Note: These are my personal views and not those of my employers, Tata Consultancy Services. I used this slide-deck to present to the Institution of Engineering and Technology in Reading University on 22nd March 2018. I will soon be recording a video with voice-over to this slide deck as well as including some of the animations built into this slide deck. I think it will have even more value as a tool to introduce people to Blockchains

1. Introduction to Blockchains
PRATAP TAMBE, 22 MARCH 2018

2. A small thought experiment
If I send you the following
image of a 5 GBP note to
your e-mail address, will
you accept it?
If I give you a 5 GBP note, how will you
decide whether to accept it or not?
But when you log into your bank account and you see a 5 GBP credit to your account on
your screen, you usually believe it? Have you ever wondered why?
Check the see-through window and the portrait of the Queen.
Check the Elizabeth Tower (Big Ben) is gold on the front of the note and silver on the back.
Check the foil patch below the see-through window changes from 'Five' to 'Pounds' when the note
is tilted.
Check the coronation crown appears 3D.
Check the ultra-violet feature.
Check the circular green foil patch on the back of the note which contains the word BLENHEIM.

3. Problems with e-mail image currency
 If email image of 5 GBP note were to be accepted, any one might make multiple
copies and spend multiple times or spend without having 5 GBP.
 What if multiple copies were to be prevented (by tracking ownership transfers
immutably in a shared ledger) and multiple spend or spending without having
were to be prevented (by using a consensus process to update the shared ledger?)
 That is what bitcoin and Bitcoin does

4. Why do we need bitcoin?
 Banks use centralised ways of ensuring integrity of money transactions in economies
 Banks/central-banks can insert/delete/modify transactions in addition to loss of privacy but we trust them
not to do so, since there is a system of checks and balances (But this is very expensive and costs 1.7 trillion
USD globally as per the Economist, near 2% of the total global payments)
 While the comparable cost for bitcoin is not known, there are other more complex problems in they way
banks, central banks and governments manage the supply of money in economies and some believe that
bitcoin offers an way to solve these problems.
 Usage of bitcoin is increasing, albeit subject to a few challenges, particularly scalability and privacy

5. Eliminating the problems of centralised
architectures
 How do we assure integrity of new transfer transactions ?
 Transaction precondition based on history (e.g. property ownership)
 Authentication of node identity submitting transaction (e.g. digital signatures)
 How do we assure integrity of transaction history?
 Transaction permanence (Did transaction happen?)
 Transaction modifications (Did transaction details change?)

6. What are Blockchains?
 PEER-TO-PEER NETWORK MAINTAINING A DISTRIBUTED DATABASE
 Distributed database used to maintain a continuously growing chain of blocks (of
transactions), so that each block contains a timestamp and a link to a previous block.
 Managed by a Peer-to-Peer network collectively adhering to a consensus process for
validating new blocks before appending them
 Permissioned networks restrict who can validate/participate in consensus process
 Permission-less networks do not restrict who can validate/participate in consensus
 Once recorded, the data in any given block cannot be altered retroactively without the
alteration of all subsequent blocks and a collusion of the network majority

7. Home Transfer Example : Digital
Signatures
House Number New Owner Date
3 Peter 23 August 2001
22 Bart 23 December 2003
3 Grace 8 February 2008
13 Ben 5 March 2011
78 Athena 7 September 2012
Land Registry
Server
Problem: Land Registry can insert fake transactions
Solution: Make homeowners digitally sign transactions
Digital Signature
Ab43fgdefghe4i
Gkksgur86ed434
Sr939g344cd3fd4
22334fchtdhy76u
3j4g5gfj66j6uj769
Only owner can sign. Signature depends on transaction details

8. Home Transfer Example : Deletion
problem
House Number New Owner Date Digtal Signature
3 Peter 23 August 2001 Ab43fgdefghe4i
22 Bart 23 December 2003 Gkksgur86ed434
13 Ben 5 March 2011 22334fchtdhy76u
78 Athena 7 September 2012 3j4g5gfj66j6uj769
Problem: Land Registry can delete transactions
Solution: Use multiple servers to store Txns
3 Rachel 16 January 2013 rtg485fgfrgh45h7
and collude with Peter to double-spend
Servers only add Txns, no deletion/modification
Which server will add next set of transactions? How are servers kept consistent?Problem:
Land Registry
Server

9. Maintaining consistency across servers
House
No.
New
Owner
Date Digital Signature
3 Peter 23 August 2001 Ab43fgdefghe4i
22 Bart 23 December 2003 Gkksgur86ed434
3 Grace 8 February 2008 Sr939g344cd3fd4
13 Ben 5 March 2011 22334fchtdhy76u
78 Athena 7 September 2012 3j4g5gfj66j6uj769
House
No.
New
Owner
Date Digital Signature
3 Peter 23 August 2001 Ab43fgdefghe4i
22 Bart 23 December 2003 Gkksgur86ed434
3 Grace 8 February 2008 Sr939g344cd3fd4
13 Ben 5 March 2011 22334fchtdhy76u
78 Athena 7 September 2012 3j4g5gfj66j6uj769
House
No.
New
Owner
Date Digital Signature
3 Jack 22 March 2018 Svxfv484hg56g84
47 Michael 22 March 2018 Frhy539g9538894
13 Rita 22 March 2018 H5g45664r45f5y5
132 Lisa 22 March 2018 ggfrtrrry4534e345
House
No.
New
Owner
Date Digital Signature
3 Jack 22 March 2018 Svxfv484hg56g84
47 Michael 22 March 2018 Frhy539g9538894
13 Rita 22 March 2018 H5g45664r45f5y5
132 Lisa 22 March 2018 Ggfrtrrry4534e34
32 Paul 22 March 2018 3344f443fhrth443
…...
…...
Server 1 …............................................................ Server N
All servers accept
unconfirmed Txns
and broadcast to
other servers
Complete chain of
blocks stored on
server 1 to server N
(One block shown)
Random master is
chosen periodically
around every 10
minutes and
confirms
transactions in
block
which is
appended by
other servers
House
No.
New
Owner
Date Digital Signature
3 Jack 22 March 2018 Svxfv484hg56g84
47 Michael 22 March 2018 Frhy539g9538894
13 Rita 22 March 2018 H5g45664r45f5y5
132 Lisa 22 March 2018 Ggfrtrrry4534e34
32 Paul 22 March 2018 3344f443fhrth443
House
No.
New
Owner
Date Digital Signature
3 Jack 22 March 2018 Svxfv484hg56g84
47 Michael 22 March 2018 Frhy539g9538894
13 Rita 22 March 2018 H5g45664r45f5y5
132 Lisa 22 March 2018 Ggfrtrrry4534e34
32 Paul 22 March 2018 3344f443fhrth443

10. Master choice using mining
New Block ID: 3256
Previous Block ID: 1957
Transaction1: 3, Jack, 22 March 2018, Svxfv484hg56g84
Transaction2: 47, Michael, 22 March 2018, Frhy539g9538894
Transaction3: 13, Rita, 22 March 2018, H5g45664r45f5y5
Transaction4: 132, Lisa, 22 March 2018, ggfrtrrry4534e345
Transaction5: 32, Paull, 22 March 2018, 3344f443fhrth443
Random Text: Abswerfe124234vdf
Hash: Gerfw4132f0034f0300000
The Bitcoin genesis (first) block includes
the following random text from the UK
Times newspaper saying “03/Jan/2009
Chancellor on brink of second bailout for
banks,” a reference to bitcoin’s birth-date
and possibly mocking fractional reserve
banking.

11. What are Smart Contracts?
Smart contracts are distributed applications enforcing legal contracts between parties (nodes of
Blockchain network)
A smart-contract is an event-driven program, with state, which runs on a replicated, shared ledger
and which can take custody over assets on that ledger.

12. Type of Blockchains and applications
 Public permissionless Blockchains
 Pure (no central authority) applications. Bitcoin is the killer app. A new capability is now available to humanity.
More dramatic applications will emerge from here. The biggest advantage is that ANYONE can join it by
buying bitcoin.
 Private permissioned Blockchains
 Impure (implicit central authority granting permissions). Multiple applications reducing friction in transaction
processing among communities. Suitable for small communities. Biggest disadvantage is that only way to join
is by getting an invitation. You cannot buy your way into this.
 Public permissioned Blockchains
 Core network is private, but nodes can contain wallets for ANYONE. So anyone can join this network and yet
more efficient than public permissionless network. My bet is on this category to do best.

13. QUESTIONS AND ANSWERs
1. Please ask questions focused on the content presented
2. Happy to discuss other questions offline