Introductory talk on blockchain and underlying concepts

1. Blockchain

2. Motivation: Land Records
JULIE NEHA
House #42
Julie sells House #42 to Neha

3. Problems to Prevent
Julie isn't the property owner
Seller is not Julie (authentication)
Julie denies transaction happened
Julie changes transaction details

4. Current Solutions

5. Current Solution: Property Owner
Central Registry (Government)
Title Search

6. Current Solution: Authentication
Government ID
Photo
Signature

7. Current Solution: Transaction
Permanence
Central Registry (Government)
Notarized Agreement Copy

8. Current Solution: Transaction Modifications
Printed agreement copies
Initials on each page

9. Can we do better?
We hate the registrar's office
Can we get rid of the government?
Can we use technology?
A database of properties and owners

10. Need Tech Solutions For
Property Owner
Authentication
Transaction Permanence
Transaction Modifications
Use Digital Authentication

11. Solution v1 – Sameer’s Webserver
Online database of house owners
Stored on Sameer’s web server
Every owner has an account+password
Log in to transfer
Record all transactions (audit trail)
This is a “ledger”

12. Home Owner Ledger
House No New Owner Date
42 Julie 13 Jul 2000
133 Peter 11 Sep
2002
42 Neha 31 Oct 2006
1024 Binary 12 Apr 2008
3 Salman 21 Dec
2012

13. Conventional Database
Who can add transactions?
– Database software / admin (Sameer)
 Homeowner authentication?
– Password (stored in database)
 Who can read transactions?
– Sameer + Homeowner
 Who can modify transactions?
– Sameer

14. Problem
• Sameer can insert fake transactions

15. Solution
• Home owners digitally sign transactions

16. Home Owner Ledger
House No New
Owner
Date Dig. Sign
42 Julie 13 Jul
2000
Xa2anT54
133 Peter 11 Sep
2002
7awRY27x
42 Neha 31 Oct
2006
Y4htT29x
H
1024 Binary 12 Apr
2008
BdR664bx
3 Salman 21 Dec
2012
RGbw5bx

17. Digital Signature: Characteristics
Only owner can sign
Sign depends on transaction details

18. Understanding
Digital
Signatures

19. Understanding Digital Signatures
Encryption using normal passwords
Encryption using 2 passwords
Public key + Private key
Digital authentication
Digital signatures

20. Encryption Using Normal
Passwords
I, Julie Andrews,
residing at 42 ...
ORIGINAL
y</PLVDg/kzExgWO</xgODEDze/?p/å"/!!!
ENCRYPTED
Encryption
Decryption
PASSWORD
How it works:
• At encryption
» Software asks for password
» You can pick any password
• At Decryption
» Software asks for password
» Must provide same password

21. Encryption Using 2
Passwords
I, Julie Andrews,
residing at 42 ...
ORIGINAL
y</PLVDg/kzExgWO</xgODEDze/?p/å"/!!!
ENCRYPTED
PASSWORD1
PASSWORD2

22. Works in Reverse Too
I, Julie Andrews,
residing at 42 ...
ORIGINAL
y</PLVDg/kzExgWO</xgODEDze/?p/å"/!!!
ENCRYPTED
PASSWORD1
PASSWORD2

23. Authentication
I, Julie Andrews,
residing at 42 ...
ORIGINAL
y</PLVDg/kzExgWO</xgODEDze/?p/å"/!!!
ENCRYPTED
PUBLIC KEY
PRIVATE KEY
Authentication Usage:
• Encrypt a random text with private key
» e.g. Today's date
• Anyone can confirm
» By decrypting using public key
• None else can do this
Initial setup for authentication:
• Public key + Private key = Keypair
• Everyone creates keypairs
• Publicly publish all public keys
• Private keys kept hidden

24. Digital Signature
Block: 3242
Previous Block: 1337
T1: House #42, Julie, 13 Jul 2017, Xa2anT54
T2: House #133, Peter, 11 Sep 2002, 7AWry27x
Random Text: Abcdefghi11111113
Hash Value: b9f85daa6f83cf02ce5c31
PRIVATE KEY
Signature: 8093d995f066734046dbf5f

25. Digital Signature: Signing
To sign a document:
– Compute its hash
– Encrypt hash with private key
 Anyone can validate:
– Decrypt signature with public key
– Compare with document hash
• Authenticates
– Identity of signing entity
– Content of document

26. Home Owner Ledger
House No New
Owner
Date Dig. Sign
42 Julie 13 Jul
2000
Xa2anT54
133 Peter 11 Sep
2002
7awRY27x
42 Neha 31 Oct
2006
Y4htT29x
H
1024 Binary 12 Apr
2008
BdR664bx
3 Salman 21 Dec
2012
RGbw5bx

27. The Transaction Deletion
Problem
Good News:
Sameer can’t fake a transaction
Sameer can’t change details of a transaction
Bad News:
Sameer can delete a transaction
Double-spend
 Julie sells same plot to someone else & shares profits with Sameer

28. House No New
Owner
Date Dig. Sign
42 Julie 13 Jul
2000
Xa2anT54
133 Peter 11 Sep
2002
7awRY27x
42 Neha 31 Oct
2006
Y4htT29x
H
1024 Binary 12 Apr
2008
BdR664bx
3 Salman 21 Dec
2012
RGbw5bx
Home Owner Ledger
House No New
Owner
Date Dig. Sign
42 Julie 13 Jul
2000
Xa2anT54
133 Peter 11 Sep
2002
7awRY27x
42 Neha 31 Oct
2006
Y4htT29x
H
1024 Binary 12 Apr
2008
BdR664bx
3 Salman 21 Dec
2012
RGbw5bx

29. Deletion – Solution
Multiple servers
Every server keeps a copy
– Of entire transaction ledger
– “Distribute Ledger”
• Servers only add transactions. No modification or
deletion allowed.
• “Append-only ledger”

30. Nobody in charge
Any server can accept transactions
– “unconfirmed”
– Forwarded to all servers
Random “Master” chosen periodically
– Every 10 minutes
– Creates and seals new block
– Confirms all unconfirmed transactions

31. Ledger Propagation
• Anyone can join anytime as a server
• Servers keep all the blocks / complete
ledger
• Servers receive confirmed transactions
from current master
• Unconfirmed transaction(s) are kept
around by the servers until reconciled

32. “Random”??
Who chooses randomness?
Number of servers not known
No central authority
Make everyone solve a hard math problem
First server to solve the problem becomes the
“Master”
– Usually gets reward/commission
This is called “Mining”

33. The Mining Problem
Compute a function based on contents of current
block
– Like a compressed encryption of the block contents
– This is called the “Hash”
 Modify block contents until hash ends with 0000

34. Hash Characteristics
Depends on contents of block
Minor changes produce totally different hash
Easy to compute/verify
Impossible to reverse-engineer

35. Mining
Block: 3242
Previous Block: 1337
T1: House #42, Julie, 13 Jul 2017, Xa2anT54
T2: House #133, Peter, 11 Sep 2002, 7AWry27x
Random Text: Abcdefghi11111111 (nonce)
Hash Value: 38260c9ad4e3142adc38a

36. Mining
Block: 3242
Previous Block: 1337
T1: House #42, Julie, 13 Jul 2017, Xa2anT54
T2: House #133, Peter, 11 Sep 2002, 7AWry27x
Random Text: Abcdefghi11111112
Hash Value: f29bc91bbdab169fc0c0a3

37. Mining
Block: 3242
Previous Block: 1337
T1: House #42, Julie, 13 Jul 2017, Xa2anT54
T2: House #133, Peter, 11 Sep 2002, 7AWry27x
Random Text: Abcdefghi11111113
Hash Value: b9f85daa6f83cf02ce5c31

38. Mining
Block: 3242
Previous Block: 1337
T1: House #42, Julie, 13 Jul 2017, Xa2anT54
T2: House #133, Peter, 11 Sep 2002, 7AWry27x
Random Text: Abcdefghi11111114
Hash Value: 21440dba05ffe31f6c6bf

39. Mining
Block: 3242
Previous Block: 1337
T1: House #42, Julie, 13 Jul 2017, Xa2anT54
T2: House #133, Peter, 11 Sep 2002, 7AWry27x
Random Text: Abcdefghi11111115
Hash Value: 0e8c4304837e44c4e8d02

40. Mining
Block: 3242
Previous Block: 1337
T1: House #42, Julie, 13 Jul 2017, Xa2anT54
T2: House #133, Peter, 11 Sep 2002, 7AWry27x
Random Text: Abcdefghi11111116
Hash Value: b591abbba2f4de490ee0c8

41. Mining
Block: 3242
Previous Block: 1337
T1: House #42, Julie, 13 Jul 2017, Xa2anT54
T2: House #133, Peter, 11 Sep 2002, 7AWry27x
Random Text: Abcdefghi11111117
Hash Value: b6485633f4901443360000

42. Bitcoin Mining
Bitcoin mining involves 16000000000000000
computations per second
Average time = 10 minutes
Problem made harder if more
servers join network

43. Conflicts
Block 43
Block 42
Slide Inspiration: Joseph Bonneau, Princeton University

44. Longest Chain Wins
Block 43
Block 42
X
Y

45. Multiple Conflicts
Block 43
Block 42

46. Handling Conflicts
Temporary conflicts possible
Rule for servers: Extend the longest chain
There can be only one blockchain