Here are the basics of Blockchain - Distributed Ledgers, Hashing, Merkle Tree, Architectural principles, etc.

1. CHAPTER II:
BLOCKCHAIN BASICS
BY. ABHISHEK NIRMAL JAIN
FCA, ISA, FAFD, CBE

2. Lets Recapitulate
• Blockchain is a cryptography based software technology which functions as a distributed ledger
that is heavily secured due to its attributes of peer to peer verification and authentication.
• Blockchain is a decentralized computation and information sharing platform which enables
multiple authoritative domains which do not trust each other to cooperate, coordinate and
collaborate in a rational decision making process.
• The Public Blockchain system’s task is to ensure that all this individual copies are consistent with
each other, that the local copies every node has are identical, and are updated based on the global
information.

3. Features
Immuta-
bility
Anonym-
ity
Security
Transpa-
rency
Decentr-
alised
Trust
Building
Irrevers-
ible

4. Potential Benefits

5. A Verified
Transaction can
involve Crypto-
currency, Contracts,
Records or any other
Information
Validation
The Network Nodes
Validates the
Transactions and the
User Status using known
Algorithms
Some one request
the Transaction
The requested
transaction is
broadcasted to
a P2P network
nodes
Once verified, the
transaction is
combined with
other transactions,
to create a new
block of data in the
ledger.The new block is then added to
the existing blockchain, in a way
that is permanent and unalterable
Transaction
is Complete
Working of Cryptocurrency

6. Public Ledgers
• The local information is a public ledger. It is something like everyone possesses his or her own copy
of data.
• Public ledger work like a data base, Public Ledger contains the historical information which is
available to everyone and can be utilized for future computation.
• The ledger which is available in an environment to everyone containing the information of all the
transactions.
• The parties in the network by looking into their local public ledger will be able to understand that
the particular transaction is valid or not valid.

7. Much more than public ledger
• Blockchain works like a public ledger however requires ensuring of different
aspects such as protocol for commitment, Consensus, Security and privacy &
authenticity.
Protocol for
commitment
Consensus /
Validity
Security Privacy and
Authenticity

8. CENTRALISED
NETWORK
DECENTRALISED
NETWORK
DISTRIBUTED
NETWORK
Network Architecture

9. Continue….
• Centralized Architecture Network: The Complete reliance for the information is on the Single point/
Node. The entire information get lost or denied if the main node collapses
• Decentralized Architecture Network: The Reliance for the Information is on multiple points, which are
again connected to their Individual nodes, these points acts as Mediators for individual nodes.
• Distributed Architecture Network: In a complete distributed architecture you have all the nodes
participating in the information sharing process where nodes coordinate with each other.
• Conclusion: Blockchain is a platform which helps you to support this kind of decentralized platform or a
distributed platform where you can share the information among yourselves in a very custody manner.

10. Hashing - #######
• Hash function is a function that map
any sized data to a fixed size.
• One advantage of this hash function is
one way function, that means, for given
a x and n, H(x) can be computed. But if
H(x) is given then the corresponding
value of x cannot be uniquely identified.
• It can be said blockchain is nothing, but
data structures which are built upon
the concept of hash function.

11. Conti###
• This hash function concept is used widely in cryptographic context and this is called as
cryptographically secured hash function. The properties of this cryptographically secured hash
function are
1. Function is one way: that means, given a x, you can compute H(x), but given H(x) you cannot
compute x with any deterministic algorithm.
2. For any two different x1 and x2, the H(x)1 and H(x)2 will be different.
• The cryptographically secured hash function have an important property which is called avalanche
effect. The avalanche property of this cryptographically secured hash function - given an input
whenever computing the digest, if you make little change in the input you will see significant
change in the digest.
• Link for Demo: http://www.sha1-online.com/

12. Harber and Stornetta
• The first use of this concept of cryptographically secured chain or blocks it came in 1991 in a
paper by Harber and Stornetta.
• What they did? They have taken parameters like the initial number in order the people have
accessed the document, it started from 0 1 2 3, then corresponding change value constructed.
• This particular architecture looks like something similar to blockchain, where you have multiple
blocks of data and these blocks of data are connected by hash value.
• This was the first use of this concept of the chain of blocks which was a earlier version blockchain
in securing this digital document.

13. Merkle tree
• Merkle Tree is widely used and is also the foundation for blockchain concept. Lets understand what is a
Merkle tree? Merkle tree is a tree structure, where the leaf nodes will contain the hash of the
document and every individual node and intermediate node will contain the hash of the combination
of the Childs.

14. A Chain of Blocks
The Longest Chain Rule ensures that network will recognise the “chain with most work” as the main chain.
The chain with the most work is typically the longest of the Chain.

15. H
H A
AA
A
HH
H
H
H H
S
S
S
S
S
S
S
S
Working of Bitcoins
• Satoshi Nakamoto through his Bitcoin paper “digital currency or crypto currency,” which is
completely Decentralised where no central authority (bank or a government) will have control
over the currency.

16. Continue….
Wallet
The Wallet
constructs the
transactions,
sign using
Senders Private
Key, and
broadcasts it to
the Network
Network
The network
nodes validates
transactions
based on
existing
Blockchain and
propagate the
transactions to
the miners
Miners
The miners
adds the
transactions to
the next block
to be mined
within the time
duration as per
the mining
procedure
Updation
Once the
Mining is done
and the harsh
is obtained the
block is
included in the
existing
blockchain in
the network.

17. Building Blocks

18. Continue….

19. Blockchain 2.0
• The concept of blockchain gradually applied to multiple other sectors like Healthcare industry,
Banking and Finance, Government, Supply chain and many more, it is some times termed as
blockchain 2.0.
• Satoshi Nakamoto in 2010 envisioned that "the blockchain design supports a tremendous variety of
possible transaction types. Escrow transactions, bonded contracts, third party arbitration, multiparty
signatures, etc.
• Blockchain 2.0 expands the scope of the technology to enable the decentralisation of markets more
generally, and the transaction involving variety of assets by providing registers for certificates and
rights and obligations.
• As blockchain 2.0 is code the new application is said to be running on a new set of protocols
("blockchain 2.0 protocol"). Blockchain 2.0 applications would be akin to browsers, social networks

20. • The main idea behind Ethereum was to use blockchain in applications which were not limited to
cryptocurrency, though it started with Crypto.
• Architecture of
Ethereum is more
developer-friendly and
allows more use-cases
and applications.
• Few of the applications
made with the (https://
www.dapp.com/)
Ethereum Platform
Dapps
Continue….

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