitcoin: A peer to peer electronic cash system
– White paper by Satoshi Nakamoto
– Idea of how to reach consensus without message passing
• Financial transaction are possible in open
market without govt., bank
How it is done??
• Transaction verification need to be done in
decentralized/ distributed manner
• Need a leader to tell that transaction is valid, you add
transaction to your list
Consensus in open network: puzzle solving
 Consensus in open network: puzzle
solving
• A person who solves this puzzle will be the leader
• Properties of the puzzle
– Very difficult solve
– Easy to verify
• Other persons will verify easily that this puzzle is
solved correctly
• Different persons may solve puzzle in different
rounds
• Good puzzle can be generated with cryptograhic
hash function
 Consensus in open network: puzzle solving

– Where x & y are known priori, it’s difficult to find k

– K is nonce here..
– Once k is found, = y1; y1<=y
• Set of valid transactions are added to a public ledger
• This particular algorithm is known a “proof of work”
in bitcoin
– (certain work is done to find out a solution, that solution
act as a proof)
 Bitcoin proof of work : open consensus
• Proof of Work: Nakamoto Consensus
• More emphasis is given on “liveness” than “safety”
Liveness (o/p will be produced within certain amount of time after running a consensus algorithm)
Safety: correct processes will yield the correct output
• Participants may agree on transaction, that is not the final one in a
chain
• consensus Finality over an open network
– Not present in Proof of Work/ Nakamoto consensus
From cryptocurrency to Blockchain
 2011: Litecoin
 2015: Ethereum
 2016 blockchain becomes popular

Why should someone solve this puzzle??

 Hard puzzle
 Needs more computing power to solve it
 Bitcoin mining: The key to consensus
• Mining is a process to solve the complex puzzle
• Special nodes are called miners
– Task is propose new blocks – solve the puzzle
– Find the nonce corresponding to a target block hash
– Add solution as a proof of solving a challenge to be the
leader
– Solving a challenge needs some work to be done - Proof of
Work
• Miners collect transactions from different participants
combine them together and form a block
• Multiple different miners (as open network)
• (just run the miner application on your system )
 Bitcoin mining: The key to consensus
 Each miner solves puzzle independently and
individually
 The miner who solves the puzzle first, his
block (valid) is added to the blockchain first.
 Proof is also added to the block
 In different rounds, diff. miners are able to
solve the puzzle.
 o/p hash value is given, miners have to find
the nonce that will produce this hash.
 Bitcoin mining: The key to consensus
• Miner has to show the proof of Work to
become a successful miner.
Why someone would want to be a leader?
(Earn money(bitcoin) by solving this puzzle ! )
 Bitcoin mining: The key to consensus
• This incentive mechanism attract people to
participate in mining
• It produces new bitcoin in the system
• Bicoin network work like a reserve bank to regulate a
flow of money(bitcoin) in the market but without
explicit governance
• Don’t have any control of any bank, don’t have
control of any governance operation
• But still successful financial through which people
can make transactions with each other
• They can participate in business in open market
 Bitcoin mining: The key to consensus
• It controls (regulates) the flow of new currency (bitcoin) in
the network
• Hashing makes the data tamper proof, thus making
blockchain immutable
Public Ledger
• Where you can put the financial transactions that everyone
can verify
• Blockchain 1.0: Distributed Ledger Technology (DLT)
• Anyone can verify the ledger and it’s correctness of content
• DLT: money for the internet – it gives generation of not only
bitcoin but other cryptocurrencies