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Distributed systems and blockchain technology

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An introduction to blockchain technology starting from the distributed systems and the CAP theorem. Consensus mechanisms explained on the bitcoin blockchain.

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Distributed systems and blockchain technology

  1. 1. The Blockchain Technology The Next Internet? ——————— Alket Cecaj PhD
  2. 2. Understanding Blockchain Technology Understanding distributed systems is essential in order to understand blockchain technology. Blockchain at its core is a distributed system, more precisely is a dece Distributed systems are a computing paradigm whereby two or more nodes work with each other in a coordinated fashion in order to achieve a common outcome
  3. 3. Distributed Systems In a distributed system a node is an individual player Nodes are capable of sending messages to and from each other Nodes can be honest, faulty or malicious and have their own memory and processor A node that can exhibit an arbitrary or malicious behavior is also known as a Byzantine node. A Byzantine node can be detrimental to the operation of the network because of its behavior
  4. 4. Distributed Systems and the Blockchain Technology The main challenge in distributed systems design is coordination between nodes and fault tolerance. Even if some of the nodes become faulty the d.s. should continue to work flawlessy in order to achieve the desired results.
  5. 5. Design Challenges in Distributed Systems and CAP Theorem • Any distributed system cannot have Consistency, Availability, and Partition tolerance simultaneously
  6. 6. Cap Theorem and the Blockchain • It seems that the CAP theorem is violated in blockchain but this is not true. • In blockchain the Consistency is sacrificed in favor of Availability and Partition tolerance • In the most famous blockchain application, bitcoin, Consistency is not achieved simultaneously with Partition Tolerance and Availability • In Bitcoin blockchain consistency is achieved as a result of validation from multiple nodes over time. • For this purpose the concept of mining was introduced, which facilities the achievement of consensus through a mechanism called PoW (Proof of Work)
  7. 7. Introduction to Blockchain Technology • The blockchain technology definition highly depends on how you look at it. Business view or technical view. • The blockchain technology is a peer-to-peer distributed ledger that is cryptographically secure, append only, immutable and up- dateable only via consensus among peers • Different consensus mechanisms allow the nodes to agree on the new state of the distributed ledger.
  8. 8. Blockchain technology under different perspectives:network Blockchain is a layer of a distributed peer-to-peer network running on top of the Internet, just like SMTP, HTTP, or FTP running on top of TCP/IP.
  9. 9. Blockchain technology under different perspectives: business • The Blockchain technology as a platform whereby peers can exchange values using transactions without the need for a central trusted arbitrator. • A powerful concept which has a tsunamic potential as it allows for decentralized consensus where no central authority is needed.
  10. 10. Blockchain technology under different perspectives: data structure • Blockchain is a data structure just like a linked list that uses hash pointers instead of normal pointers. Hash pointers are used to point to the previous block.
  11. 11. Blockchain Elements • Addresses are unique identifiers that are used in a transaction on the blockchain to denote senders and recipients. • A transaction is the fundamental unit of a blockchain and represents a transfer of value from one address to another. • A block = multiple transactions, previous block hash (hash pointer), timestamp, and nonce. • A node in a blockchain network can have different roles. It can propose and validate transactions and perform mining. Make simple payments etc.. • A smart contract is a program that runs on top of the blockchain and encapsulate the business logic to be executed when certain conditions are met. A very desirable feature due to the flexibility and power it provides to
  12. 12. Features of a blockchain • Distributed consensus enables a blockchain to present a single version of the truth without the requirement of a central authority • Transactions posted from nodes are verified based on a predetermined set of rules. Only valid transactions are selected for inclusion in a block • A blockchain is a platform where programs can run that execute business logic on behalf of the users, the so called smart contracts • Blockchain enables the transfer of value between its users via tokens. Tokens can be thought of as a carrier of value • This is an optional feature depending on the type of blockchain used. A blockchain can generate cryptocurrency as an incentive to its miners who validate the transactions and spend resources in order to secure the blockchain.
  13. 13. Blockchain Types • Public Blockchain • Private Blockchain • Semi-private Blockchain • Sidechain • Tokenized Blockchain • Tokenless Blockchain
  14. 14. Consensus Mechanisms • The choice of the consensus mechanism is conditioned by the type of blockchain. • Two types of consensus mechanisms ➢ Proof-based ➢ Votes based
  15. 15. Consensus Mechanisms • Proof of work • Proof of stake • Delegated Proof of Stake • Proof of Elapsed Time • Deposit-based consensus • Proof of importance • Federated consensus or federated Byzantine consensus
  16. 16. Consensus Mechanisms and Performance Votes based Proof based Speed Good Poor Scalability Moderate Good Finality Good Poor
  17. 17. Blockchain Demo There is a great demo showing how a blockchain works and in particular it explains concepts like cryptography, hashing of a transaction, elements of a block and how they are appended to the blockchain etc.. The demo can be found here https://anders.com/blockchain/hash.html
  18. 18. Example – Bitcoin • The Bitcoin blockchain: understanding the blockchain technology through its most famous application, bitcoin.
  19. 19. Bitcoin Transactions
  20. 20. Bitcoin Transactions
  21. 21. Bitcoin Transactions The math behind digital signatures
  22. 22. Account balances
  23. 23. Mining
  24. 24. Bitcoin generation and Halving The reward of miners, every 4 years gets halved. At the end there will be only 21 million bitcoins

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