The document discusses blockchain transactions and components. It begins with recapping blocks and consensus protocols in blockchains like Bitcoin. It then discusses different types of crypto assets that can be represented on blockchains as tokens, including currencies, digital entities, and representations of real-world assets. The document outlines different types of transactions on blockchains like Bitcoin and Aeternity, including paying to public keys and multi-signature transactions. It also discusses cryptographic methods used for signing transactions like public/private key cryptography and Merkle trees. Finally, it provides an exercise on creating, signing, and verifying transactions as well as modifying a smart contract for a free-for-all account.

1. Blockchain Transactions
Dr. Bastian Blankenburg, UTU Technologies Limited
Nairobi, October 2018

2. Outline
1. Blockchain components and protocols
1. Recap: blocks and consensus
2. Types of assets
3. Transactions: types and signing
2. Cryptographic methods used in blockchains
3. Exercise: continue ongoing smart contract development exercise

3. Blockchain components and protocols
Part 1

4. Recap: blocks and consensus
Blockchain: creating a fixed order of blocks of transactions using
p2p time-stamping by Proof of Work:
1. Everybody can create blocks + hashes.
2. But: hashing is made difficult.
3. Broadcast blocks to all known nodes (recursively)
4. Consensus: the longest chain always wins.
Sources: Bitcoin: A Peer-to-Peer Electronic Cash System. Nakamoto, 2008, https://bitcoin.org/bitcoin.pdf,
https://en.wikipedia.org/wiki/Blockchain

5. Byzantine Generals Problem
Source: https://medium.com/@sardorislomov/what-is-byzantine-generals-problem-1f436b49bc23

6. Byzantine Generals Problem
Source: https://medium.com/@sardorislomov/what-is-byzantine-generals-problem-1f436b49bc23

7. Crypto Assets
Types of crypto/digital assets:
• “Natively" digital:
• Crypto currencies like Bitcoin
• Other ditigal entities like cryptokitties
• Representation of a real-world asset
• Land ownership
• Art usage rights
• Concert tickets
• …
Source: https://www.stateofthedapps.com/dapps/cryptokitties
Source: https://blockgeeks.com/guides/smart-contracts/

8. Tokens
Assets are represented on the blockchain via smart contracts as
tokens. A token
• is issued and transferred via its defining smart contract and
• represents rights and/or obligations to some asset and therefore
has some value.
Source: https://hackernoon.com/the-token-handbook-a80244a6aacb
NB: a crypto currency is the native token of a blockchain, where the blockchain
implementation itself can be viewed as a sort of native smart contract.

9. Transactions on Bitcoin
Transaction types: depending on the blockchain.
Bitcoin:
• Pay to PubKey Hash: sending Bitcoin to an
address
• Pay to PubKey: assigning newly mined Bitcoin
• Pay to Script Hash: sends an amount to a
“script hash”, which can then be claimed by
the recipient by providing that script.
• Multi-Signature: multiple signatures required
to spend
• (a few more exotic ones) Source: https://blockgeeks.com/bitcoin-transactions/

10. Transactions on Æternity
Æternity: two main types:
1. Data transactions:
• Spend: transfer of Æ
• Oracle: creation, registration,
responses
• Naming: claiming, updating,
transferring, revoking
• Channels: creation, closing, settling
2. Smart contracts: compile, deploy, call
Source: elixir-node source code

11. Cryptographic methods used in
blockchains
Part 2

12. Public/Private Key Cryptography for Signing Transactions
Source: https://www.slideshare.net/easel1/django-cryptography/16-Asymmetric_Nway_encrypt_decrypt_sign

13. Implementation in elixir-node
Source: elixir-node source code
NB: when using cryptography in application, always use standard crypto libraries
unless you’re learning, doing crypto research or building a crypto library.

14. Public/Private Key Cryptography Methods
• Mathematical functions which are
1. easy to compute but
2. hard to compute the reverse.
• Examples:
• Exponentiation over finite fields (Diffie–Hellman, DH),
key agreement only
• Exponentiation modulo a product of 2 large primes
(RSA)
• Discrete logarithm (ElGamal, DSA)
• Elliptic Curve, i.e. discrete logarithm of a random
elliptic curve elements
• more secure, fast, smaller keys
• widely used in blockchain
https://arstechnica.com/information-technology/2013/10/a-relatively-easy-to-
understand-primer-on-elliptic-curve-cryptography/2/

15. Merkle Trees
https://hackernoon.com/merkle-trees-181cb4bc30b4
Used to efficiently store and verify many hashes in a block.

16. Merkle Trees
https://hackernoon.com/merkle-trees-181cb4bc30b4
Used to efficiently store and verify many hashes in a block.

17. Exercise
Part 3

18. Exercise: transactions
1. Create and sign transactions,
2. inspect the block chain,
3. manually verify transactions

19. Exercise: Free for All Contract
1. https://github.com/aeternity/protocol/blob/master/contracts/sophia.md
2. Example: free-for-all account:
contract Test =
record state = {balance : int}
public function init() : state = {balance = 0}
public stateful function add(amount: int) = put(state{balance @ b = b + amount})
public function getBalance() = state.balance
public stateful function withdraw(amount: int) =
if(amount < state.balance)
put(state{balance @ b = b - amount})
amount
else
0

20. Exercise: Free for All Contract
Exercise:
1. Use actual tokens transfer instead of just assigning ints
2. Everybody has their own balance and add, getBalance and withdraw
work only for the caller’s balance.

21. Thank you!