Blockchain learning to basic understand.pptx

EY Blockchain Tech Meet-up
BlockchainTechnology Landscape Primer
An introduction to the technologies leveraged in
blockchain
Hoboken, NJ | April 19, 2018

For Internal Use Only | EY Blockchain Tech Meet-up
Introduction
Arwin Holmes
Global Blockchain Technology Operations Leader
Some things about me:
► I coordinate and foster efficient development operations across our global team.
► I provide technical oversight to many of our US-based blockchain pursuits and engagements.
► I lead our US-based technical team and our blockchain working group for Media & Entertainment.
► I love martial arts, particularly Kung Fu.
► I have a beautiful daughter who will soon have a little brother.

Course Objectives
When you complete this course, you should be able to:
► Describe the basic components of a blockchain
► List and explain distinguishing features of major blockchain protocols
► Explain a basic blockchain solution with the major architectural components
► Articulate some future disruptors to present day blockchain implementations

Agenda
Today, we’ll be covering the life of blockchain:
► 0x00: Birth of blockchain (idea, whitepaper, community) – 5 minutes
► 0x01: Blockchain anatomy (nodes, networks and dapps) – 5 minutes
► Q&A #1
► 0x02: Species of blockchain (various protocols) – 10 minutes
► Q&A #2 & #3
► 0x03: Anatomy of a blockchain solution (key architectural considerations) – 10 minutes
► Q&A #4
► 0x04: Blockchain habitats (hosting environments) – 5 minutes
► 0x05: Blockchain instrumentation (tooling) – 5 minutes
► Q&A #5
► 0x06: Blockchain evolution (what could disrupt the blockchain?) – 5 minutes
► Q&A #6
► 0x07: Wrap up and Q&A – 10 minutes

0x00: The birth of blockchain

Blockchain’s Early Milestones
October 31, 2008
January 3, 2009
May 22, 2010
FIRST STEPS
Laszlo Hanyecz
buys these pizzas
for 10,000 bitcoins
CONCEPTION
Satoshi Nakamoto
releases a whitepaper
on Bitcoin
BIRTH
Bitcoin’s network
launches with a
genesis block
0000000000
19d6689c08
5ae165831e
934ff763ae
46a2a6c172
b3f1b60a8c
e26f
IMAGE SOURCE: https://blockexplorer.com/tx/cca7507897abc89628f450e8b1e0c6fca4ec3f7b34cccf55f3f531c659ff4d79

Blockchain supports three key areas the Internet does not
VALUE
Enables a unique asset to be transferred over
the Internet without a middle centralized agent.
TRUST
Creates a secure permanent record of who owns
what using advanced hash cryptography to
preserve information integrity.
RELIABILITY
Decentralized network structure ensures
there is no single point of failure that could
bring the system down.

0x01: Blockchain anatomy

Blockchain has four primary components
SOFTWARE
Client distributed applications to create, operate,
manage and maintain the network.
CRYPTOGRAPHY
Encryption and hashing mechanisms to secure
the blockchain.
HARDWARE
Servers and network infrastructure upon
which software is executed.
GAME THEORY
The study of strategic decision making including
players, strategies and payoffs.

Consensus algorithms are mechanisms to ensure a common, non-ambiguous and transparent ordering of blocks and
transactions. Since such mechanisms ensure integrity and consistency of data across the network, security of consensus
mechanism is a highly crucial aspect. Key considerations:
• Consistency: All nodes/participants must produce the same output and valid per the rules of the protocol.
• Availability: There should be a guarantee that all non-faulty nodes participating produce an output
• Fault Tolerance: The protocol must provide fault tolerance upon recovery of a failed node participating in the consensus
Broad categories:
 Proof of Work: Every node has to prove that it has performed some amount of work, and must establish a hash lower than a
certain value called the difficulty level – also known as mining. Advanced techniques are used to discourage mining
centralization (e.g. Ethash and GHOST)
 Proof of Stake: Mining operations in PoW are replaced with users buying stake for a higher chance of generating blocks. Such
nodes are called bonded validators, and each validator is chosen on a pseudo-random basis, with probability of selection
proportionate to the bought stake (e.g Casper, Tendermint)
 Proof of Elapsed Time: Leverages a leader election model in a secure environment, where leader is selected on a random
basis for every block creation. Every validator requests for a wait time and the one with the shortest wait time wins the
opportunity to create a block (e.g., Sawtooth)
 Byzantine Fault Tolerance: Uses the concept of replicated state machine and voting by replicas for state changes. In addition,
it also provides signing and encryption of data and reducing the sizes of messages to be transmitted in case of fault nodes.
Advanced methods involve detecting divergences of outputs amongst the nodes and are accordingly filtered out (e.g. Fabric,
Quorum, etc.)
Consensus Algorithms

NODE TYPES
► Full Nodes
► Lightweight Nodes
► Transacting Nodes
► Validator Nodes
► Approver Nodes
There can be many other node types
depending on blockchain protocol and
consensus mechanism.
Distributed Ledger: Node and Network Types
NETWORK TYPES
► Private (Hyperledger, Ethereum)
► Public (Ethereum)
► Hybrid / Consortium (Quorum, Kadena)
We believe there will be a significant shift
from private to public blockchains and
important that we are building solutions
with a path to support that transition.

► UTXO model (unsigned transaction output)
Every transaction is seen as a state with inputs and outputs and all inputs and outputs must
always be balanced. I.e. a zero-sum game. Examples include Bitcoin and Ripple.
► Account or state-based model
Every state change is represented by the interaction of an account with the blockchain data via
smart contracts. Examples include Ethereum and Hyperledger.
Data Models

What are the basic components of a blockchain?
QUESTI
ON
#1

Software
Hardware
Cryptography
Game Theory
ANSWE
R

0x02: Species of blockchain

Characteristics of Distributed Ledger Technology (DLT)
Platforms
► Usability
► Support & Documentation
► Platform Maturity
► Limitations & Flexibility
► Scalability
► Consensus Mechanisms
► Security
► Enterprise Integration
► Formal Validation and Development Tools Support
► Ease of Development

Qualitative characteristics of three DLTs
Platform
Characteristics
Ethereum Hyperledger Fabric R3 Corda
Description of Platform Generic blockchain platform Modular blockchain platform
Specialized distributed ledger platform
financial industry
Governance Ethereum developers Linux Foundation R3
Mode of Operation
Permissionless,
public or private
Permissioned,
private
Permissioned,
private
Consensus
• Mining based on proof-of-work
• Ledger level
• Broad understanding of consensus
allows multiple approaches
• Transaction level
• Specific understanding of consensus
notary nodes)
• Transaction level
Smart Contract Smart contract code (e.g., Solidity) Smart contract code (e.g., Go, Java)
• Smart contract code (e.g., Kotlin,
• Smart legal contract (legal prose)
Currency
• Ether
• Tokens via smart contract
• None
• Currency and tokens via chaincode
None

Quantitative characteristics of three DLTs
Platform
Characteristics
Measurement Criteria
Existing Assessment and Findings for in-Scope DLT Platforms
Ethereum Hyperledger Fabric R3 Corda
Performance
Native support for data
encryption/obfuscation
Yes Yes Yes
Transaction/Data Model Account based model Role based model UTXO based model
Trade volume processing capacity
(based on 8 cpu’s and 8 servers)
1000 tx/sec 1200 tx/sec 1000 tx/sec
Latency
(based on 8 cpu’s and 8 servers)
100 requests/sec 100 requests/sec 100 requests/sec
Contract execution Transaction and Miner Peers
Validating Peer (v0.6) /
Peer + Ordering Service (v1)
Signing Service (Notary
node)
Number of nodes vs performance Not a factor
Performance decreases with the
increase in # of nodes
Performance is optimized
depending on # of peers
Node proximity vs performance Not a factor Not a factor Not a factor
Privacy Transaction privacy Yes Yes

What part of blockchain’s anatomy establishes trust?
QUESTI
ON
#2

Consensus
Algorithm
ANSWE
R

Name one permissionless/public distributed ledger based on the
provided examples.
QUESTI
ON
#3

Ethereum
ANSWE
R

0x03: Anatomy of a blockchain solution

Anatomy of a potential blockchain solution
BLOCKCHAIN
OFFCHAIN STORAGE
BLOCKCHAIN INTERFACE
SIMULATOR
API
USER INTERFACE (UI)
SMART CONTRACTS
DAPP
HARDWARE AND NETWORK TOPOLOGY

What are a set of instructions residing on a blockchain?
QUESTI
ON
#4

Smart Contracts
ANSWE
R

0x04: Blockchain habitats

Blockchain habitats
On premise

0x05: Blockchain Instrumentation

Common Development Tools
Tool Description
Node.js Node.js is a JavaScript runtime built on Chrome's JavaScript engine. This will be utilized for creating APIs
Ganache / Ganache-CLI Fully interactive test blockchain with UI or command-line interface for Ethereum and Quorum development testing. Formerly known as TestRPC.
Constellation Constellation as an amalgamation of a distributed key server, PGP encryption (using modern cryptography,) and Mail Transfer Agents (MTAs.)
Truffle Truffle is a framework for smart contract creation, deployment, and testing in ethereum
React React is a JavaScript library for building user interfaces
Redux Predictable state container for JavaScript apps
Docker Docker is a container service for creating a universal development/testing environment to work across machines
Kubernetes Kubernetes is an open-source system for automating deployment, scaling and management of containerized applications
MongoDB MongoDB is a cross-platform document-oriented database program that will be used as a separate data store for dynamic data on the user interface)
Web3 Web3 is a collection of libraries which allow interaction with a local or remote ethereum node
Socket.IO Socket.IO is a JavaScript library that enables real-time communications between web clients and servers
Font Awesome Font Awesome is a font and icon CSS toolkit

Common Development Tools
Tool Description
Gulp Gulp is a JavaScript build system that will be used to manage the asset pipeline
Node-Sass Node-sass is a library that provides binding for Node.js to LibSass, the C version of the popular stylesheet preprocessor, Sass.
Webpack A bundler for javascript and friends. Packs many modules into a few bundled assets.
Bulma Modern CSS framework based on Flexbox
Bloomer A set of React components for Bulma CSS Framework
Luxon A library for working with dates and times in JS
UUID Simple, fast generation of RFC4122 UUIDS.
Redux-little-router A tiny router for Redux that lets the URL do the talking.
Redux-logger Logger for Redux
Redux-thunk Thunk middleware for Redux
Redux-form A Higher Order Component using react-redux to keep form state in a Redux store
Adal-angular Active Directory Authentication Library for JavaScript (ADAL JS) helps you to use Azure AD for handling authentication in your single page applications.

Global Blockchain Tech Ops Tools
Tool Description
Atlassian JIRA JIRA is used to support agile project and product development.
Github Github is used to manage all source code developed.
Slack
Slack is used to facilitate team communications and
collaboration across globally distributed teams.

You don’t have to worry about high availability or disaster
recovery with a blockchain solution. TRUE or FALSE?
QUESTI
ON
#5

FALSE
ANSWE
R

0x06: Blockchain evolution: what could disrupt the blockchain?

Lightning Networks and Side Chains
► Lightning Networks is one potential optimization to address performance and scalability
issues on current blockchains like Bitcoin. It does this by leveraging payment channels
opened between you and a counterparty and only writing data to the blockchain once
the payment channel has been closed. This drastically minimizes the writes to the
blockchain.
► Sidechains are emerging mechanisms that allow tokens and other digital assets from
one blockchain to be securely used in a separate blockchain and then be moved back to
the original blockchain if needed. Sidechain functionality holds tremendous potential to
enhance the capabilities of existing blockchains.

A zero-knowledge protocol is a method by which one party (the prover) can prove to another party (the verifier) that
something is true, without revealing any information apart from the fact that this specific statement is true. Zero-
knowledge proofs let you validate the truth of something without revealing how you know that truth or sharing the
content of this truth with the verifier. This principle is based on an algorithm that takes some data as input and returns
either ‘true’ or ‘false’.
Requirements:
 Completeness: If the input is true, the ZKP always returns true
 Soundness: If the input is false, it is not possible to trick the ZKP
to return true
 Privacy: The input cannot be obtained by any party
Zero Knowledge Proofs (ZKP)
Implications:
 Improved authentication systems: Logging in doesn’t require
cumbersome methods for protecting passwords
 Elimination of escrow services: Proof of compute or validation
is made secure wherein validators do need to provide results
for compensation and customers can pay without having to
explicitly verify whether the validation is passed or not
 Privacy: Complete privacy of transactions without ever
revealing the contents or the parties involved in a transaction
Input
ZKP of
Validity
Output
Details to
create ZKP
(encrypted)
Input
ZKP of
Validity
Output
Details to
create ZKP
(encrypted)
?
?

Quantum computing is a highly inter-disciplinary field which combines computer science, mathematics, physics,
information theory and nanotechnology. Computing systems that leverage such a field, have the potential to
perform calculations billions of times faster than any silicon based computer. Classical computers work using
bits (0s and 1s), and operate on the signaling characteristics of semi-conductors. In quantum computers, the
fundamental unit of information (qubit) can exist as a combination of 0 and 1, and only upon measurement the
qubit collapses to a bit (based on principles of quantum mechanics: superposition and entanglement
Implications:
 Most blockchain protocols leverage ECDSA as a signature scheme and there is no known method that is fast, to
factorize or break the signature on a classical computer. Current quantum computing algorithms can break ECDSA in
countable time, making potential adversaries decode the private key from just a public key (Shor’s algorithm)
 Most of the platforms rely on RSA to generate a digital signature, variations of which are used for signing and creation
of blocks. Quantum computing algorithms allow for function inversion, wherein a modified pre-image of hash can be
generated , causing hash collisions. This could allow attackers to mine faster and create a 51% attack scenario
Quantum Computing
Safeguards from quantum computing enabled attackers:
 Evolving research to leverage quantum-resistant signature scheme: Lattice-based cryptography and
Multivariate quadratic equations based cryptography
 Secure quantum key distribution to exchange keys prior to transmitting messages, wherein a classical ledger
can be used to store information, but uses quantum methods to mine and verify a block

Directed Acyclic Graphs (DAGs)
graph = structure consisting of nodes, that are connected to
each other with edges
directed = the connections between the nodes (edges)
have a direction: A -> B is not the same as B -> A
acyclic = "non-circular" = moving from node to node by
following the edges, you will never encounter the same
node for the second time.
A good example of a directed acyclic graph is a tree.
Note, however, that not all directed acyclic graphs are trees.
Examples include: IoTa, Hashgraph and Coti
DAGs have blockchain-like properties but
promise to significantly outperform
blockchains however the majority of
proposed solutions are proprietary and
only some very small isolated tests have
been conducted to date.

Identify two future disruptors of blockchain.
QUESTI
ON
#6

Quantum
Computing
Distributed Acyclic
Graphs
ANSWE
R

0x07: Wrap up and Q&A

That’s a wrap!
► So today we learned about:
▶ The basic components of a blockchain
▶ Distinguishing features of major blockchain protocols
▶ The major architectural components of a blockchain solution
▶ An ecosystem of tools and services for development and hosting
▶ Some future disruptors to present day blockchain implementations
► Homework: Connect with a global blockchain team member and get involved with a current blockchain
product or project.
► Questions?

APPENDIX REFERENCE MATERIAL

DLT Platform & SmartContract Design Principles
We will follow a set of holistic guidelinesand design principlesto mitigatecommon risksthat we often observein implementation of DLT platforms in complex
technology environments.
Smart Contract Design
Formal verification paradigms
Design of smart contracts must account for formal verification of the contracts. Ensure that the
design of smart contracts maintains the integrity of business logic, as contracts cannot be
changed once published to the DL network.
Data models & functional rules
Smart contracts are a framework to maintain and register data schemas, such that the network
has a common agreed upon data model. Lock in the data model and maintain version control
for better model governance.
Transparent state transition
Tracking the state of a data structure (digitized trades) during the process of a trade life cycle
allows for key participants within the network to have near real time synchronization of data.
Registration of proof of compute
Depending on the participant requirements, ledgers maintain an immutable record of the secure
computation of business logic done external to the ledger, and not to carry out the actual
execution itself on the ledger.
Off-ledger data orchestration
Smart contracts are to be used for indexing and linking data between data on and off ledger to
ensure data integrity. The principle is to register key information required for multi-party
systems on the ledger and not to treat DLs as data stores.
Choice of consensus
Depending on the implementation requirements for high performance, decisions around
consensus choices – proof of authority, fault tolerant mechanisms, and raft consensus
mechanisms must be specified.
Governance: Types of nodes
Assign leadership or authority to validator nodes, trade data registry to transacting nodes,
approval workflows to approver nodes. For achieving high performance, delegate the authority
and registry across multiple nodes for seamless batch processing.
Privacy & Confidentiality
Depending on the privacy and confidentiality of client data, zones must be created whereby,
there can be private contracts and managed sub-ledgers between parties to a transaction or
trade information.
Network Discovery
Design of the networks must account for peer to peer connectivity and discoverability on the
network. Factors like network size, capacity, number of DL nodes, firewalls, etc. are to be
considered to ensure consistent connectivity and low latency.
Retention and archival policy
Overarching requirements around retention of information on ledgers, considerations for
truncating of the ledgers and/or creation of a new genesis block upon expiration of the retention
period must be taken into account.
Network Design

Nick Szabo on Smart Contracts (1994)
“A smart contract is a computerized transaction protocol that executes the terms of a
contract. The general objectives are to satisfy common contractual conditions (such as
payment terms, liens, confidentiality, and even enforcement), minimize exceptions both
malicious and accidental, and minimize the need for trusted intermediaries.
Related economic goals include lowering fraud loss, arbitrations and enforcement costs,
and other transaction costs.”

What is a Merkle Tree?
“A Merkle Tree is a mathematical data structure
composed of hashes of different blocks of data,
and which serves as a summary of all the
transactions in a block.”

Architecture
1. Authentication Services: Leverages Azure Active Directory
and Key Vault Management services for validating application
access
2. Azure API Management: Leverages Azure App Gateway and
related networking services to hold the backend functionality
secured from external access
3. Transaction Analytics Service: Uses Power BI and custom
analytics to analyze the contract set up and processing of
transactions on the blockchain
4. API Service: Uses custom built APIs for interaction with the
blockchain platform
5. Enterprise Data Integration: Comprises of a managed data
layer to hold off-chain data and integration with legacy data
stores
6. Blockchain Interaction Services: Consists of smart contracts
designed/modeled to integrate with the private blockchain
network and API service
7. Quorum: Ethereum based blockchain platform implemented
by Enterprise Ethereum Alliance for ensuring privacy and
confidentiality of managing data on the blockchain

Architecture – Deep Dive

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