Ever wondered how a blockchain works. What about bitcoin? It's very interesting that a lot of engineering tricks have been used there that you don't find in system at large. Let's dig in...

1. BITCOIN AND THE BLOCKCHAIN
FOR THE ENGINEER IN YOU
BLOCKCHAIN

2. INTRO

3. INTRO
WHY BITCOIN?
▸ Bitcoin is the first blockchain implementation
▸ The underlying use case (double-entry accounting) is easy
to understand
▸ The important part is not the crypto currency, it’s the
DECENTRALISED TRUST

4. THE BLOCKCHAIN

5. THE BLOCKCHAIN
WHAT IS IT?
▸ A replicated database (every full
node has a copy 140 GB)
▸ Constructed as a simple linked-list
▸ Each element is called a block
▸ Each element contains a large set
of data

6. THE BLOCKCHAIN
VOCABULARY
▸ Genesis block: The first block of
the chain, hardcoded in the system
▸ Block height: a block’s distance to
the genesis block
▸ Block depth: a block’s distance to
the current tip of the chain

7. THE BLOCKCHAIN
HOW IS TRUST ACHIEVED?
▸ Everybody has a copy of the database
▸ The database is (almost) append-only (i.e. data written is
immutable)
▸ The consistency of the database is easily verified as the
system follows specific rules

8. THE BLOCKCHAIN
THE PROOF OF WORK CONCEPT
▸ Writing into the database is controlled
▸ It must be difficult enough so that
• It requires a fair amount of computing power (cost, to discourage
attacks)
• It does not happen too often (to achieve consistency more easily)
▸ Solving the proof of work must be difficult, checking that the solution
found is right must be easy (typically using a hashing algorithm)
▸ Writers are called miners and they compete to write the next block
in the chain

9. THE BITCOIN
IMPLEMENTATION

10. TRANSACTIONS
THE BITCOIN IMPLEMENTATION

11. THE BITCOIN IMPLEMENTATION - TRANSACTIONS
ANATOMY OF A TRANSACTION
▸ A transaction uses previous transaction output(s) as input(s) and spends
them as new outputs

12. THE BITCOIN IMPLEMENTATION - TRANSACTIONS
TRANSACTION OUTPUT
▸ The address to which the funds are delivered is part of the locking
script (see Encumbrance script)
▸ Satoshis are 1/106th of a Bitcoin
▸ 1/103th of a Bitcoin are called milliBitcoin

13. THE BITCOIN IMPLEMENTATION - TRANSACTIONS
TRANSACTION INPUT
▸ References a previous transaction output
▸ Provides the means to unlock the money attached

14. BLOCKS
THE BITCOIN IMPLEMENTATION

15. THE BITCOIN IMPLEMENTATION - BLOCKS
ANATOMY OF A BLOCK
▸ A block is composed of
• a header
• a list of transactions (several 100s)

16. THE BITCOIN IMPLEMENTATION - BLOCKS
THE GENERATION BLOCK
▸ This is how Bitcoin are minted
▸ This is how the “miners” are compensated for the
computing power they lend to the network
▸ It is a special transaction with no inputs
▸ It contains a predefined amount of Bitcoins
▸ It contains the sum of transaction fees that the miner
pockets

17. THE BITCOIN IMPLEMENTATION - BLOCKS
THE BLOCK HEADER
▸ It contains
• A reference to the parent block
• A signature for the whole block (see Merkle Tree)
• A timestamp
• A difficulty target
• The proof of work

18. ENCUMBRANCE SCRIPT
THE BITCOIN IMPLEMENTATION

19. THE BITCOIN IMPLEMENTATION - ENCUMBRANCE SCRIPT
DESCRIPTION
▸ This is a bit of code that “locks” the bitcoin in an output
▸ It is based on a Forth-like reverse-polish notation stack-based
execution language
▸ It has a small set of available operations
(https://en.bitcoin.it/wiki/Script)
▸ Allow for other uses cases than locking to a user’s address

20. THE BITCOIN IMPLEMENTATION - ENCUMBRANCE SCRIPT
EXAMPLE
▸ Encumbrance script
▸ OP_SHA256 BITCOIN_ADDRESS OP_EQUAL
▸ Unlocking
▸ PUBLIC_KEY
Reality
is
a
bit
m
ore
com
plicated

21. ELEMENTS OF ARCHITECTURE
THE BITCOIN IMPLEMENTATION

22. ELEMENTS OF ARCHITECTURE
SOME PARAMETERS
▸ Total number of bitcoins: 21 millions, by 2140
▸ Generation speed: 50 bitcoins per block when it started
in 2009. Amount divided by 2 every 210,000 blocks (~4
years)
▸ Difficulty adjustment: every 2,016 blocks (~2 weeks)
▸ Typical fees: Depends on transaction size !

23. ELEMENTS OF ARCHITECTURE
RESOLVING THE FORKS
▸ It is possible that 2 miners competing might find a solution
at more or less the same time
▸ In this case, it creates 2 “sub-networks” of miners that try to
build a block based on a different parent
▸ Basically the first group that finishes wins as the network
always accepts the longest chain

24. ELEMENTS OF ARCHITECTURE
MERKLE TREE
▸ Binary hash tree
▸ Signs/summarises the entire dataset in a single hash

25. ELEMENTS OF ARCHITECTURE
MERKLE TREE - MERKLE PATH
▸ By communicating log2(n) transactions, one can prove the
inclusion of a transaction in the block
A block with 2048
transactions weighs
512 kB
There are 484700
blocks (Sept 2017)—>
140 GB
It takes only 11
hashes, i.e. 352
bytes to prove that a
transaction belongs
to this block

26. ELEMENTS OF ARCHITECTURE
BLOOM FILTER
▸ Allows to request transactions of interest without revealing one’s identity
▸ A bloom filter is a bit field of N bits
▸ It is based on H hashing algorithms that output a hash value between 1 and
N
▸ If a node is interested in a transaction
1.it hashes the transaction and gets a value V between 1 and N
2.it flips the Vth bit of the filter to 1
3.does the same with the other H hashing functions
4.does the same with the other transactions of interests
▸ It then broadcast this filter to neighbouring full bitcoin nodes

27. ELEMENTS OF ARCHITECTURE
BLOOM FILTER
▸ Allows to request transactions of interest without revealing one’s identity

28. ELEMENTS OF ARCHITECTURE
PROOF OF WORK AND TIMING
▸ The Bitcoin network is calibrated so that one block is generated
every 10 minutes on average
▸ It is based on a difficulty level that is fine-tuned every 2 weeks
▸ Miner compete to find a nonce so that the SHA256 hash of the
block header is smaller than the difficulty target
▸ Miners moved from desktop computer CPU to FPGA to
specialised hardware (ASIC) that encodes SHA256 on the chip
▸ Today it is useless to try to mine bitcoin on a desktop computer

29. ELEMENTS OF ARCHITECTURE
PROOF OF WORK - NUMBERS
▸ In 2014:
▸ It took about 150 quadrillions hashes per second to find a
solution for a block (150 x 1015)
▸ The network was bringing 100 petahashes per second (100 x
1015)
▸ Resulted in a 1 block every 10 minutes
▸ Today (Sept 11th 2017)
(https://bitcoinwisdom.com/bitcoin/difficulty)
▸ 5.6 x 1018 hashes per second

31. ELEMENTS OF ARCHITECTURE
PROOF OF WORK - SOURCE OF ENTROPY (1/3)

32. ELEMENTS OF ARCHITECTURE
PROOF OF WORK - SOURCE OF ENTROPY (2/3)

33. ELEMENTS OF ARCHITECTURE
PROOF OF WORK - SOURCE OF ENTROPY (3/3)

34. SECURITY
THE BITCOIN IMPLEMENTATION

35. SECURITY
TWO ATTACK TYPES
▸ Double spend
▸ Likelihood decreases with the block depth
▸ Denial of Service on an address

36. GOING FURTHER

37. OTHER BLOCKCHAINS
GOING FURTHER

38. LITECOIN
Litecoin is a peer-to-peer Internet currency that enables instant,
near-zero cost payments to anyone in the world. Litecoin is an
open source, global payment network that is fully decentralized
without any central authorities. Mathematics secures the network
and empowers individuals to control their own finances. Litecoin
features faster transaction confirmation times and improved
storage efficiency than the leading math-based currency. With
substantial industry support, trade volume and liquidity, Litecoin is
a proven medium of commerce complementary to Bitcoin.

39. NAMECOIN
Namecoin is a decentralized open source
information registration and transfer
system based on the Bitcoin cryptocurrency

40. ETHEREUM
Ethereum is a decentralized platform that runs smart
contracts: applications that run exactly as programmed
without any possibility of downtime, censorship, fraud or third
party interference.
Ethereum is how the Internet was supposed to work.
Ethereum was crowdfunded during August 2014 by fans all
around the world. It is developed by ETHDEV with
contributions from great minds across the globe.
And
for
the
Pros,
it is Turing
com
plete

41. LIMITATIONS
GOING FURTHER

42. GOING FURTHER
LIMITATIONS
▸ Waste a lot of resources
https://digiconomist.net/bitcoin-energy-consumption

43. GOING FURTHER
LIMITATIONS
▸ Concentration: Just a few mining rings doing most of the blocks
https://blockchain.info/blocks

44. GOING FURTHER
▸ Miner vulnerable
▸ Their location is known. Margins are low.
▸ Scalability
▸ The block size is limited. Lot of waste. 10 min for a block to appear
▸ Ambiguity due to forks
▸ Long latency to get the “truth”
▸ Suppose an honest majority of miners
LIMITATIONS

45. A NEW PROMISE?
GOING FURTHER

46. GOING FURTHER
▸ Algorand (https://people.csail.mit.edu/nickolai/papers/
gilad-algorand-eprint.pdf)
▸ No fork (10-18)
▸ No proof of work
▸ Byzantine agreement
▸ Assumes that the majority (2/3) of the money is in honest
hand
▸ Remains to be tested out of the lab
▸ Uses VRFs (Verifiable Random Function)
A NEW PROMISE?
MIT Turing Award
recipient Silvio Micali

47. ROTI

48. 48
Grégory Bataille
@gregbfiveten
Pix4D
Back end engineer
Photogrammetry