The document discusses the transformative impact of blockchain technology, likening it to historical inventions like the steam engine, emphasizing its ability to decentralize trust in the digital economy. It explains how blockchain addresses issues such as double spending and provides a framework for cryptocurrencies like Bitcoin, outlining its properties and advantages including distributed consensus and improved privacy. The text also highlights various applications of blockchain beyond finance, including smart contracts, decentralized IoT, and proof of legal document existence, while acknowledging challenges such as scalability and regulatory concerns.

1. Blockchain: Bitcoin and Beyond:
Move from Centralized to
Decentralized Trusted Framework
Sanjeev Verma

2. BREAKTHROUGH
25 years ago a breakthrough
technology that connected people
Connected people around the world,
foundation for modern growth.
Today the Internet gives a new
breakthrough-BLOCKCHAIN
Changes the way economy & businesses
work
Distributed Consensus without a
centralized Trust Entity.

3. BNP Paribas: Blockchain is a Disruptive Invention
‘Like The Steam or Combustion Engine’

4. Problem: Dependency on a Single
Trusted Entity
• Trust in Digital Economy is Broken:
– We depend on Email Server ( like GMAIL) for
secure delivery of our emails.
– Social network like Facebook to broadcast our life
events to our loved ones.
– CA for our Digital Certificates...
• We are living our life precariously by relying
on a Third Party for the security and privacy of
our digital assets.

5. Solution: Move Towards Decentralized
Trusted Framework
• Solution:
– Decentralized Trusted Framework instead of a Single
Trusted Entity.
• Bitcoin is the first Cryptocurrency that gave a Trusted
solution using Blockchain ( based on 2009 paper).

6. What is Money?
• Money is means for exchanging goods and
services & has 4 properties
– Divisible, Durable, Fungible and Verifiable.
• Bitcoin like any other Fiat Currency (US $) is
based on trust.
• Bitcoin unlike US $ is deflationary since there
can be a maximum of 21 Millions Bitcoins in
Bitcoin network ( by year 2140).

7. Requirements of a Trusted
Cryptocurrency system
• Requirements of a Trusted Cryptocurrency
network:
– Verification of the entity initiating transaction.
– Trusted Ownership changes.
– Transaction ordering to prevent fraud ( double
spend).

8. Note
SignatureTo
From Amount
From Signature To Amount
RFloxXpoYC z0D8Pm9ITT z4ZFAMEl0i 300
z4ZFAMEl0i 04GNav84TI CHRouGK9WN 50
z4ZFAMEl0i fBC5cV0edM MlAClZmSX6 100
CHRouGK9WN mG6VnlKrQL MlAClZmSX6 200
... ... ... ...
#1 Signature Verification

9. #2 Trusted Ownership Changes
This pics taken from iponderablethings.com

10. #3 Transactions Ordering to prevent Double Spending
Double Spending problem
• Alice ( consumer) sends
cryptocurrency to Bob (
merchant to buy a product.
• Alice Waits for Bob to ship the
product.
• Alice conducts another
transaction referring the same
input to himself/herself.
• Due to propagation delay,
second transaction go
through. Bob ships the
product and does not get his
money too!
Bitcoin was the first cryptocurrency to address this problem using a
mechanism—now popularly known as Blockchain.

11. What is Blockchain?
• Blockchain is a decentralized public ledger
– Public Key is your A/C #
– Private Key your key to get access
– Entries verified by distributed computing entities
(called miners)

12. This pics taken from financialexpress.com

13. Miners work on unconfirmed transactions
and packages them into a Block.
This pics taken from iponderablethings.com

14. Nonce is just a solution to a puzzle
e.g. Pick a number such that the hash of all the blocks
content has 5 leading zeros.
Last Block
Nonce
Metadata
Signature
Amount
To
From
Tx Id
Block Id
10^8 Gig hashes to solve a single Block.
How a Block is Generated?

15. Blockchain Blocks
Blocks are cryptographically linked together: A Block can’t be solved
until previous block is solved

16. Occasionally there could be more than one block solved at a time:
In Bitcoin Network it takes on average 10 minutes to solve a Block.
Bitcoin Network finally stabilizes to a single
chain that is trusted by everyone in the
network.

17. How Blockchain addresses the issue of double spending?
Mathematical Race starts
This pics taken from iponderablethings.com

18. You need 50 % of the Computing Power to Break the System!

19. Blockchain Advantages
• Two Main Characteristics
– Distributed Consensus
• Past and Present events involving digital assets can be
verified by anyone by looking at Blockchain at any time.
– Anonymity
• Use of public cryptography ensures privacy of the
digital assets.

20. Applications of Blockchain
• Monetary Aspect is the tip of the iceberg-
Blockchain is ground breaking technology:
– Financial Applications
• Stock Exchange, Insurance,
– Non-Financial Applications
• Notary, Proof of Existence of Legal Documents, IoT,
Distributed Storage,
• Escrow Service

22. What is Smart Contract?
• Computer Programs that enforce the terms of
a contact:
– Self Enforceable
– Transparent
– Faster
– Cheaper

23. Smart Contract Example

24. Example:
Smart Contract Betting
Escrow Service
BET
49 ERS Wins
2
11
Bob bets
on
Alice bets
on 3

25. Smart Property
• Smart Property is a physical property whose
ownership is controlled by Blockchain using
Smart Contracts
– It also includes non-physical properties such as
shares in a company or access to a remote
computer.
– Examples include Cars, Houses, Diamonds etc.

26. Blockchain based AirBnB service
• Smart Property can be used to implement a Blockchain-based AirBnB service- From
Brokerage Service to Escrow service

27. Some Other Applications
• Decentralized Proof of Existence of Legal Documents:
– Cryptographic Hash or fingerprint of legal documents can
be stored in the Blockchain.
• Decentralized IoT
– Current implementation is based on a centralized hub or
broker.
– IBM’s ADEPT uses Blockchain as a general ledger to keep
secure messages exchanged between IoT devices.
– Filament a start-up provides a decentralized Software stack
that stores the digital identities of the IoT devices in a
Blockchain.

28. Blockchain based Peer-to-Peer Implementations of IoT

29. Conclusion
• Blockchain is a disruptive technology
– Distributed Consensus and Anonymity are its two
main characteristics.
– Finding newer applications in both Financial and Non-
Financial space.
– A new term Fintech has been coined to describe its
applications in financial space.
• Still has challenges in terms of scalability, govt
regulations and behavioral change in trade
without involving third party.
• https://www.youtube.com/watch?v=YIVAluSL9SU

30. The Emerging Technology Hype Cycle-2015