BLOCKCHAIN

LYDIA RAJA
SMIT2021005
WHAT IS BLOCKCHAIN?

Blockchain is a constantly growing

ledger that keeps a permanent
record of all the transactions that
have taken place in a secure,
chronological and immutable .
● A blockchain is a chain of
blocks which contain
information .
● Each block records all of
the recent transactions,
and once completed goes
into the blockchain as a
permanent database.
● Each time a block gets
completed, a new block is
generated.
 BANKING
WHO
USES HEALTHCARE
MEDIA
BLOCK &
CHAIN? ENTERTAINMENT

RETAIL
NEED FOR BLOCKCHAIN
TIME REDUCTION UNCHANGEABLE TRANSACTION RELIABILITY
It does not not take a lengthy
process for verification ,
Blockchain register transactions in Blockchain certifies and verifies
settlements and clearance.
chronological order which certifies the identities of each interested
It is because of a single version of
the inalterability of all operations. parties.
agreed - upon data available
between all stakeholders.

SECURITY COLLABORATIONS DECENTRALISED

Blockchain uses DISTRIBUTED
LEDGER TECHNOLOGY where This methods ensures that all
It allows each party to transact
each party holds a copy of the transactions are validated , and all
directly with each other without
original chain, so the system valid transactions are added one
requiring a third -party intermediary.
remains operative,even the large by one.
number of other nodes fall.
 CENTRALIZED VS. DECENTRALIZED
❏ As the name suggests, a centralized ❏ As the name suggests, a decentralized
system has a centralized control with system does not have a centralized control
all administrative authority. and every node has equal authority

❏ Such systems are easy to design, ❏ Such systems are difficult to design ,
maintain,impose,trust and govern. maintain, govern or impose trust.

❏ But they suffer from many inherent ❏ However,they do not suffer from the
limitations. limitations of conventional centralized
systems.
DECENTRALIZED
1. They do not have a central
point of failure, so more
stable and fault tolerance.
2. Attack resistant, as no central
point to easily attack and
hence more secured.
3. Symmetric system with equal
authority to all, so less scope
of unethical operations and
usually decomcratic in nature
CENTRALIZED
1. They have central point of
failure, so are less stable.
2. They are more vulnerable to
attack and hence less secured.
3. Centralization of power can lead
to unethical operations.
4. Scalability is difficult most of the
time.
 CONTRACTING
❖ With blockchain, you turn contract into a EXAMPLE:-
❖ Let’s suppose you want to rent an
program that will be executed only when
apartment using smart contracts.
both contracting parties enter their keys,
❖ You can pay in cryptocurrency and by a
thereby agreeing to a contract.
specified date, receive a digital entry key.
❖ If the key doesn't come on time , the
❖ The same program can track information
blockchain makes a refund, making sure
from external data sources and create
you won’t lose your money .
contracts that will be automatically
❖ The key starts working exactly on the
executed when certain conditions are met.
specified date and becomes when the
❖ This mechanism is called “SMART rental period is over, so the landlord is
safe.
CONTRACTS”, and the areas of their
❖ The system can not be fooled as it is
possible application are almost infinite.
witnessed by thousand of people.
 WHY BLOCKCHAIN IS IMPORTANT?
Blockchain is here today to take the internet to a whole new level
by removing friction along three key areas:
❏ Control:- Blockchain enabled distribution of the control by
making the system decentralized .
❏ Trust :- Blockchain is an immutable , tamper - resistant
ledger. It gives , shared source of truth to all nodes, making
the system trust less.
❏ Value:- Blockchain enables exchange of value in any form.
One can issue and transfer assets without central entities or
intermediaries.
BLOCKCHAIN VS. DATABASES
 7 USES CASES OF BLOCKCHAIN

1. SUPPLY CHAIN
MANAGEMENT
2. DIGITAL IDENTITY 3. VOTING
❖ Blockchain can
❖ Blockchain promises to
❖ In a blockchain , users can successfully eliminate the
find a to supply chain
have control over their concerns of fraud as it will
through the digitization of
information. Instead of present a clear record of the
assets.
providing consent to many votes that have been cast.
❖ It allows for products to be
service providers. ❖ With blockchain , the
tagged and assigned with
❖ Users can store their digital voting process can be
unique identities which are
identity data in an encrypted carried out comfortably
then transplanted onto an
digital hub . from the confines of the
immutable, transparent and
voter’s homes.
secure blockchain.
 7 USES CASES OF BLOCKCHAIN

4. HEALTH 5. FOOD 6. ENERGY 7. REAL

CARE SAFETY MARKET ESTATE

❖ Blockchain ❖ Blockchain
❖ Blockchain helps ❖ Using blockchain
helps technology allows
decentralize the technology in real
decentralize the quick and easy
energy market , estate has the
energy market , verification of
which is potential to
which is history, location
controlled by large revolutionize
controlled by and status of a
corporations. rental property
large particular food
payments.
corporations. product.
 APPLICATION LAYER:-
● This is the layer where you code up the desired functionalities and
make an application out of it for the end users.
● For these applications, blockchain network is the backend system
5 and they often connect with blockchain network via APIs

LAYERS
OF
BLOCK EXECUTION LAYER:-
● Execution layer is the sublayer which constitutes of smart
CHAIN contracts,underlying rules and chaincode.
● This sublayer has the actual code that gets executed and rules that
are executed.
 SEMANTIC LAYER:-
● This layer is a logical layer because there is an orderliness in the
transactions and blocks.
● This layer defines how the blocks are linked with each other.
● In this layer, the rules of the system can be defined, such as data
5 models and structures.
LAYERS PROPAGATION LAYER:-
OF ● In this layer the transaction/block propagation in the network
which ensures stability of the whole network.
BLOCK ● By design, most of the blockchains are designed such that they
forward a transaction/ block immediately to all the nodes they are
CHAIN directly connected to when they get to know of a new transaction.
CONSENSUS LAYER:-
● This layer usually the base layer for most of the blockchain
systems.
● The primary purpose of this layer is to get all the nodes to agree
on one consistent state of the ledger.
WORKING OF BLOCKCHAIN
❖ IMAGINE THE WHOLE PROCESS TAKING PLACE FOR SELLING OF A WHOLE
COMPANY OR HOUSE

● Firstly, when the individual makes a call to transfer money following things
will happen :
1. That request for the transaction first represents online to the block itself.
2. Once the information received by the block ,then it again sends it to the
parties of the user.
3. Once this request received from the parties ,it then analyze and approved by
all the parties.
4. After approval of request that new block can now officially added to the
chain.
5. After this block is added the money is transferred to the second individual.
WORKING OF BLOCKCHAIN
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CRYPTOCURRENCY
❏ Cryptocurrencies are systems that allow for the secure
payments online which are dominated in terms of
“Virtual Tokens”, which are represented by ledger
entries internal to the system.
❏ “Crypto” refers to the various encryption algorithms
and cryptographic techniques that safeguard these
entries.
 BLOCKCHAIN FOUNDATION

COMPUTER
CRYPTOGRAPHY GAME THEORY SCIENCE
ENGINEERING
The transactions is Game theory is a
secured using study of strategies Computer Science
cryptography in involved in complex
concepts is the engineering
blockchain. that stitches the
games. components of
cryptography,game theory
and many other to build a
blockchain.
LET US STUDY THE CONCEPT OF GAME
THEORY AND COMPUTER SCIENCE
ENGINEERING IN DEPTH…………...

WHAT IS GAME THEORY?
Game theory is the strategic
decision making .
This tells how corporations
make decisions while keeping in
mind the actions that their
competitor will take.
The game theory at least have 3
models:-
❏ Players:- The decision makers.
Eg:- The managers in the firms
❏ Strategies:- The decision they
want to take to further their
companies.
❏ Payoff:- Outcome of the
strategies.
In game theory , there are two types of
games.
❏ Zero Sum Game:- It is the game
in which the gain of one player
comes at the expense of another
player.
❏ Non Zero Sum Games:- It is the
game in which the gain of one
player doesn't come at the expense
of another player.
EXAMPLE:-

COLLECTING BARGAINING OR
NEGOTIATION BETWEEN PARTIES

❏ Different negotiations take place

between worker unions and the
management during the situation of the
strike of workers or lockout period to
increase wages.

❏ Using Game Theory, both parties can

arrive at the optimum solution of the
issue, i.e .to increase wages by
examining different options available
for wages and benefits which can
maximize the welfare of both workers
and management.
 NASH EQUILIBRIUM

➔ Nash Equilibrium states that, in any

non cooperative games where the
players know the strategies of each
other, there exists at least one
equilibrium where all the players
play the best strategies to get the
maximum profits and no side would
benefit by changing their strategies.

➔ If you know the strategies of other

players and you have your own
strategy as well, if you cannot benefit
by changing your own strategy, then
this is the state of Nash Equilibrium.
PRISONER’S DILEMMA

★ The Prisoner’s Dilemma is a non

cooperative game theory model.

★ Prisoner’s Dilemma can be used in a

variety of real- world situations to
demonstrate cooperative behavior
between players
 PRISONER’S DILEMMA
In this Scenario, there are two prisoners being
interrogated separately for a crime that they are both
equally guilty of:-
❏ Alice and Bob. Both are offered an opportunity
to confess and receive a reduced sentence.
❏ OUTCOME:- It can play out in 4 ways with
both having to two possible decisions, either
confess or don’t confess.
❏ As you can see, the overall solution with the
least jail time for both prisoners to both remain
silent and not confess.
❏ This option is highlighted in blue in the bottom
right corner.
❏ But when you play as a participant in the
game, Nash equilibrium is what you eventually
fall into.
 BYZANTINE GENERALS’
PROBLEM
➢ The serious problem that exist within
distributed computing is Byzantine
Generals’ Problem.

➢ In short , it is an issue where there are

multiple systems that need to communicate
within network , where communication
channels and messages cannot be
completely trusted.

➢ The solution to the problem is “Fault

Tolerance “.

➢ Adopting a protocol among the generals is

the best way to make decisions when faced
with uncertainty.
 ZERO SUM GAMES Example
● Zero Sum is a situation in Game theory in which one
person’s gain is another person’s loss, so the net change
● A good example of zero sum games is
in wealth or benefit is zero.
simple election.
● Poker and gamblibg are the examples of zero sum
● If there are candidates A,B,C where
games, since the sum of the amounts won by the players
each receives some amount of votes ,
equals the combined losses of the others.
and the candidate with the highest
number of votes wins.
● Then this the situation of Zero Sum
Game.
❏ Game theory is a revolutionary
interdisciplinary phenomenon
bringing together
psychology,economics, mathematics,
philosophy, and an extensive mix of
various other academic areas. WHY TO
STUDY
❏ So, learning this concepts not only
helps us to formulate the problems in
a more mathematical way, but also
enables us to make the best move.
❏ It helps us to identify aspects the
GAME
each participant should consider
before choosing a strategic action in THEORY?
any given interaction .
❏ It tell us to identify the game first ,
who are the players, what are their
objective or goals,etc..
❏ Game theory provides the basis for
rational decision making.
COMPUTER SCIENCE ENGINEERING

Computer Science
Engineering is the concept
that stitches the
components of
cryptography, game theory
and many others to build a
blockchain.
 MERKLE TREE

➔ A Merkle tree is a binary

tree of cryptographic
hash pointers, hence it a
hash binary tree.
➔ It is named so after its
Ralph Merkle .
➔ Merkle trees are
constructed by hashing
paired data (usually
transactions at the leaf
level) .
MERKLE TREE

➔ Again hashing the hashed outputs all

the way up to the root node, called
the Merkle Tree Root.
➔ Like any other tree , it is constructed
buttom-up.
➔ The Merkle tree is also tamper-proof.
➔ It ensure the integrity of the order of
transactions.
➔ In Merkle tree, there should be an
even number of items iat the leaf
level
PROPERTIES OF BLOCKCHAIN
IMMUTABILITY
● It is the most desired
property to maintain the
atomicity of the Blockchain
transactions.
● Once a transaction is recorded,
it cannot be altered.
● If the transactions are
broadcast to the network , then
almost everyone has a copy of
it .
● With time, when more and
more blocks are added to the
blockchain, the imutability
increases and after a certain
time, it becomes immutable.
FORGERY RESISTANT
● A decentralized solution where
the transaction are public is prone
to different kinds of attacks.
● Cryptographic hash and digital
signatures can be used to ensure
he system is forgery resistant.
● If you make a transaction and
sign a hash of it , no one can alter
the transaction later and if you
signed a different transactions.
● Later you cannot deny that you
never did the transaction as it is
you who signed.
DEMOCRACTIC
● Any peer- to- peer
decentralized system should
be democratic by design
( may not be fully applicable
to the private blockchain.)
● There should be any entity
in the system that is more
powerful than the others .
● Every participant should
have equal rights in any
situation.
 PROPERTIES OF BLOCKCHAIN
DOUBLE- SPEND CONSISTENT STATE OF
RESITANT
● Double- spend attacks THE LEDGER RESILIENT AUDITABLE
are quite common in ● The properties we just
monetary as well as ensure that the ledger is ● A blockchain is a
non monetary consistent throughout, to chain of blocks
● The network should
transactions. some extent. that are linked
be resilient enough
● In a cryptocurrency ● If somehow some nodes together through
to withstand
setting, a double- are not in sync with the hashes.
temporary node
spend attempt is when ledger and hence not ● Since the
failures,
you try to spend the aware of a few transaction blocks
unavailability of
same amount to transaction may look like are linked back till
some computing
multiple people. fraudulent. the genesis block,
nodes at times,
● In a centralized system ● The right kind of auditability
network latency
it is quite easy to consensus suitable for already exists and
and packet
prevent double-spend agiven situation plays the we have to ensure
drops,etc.
because the central most important role to that it does not
authority is aware of ensure stability of a break at any cost.
all the transactions. decentralized solution.
 TRANSACTION OF BLOCKCHAIN
❏ Every new transaction gets broadcast to the network so that all the
computing nodes are aware of that fact at the time it took
place(Double - spend resistant)
❏ Transactions may get validated by the nodes to accept or eject by
checking the authenticity.
❏ The nodes may then group multiple transactions into blocks to share
with the other nodes in the network.
❏ The generation of new blocks should be controlled but not in
centralized fashion.Every node agreeing yupon a block is allied the
consensus , but these are different algorithms to achieve the same
objective, spending on your use case.
❏ The blocks are time stamped in the order they arrive and get added
in the blockchain.
❏ Once the nodes in the network unanimously accept a block, then that
blockchain gets into the blockchain and it includes the hash of the
block that was created right before it.
DISTRIBUTED CONSENSUS MECHANISM

❏ A distributed consensus ensures a consensus of data among

nodes in a distributed system or reaches an agreement on a
proposal.
❏ A consensus algorithm may be defined as the mechanism
through which a blockchain network reach consensus.
❏ Public (decentralized) blockchains are built as distributed
systems and, since they do not rely on a central authority,
the distributed nodes need to agree on the validity of
transactions.
❏ This is where consensus algorithms come into play.
❏ They assure that the protocol rules are being followed and
guarantee that all transactions occur in a trustless way, so
the coins are only able to be spent once.
POWER OF WORK (POW)
❏ In Blockchain, this algorithm is used to confirm transactions and produce new blocks to the
chain. With PoW, miners compete against each other to complete transactions on the network
and get rewarded.
❏ In a network users send each other digital tokens. A decentralized ledger gathers all the
transactions into blocks. However, care should be taken to confirm the transactions and arrange
blocks.
❏ Proof-of-Work is used in a lot of cryptocurrencies.
❏ The most famous application of PoW is Bitcoin. It was Bitcoin that laid the foundation for this
type of consensus. The puzzle is Hashcash. This algorithm allows changing the complexity of a
puzzle based on the total power of the network.
❏ One of the old usages of PoW was to prevent email spams.
POWER OF STAKE(POS)
1. Nodes make transactions. The PoS algorithm puts all these transactions in a pool.
2. All the nodes contending to become validator for the next block raise a stake. This stake is combined with other
factors like ‘coin-age’ or ‘randomized block selection’ to select the validator.
3. The validator verifies all the transactions and publishes the block. His stake still remains locked and the forging
reward is also not granted yet. This is so that the nodes on the network can ‘OK’ the new block.
4. If the block is ‘OK’-ed, the validator gets the stake back and the reward too. If the algorithm is using a coin-age based
mechanism to select validators, the validator for the current block’s has its coinage reset to 0. This puts him in a low-
priority for the next validator election.
5. If the block is not verified by other nodes on the network, the validator loses its stake and is marked as ‘bad’ by the
algorithm. The process again starts from step 1 to forge the new block.
THANK YOU