Blockchain part 2

SANJAY BASU SANJBASU@CLOUDFLOATERS.COM

Agenda
• Characteristics
• Blockchain Mining
• How to build a chain
• Scaling the network

Characteristics of a blockchain network
q Each user has a copy of the entire blockchain
q Each user executing the blockchain client is a part of the network
q New blocks added to chain are sent as a broadcast to the network
q Each user updates its local copy of the blockchain
q When the blockchain is queried, every user receives the same answer.

Mining in blockchain, is all about solving a difficult mathematical problem
based on a cryptographic hash algorithm. The miners compete to complete
this task.
What is Mining?
The linking of a new block to the
end of the chain is done by a
process called mining.
Each miner has to show that a costly use of
time and energy is dedicated to the
execution of a new block. This evidence is
known as Proof-of-Work.
In an open distributed network, there are no
designated miners. The miners are selected
based on their proof-of-work on a per-block
basis. The miners compete for the right to add
the next block. They get rewards for doing so.
Miners are free to join or leave the network,
while the network continues to operate without
any impact.

The miners work under a consensus protocol. Consensus protocol is a
communication rule to exchange state information between users and their
neighbors in order to reach group agreement by means of distributed decision
making
Mining Concepts
Consensus mechanism is like a race, in which
the winner is rewarded. The winner is the miner
that is able to add a new block to the chain that
is accepted by other miners
There are other methods which are implemented
in place of proof-of-work

Proof-of-Stake
PoS is a type of algorithm by which a cryptocurrency blockchain network aims to achieve
distributed consensus. In PoS-based cryptocurrencies the creator of the next block is chosen
via various combinations of random selection and wealth or age (i.e. the stake).
Mining Concepts – contd.
Proof-of-Burn
This is a method for distributed consensus and an alternative to Proof of Work
and Proof of Stake. It can also be used for bootstrapping one cryptocurrency off of
another. The idea is that miners should show proof that they burned some coins - that is,
sent them to a verifiably non-spendable address.
SOURCE: WIKIPEDIA
Proof-of-Retrievability
POR is a compact proof by a miner ( prover) to a user (verifier) that a target file F in
memory or storage is intact, in the sense that the client can fully recover it. As PORs incur
lower communication complexity than transmission of F itself, they are an attractive building
block for high-assurance.

How to build the chain?
Ø The initial block is at height 0.
Ø A miner solves a block at height 1 (I)
Ø Simultaneously another miner solves another block 1B (II)
Ø These two blocks may or may not contain same transactions. Both blocks are considered
provisional, so some miners would continue to work on adding to the chain at 1A while other to
the chain 1B
Ø Eventually a new block is created and attached to 1B as 2B (III). Since all miners must work at
the highest height, miners working on 1A, stop and start working on creating a block to attach to
the accepted block 2. As a result, one miner is successful in creating and attaching a block at
height 3 and broadcasts this update to the network (IV)
Ø All of the other miners abandon their work at height two and starts working
at height 4 and a miner successfully adds a block and broadcasts (V)
Ø But another miner creates another block before receiving this update,
resulting in a fork in the chain (VI)
Ø This race condition may continue resulting in creations of additional blocks
(VII)
Ø The miners working on 5B solves a block thus adding a
new block 6 (VIII). This is broadcasted to the network.
Ø Now all workers start working to solve blocks to
append to 6. This activity continues as the chain
grows, with occasional forks that are eventually
discarded.

A blockchain continually grows
and never shrinks. For some
applications, a user need to store
the entire blockchain to perform
all the functions like Bitcoin. This
results in a requirement for huge
processing and memory
resources. Unlike Bitcoin, there are
other applications not requiring
all the users to perform all the
blockchain tasks or storing the
entire chain.
These systems can be configured
to provide a subset of all the tasks
of a full implementation.
Scaling the chain Judmayer, Stifter, Krombholz and Weippl defined the
following 5 categories of configuration:
ü Basic Client: A user-controlled device perfoms key
management operations excluding any P2P network
communication. E.g. – hardware clients/wallets.
ü Thin Client: This can perform some P2P
communications like verification but doesn’t keep a
copy of the full blockchain.
ü Thick Client: Performs all P2P tasks including
verification and keeps a copy of the full blockchain.
This client is also know as a full node.
ü Fully Functional Basic Client: Performs all the
functions of a thick client and executes the mining
algorithm.
ü Hosted Client: All tasks are performed by a third party
on behalf of the user. This is not a user-controlled
device. User communicates with the third party using
cryptographic secrets.

Scaling the chain – How to increase scalability?
In some applications, a full client may not store the full chain going back to the genesis block. Few
archival nodes can be used to bootstrap fully validated nodes from the beginning.
ü Scalability can be increased by moving some computations off the
chain to reduce the load on the network nodes.
ü Scalability can be increased by reducing the information every node
has to store and process. This way, the system can process more
parallel transactions.
ü Scalability increases by making more space for transactions by
moving certain data within the block to another extended block.
ü Scalability can be increased by only broadcasting net effect of
transactions to reduce the total number of transactions broadcasted
on the blockchain.

• Stallings, W., Cryptography and Network Security, Seventh Edition, ISBN-13: 978-0134444284, Pearson, 2017.
• Judmayer, A., Stifter, N., Krombholz, K., and Weippl, E., Blocks and Chains: Introduction to Bitcoin, Cryptocurrencies,
and Their Consensus. Synthesis Lectures on Information Security, Privacy, and Trust,ISBN-13: 978-1627057165,
Morgan & Claypool, 2017.
• Buterin, M.V., “On Public and Private Blockchains,” Ethereum Blog, August 7, 2015,
https://blog.ethereum.org/2015/08/07/on-public-and-private-blockchains/
• Transparency Market Research, “Blockchain Technology Market (Type - Public Blockchain, Private Blockchain, and
Consortium Blockchain; Application - Financial Services and Non-financial Sector) - Global Industry Analysis, Size,
Share, Growth, Trends, and Forecast 2016–2024,” 2017.
• Velde, F., “Bitcoin: A primer,” Chicago Fed Letter, December 2013,
http://www.chicagofed.org/digital_assets/publications/chicago_fed_letter/2013/cfldecember2013_317.pdf
• Underwood, S., “Blockchain Beyond Bitcoin,” Communications of the ACM, November 2016.
• Prisco, G., “Department of Homeland Security Awards Blockchain Tech Development Grants for Identity Management
and Privacy Protection,” Bitcoin Magazine, August 18, 2016.
• Regnier, P., “ICO Is the New IPO,” Bloomberg BusinessWeek, June 19, 1917.
• Androulaki, E., “Cryptography and Protocols in Hyperledger Fabric,” Real-World Cryptography Conference, 2017.
• Cachin, C., “Architecture of the Hyperledger Blockchain Fabric,” Workshop on Distributed Cryptocurrencies and
Consensus Ledgers, July 2016.
References for part 2

Blockchain part 2

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