Blockchain Technologies

Blockchain Technologies
Adri Jovin J J, M.Tech., Ph.D., B.G.L.,
Assistant Professor (Sl. Gr.), Department of Information Technology
Sri Ramakrishna Institute of Technology

This presentation is intended…
• For beginners
• To understand the characteristics and uses of blockchain
• To discuss about the roles and users in a blockchain
• To discuss about public and private blockchains
• To get enlightened about consensus and the need for consensus in a blockchain
26-05-2021 Blockchain Technologies 2

Agent-based Intelligent Systems
• Code Mobility using Mobile Agents
• Decentralization, Distribution of authority
• Comprises of 3 components
• Code
• State
• Data

Distributed Ledger Technologies (DLT)
“The arc of the internet is now bending towards decentralization.”
— Naval Ravikant
• Decentralization – a major transformation
• Giving the rights to the user
• Crypto-economy
• Computer security engineer, applied cryptographer, and distributed systems engineer

DLT (Contd…)
Distributed Ledger – a type of data structure
Includes blockchains and smart contracts
3 basic components
• Data Model – maintains the current state of the ledger
• Language of transactions – changes the state of the ledger
• Protocol – used to build consensus among participants

What is blockchain?
Peer-to-peer distributed ledger
Forged by consensus
Combined with a system
Used to build transactional applications that establish
• Trust
• Accountability
• Transparency

Application Domains
• Goods Transfer (e.g. Supply Chain)
• Digital Media Transfer (e.g. Sale of Art)
• Remote Services Delivery (e.g. Travel and Tourism)
• Decentralized Business Logic (e.g. Moving Computing to Data Sources)
• Distributed Intelligence (e.g. Education Credentialing)
• Distributed Resources (e.g. Power Generation and Distribution)
• Crowd Funding (e.g. Startup Fund Raising)
• Crowd Operations (e.g. Electronic Voting)
• Identity Management (e.g. One ID for all life functions)
• Government Public Records (e.g. Open Governing)

Definition of blockchain
According to Hyperledger
A blockchain is a peer-to-peer distributed ledger forged by consensus, combined with a
system for "smart contracts" and other assistive technologies.
Smart contracts are computer programs that execute predefined actions when certain
conditions within the system are met.
Consensus refers to a system of ensuring that parties agree to a certain state of the
system as the true state.

Bitcoin vs Blockchain
• Bitcoin made blockchain popular
• Bitcoin - Major innovation of blockchain
• Bitcoin is a use case for blockchain
• Transacted over an open, public, anonymous blockchain network
• Continuously working digital currency

Blockchain – a little deeper perspective
Subset of DLT
Block - set of transactions that are bundled together and added to the chain at the same time
Block contains 4 pieces of metadata
• Reference of the previous block
• Proof of work, also known as nonce
• Timestamp
• Merkle tree root for the transactions included in this block

Blockchain is Immutable
• If the data is tampered with anywhere in the chain, the links will break
• This provides immutability and security.

Transactions
• Record of an event, cryptographically secured with a digital signature, that is verified, ordered,
and bundled together into blocks
• Cryptography has a key role to play both in the security, as well as in the immutability of the
transactions recorded on blockchains.

Databases vs Blockchains
Blockchains Databases
Write-only data
structure
Data can be easily
modified and deleted
Decentralized
applications
Centralized
applications

Structure of Blockchain
Transactions Blocks Blockchain
Consensus
and Verify

Components of Blockchain
Ledger: A distributed, immutable historical record
Peer Network: Stores, updates, and maintains the ledger
Membership Services: User authentication, authorization, and identity management
Smart Contract: Program that runs on the blockchain
Wallet: Stores users' credentials
Events: Notifications of updates and actions on the blockchain
Systems Management: Component creation, modification, and monitoring
Systems Integration: Integration of blockchain with external systems.

Bitcoin- Basic block
Unspent Transaction Output (UTXO)
Reference Number
Input Output
UTXO1 UTXO1
UTXO2 UTXO2
UTXO3 UTXO3
UTXOn UTXOm

UTXO
• Unique identifier of the transaction that created the UTXO
• Index of the UTXO in the transaction’s output list
• Value
• Optional: Conditions under which output can be spent

Transaction
• Reference number of the current transaction
• References to one or more input UTXOs
• References to one or more output UTXOs newly generated by the current transaction
• Total input and output amount

Sample Transaction
Input UTXO
Output UTXO
Total amount spent

Sample Transaction (Contd…)

Sample Block

Sample Block (Contd…)

Roles of Participants
• Transfer of values by
creating transactions • Verify transactions
• Broadcast transactions
• Compete to create a block
• Reach consensus by validating block
• Broadcasting new block
• Confirm transactions
USER MINER

Creating a block
Transaction
added
Rejected
Transaction
Valid
Transaction
Pool of
Unconfirmed
Transaction
Select set of
Transactions
to create
block
Miners
compete by
solving
puzzle
Solved block
broadcast
Verify new
block
New block
added to
chain and
confirmed

Types of blockchains (Application based)
Blockchains (based
on application)
Type 1: Only
Cryptocurrency
Type 2: Currency +
Business Logic
Type 3: Only
Business Logic

Types of blockchains (Access based)
Blockchains
Public Private Permissioned

Bitcoin vs Ethereum
Wallet/ Exchange Applications
Bitcoin Blockchain Protocol/ Operations
Peer to peer Network and Operating Systems
Hardware
Verticals: End User Applications
Application Frameworks: Smart Contracts
Ethereum Blockchain and Ethereum Virtual
Machine
Peer-to-peer Network and Operating Systems
Hardware

Smart Contracts
• Data
• Functions or Methods with modifiers
• Get/ Set functions
Solidity is a programming language specifically designed to execute Smart Contracts

Security in Ethereum and Bitcoin
• Both the blockchains use Elliptic-Curve Cryptography rather than using RSA
• 256 bits ECC key pair ≅3072 bits RSA key pair
• Hashing for integrity (SHA-3, SHA-256, Keccak)
• Hashing is used to generate
 Account Addresses
 Digital Signature
 Transaction Hash
 Receipt Hash
 Block Header Hash

Address of accounts
1. 256 – bit random number = private key
2. ECC algorithm is applied to private key to generate public key
3. Hashing applied to public key = account address (20 bytes)
Transaction for transferring assets should be
• Authorized
• Non-repudiable
• Unmodifiable

Complete transaction Verification
• Timestamp
• Nonce
• Account Balances
• Sufficiency of Fees

Integrity of a block
• Block header contents are not tampered
• Transactions are not tampered
• State Transitions are computed, hashed and verified

Merkle Tree
60
41
10 31
10
4 6
21
19

Establishing Trust in a Blockchain
• Secure chain using protocols
• Validate blocks and transactions
• Verifying the availability of resources
• Executing and confirming transactions

Consensus Algorithm
• Ensures that the data on the ledger is the same for all the nodes in the network
• Prevents malicious actors from manipulating the data
• Varies with different implementations

Types
• Proof of Work
• Proof of Stake
• Proof of Elapsed Time
• Proof of Authority

Proof of Work
• Involves solving a computational challenging puzzle in order to create new blocks
• Requires a huge amount of energy to be expended, given the computationally heavy
algorithm
• Has a high latency of transaction validation
• Concentration of mining power is located in countries where electricity is cheap
Proof-of-work (PoW) is the outcome of a successful mining process and, although the proof is hard to create, [it] is easy
to verify.
- 2016 Kudelski Security report

PoW in Bitcoin and Ethereum
Block Header
Element
(BHash)
Nonce
H=Hash(Bhash, Nonce)
H<F(Difficulty)
Change
Variable
Nonce
Solved winner
adds block to the
blockchain
Broadcasts Block

Proof of Stake (PoS)
• Generalization of the Proof of Work
• Nodes are known as the 'validators‘ that validate the transactions to earn a transaction fee
• Nodes are randomly selected to validate blocks
• PoS algorithm saves expensive computational resources that are spent in mining under a
PoW consensus

Proof of Elapsed Time (PoET)
• Developed by Intel
• Hybrid of a random lottery and first-come-first-serve basis
• Each validator is given a random wait time
• The validator with the shortest wait time for a particular transaction block is elected the
leader.
• This "leader" gets to create the next block on the chain

Proof of Authority
• Used for permissioned ledgers
• Uses a set of 'authorities', which are designated nodes that are allowed to create new blocks
and secure the ledger
• Require sign-off by a majority of authorities in order for a block to be created

Key takeaways
Decentralization
Distributed Immutable Ledger
UTXO
Smart Contract
EVM
Merkle Tree
Proof of Work

References
http://hyperledger.org/about
https://github.com/hyperledger-archives/education/tree/master/LFS171x
https://hbr.org/2017/02/a-brief-history-of-blockchain
https://www.investopedia.com/terms/m/merkle-root-cryptocurrency.asp
http://chimera.labs.oreilly.com/books/1234000001802/ch07.html
#_structure_of_a_block

Thank you!

Blockchain Technologies

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Editor's Notes