Blockchain Introduction

1. Blockchain
An Introduction
- Manish Chaitanya

2. Agenda
 Introduction
 Bitcoin
 Smart Contracts
 Blockchain for Business / Hyperledger
 Demo – Hyperledger
 Blockchain Use Case Decision Path

3. Bitcoin
$1.25 Trillion
Market Cap
• CBOE starting Bitcoin Futures
trading on Dec 10th
• CME launching Bitcoin Futures
trading on Dec 18th
• Nasdaq Plans to Launch Bitcoin
Futures in First Half 2018

4. History
1991-
Cryptographically
secure chain of
blocks
1998 –
Decentralized
Digital Currency
2008 – Blockchain
Concept (by Satoshi
Nakamoto)
2009 - Bitcoin
2014 - Becoming
a Mainstream
Term
2017 - The Race
is on!

5. Centralized Vs Decentralized Economy
Central Control
Decentralized Control

6. Central System Risks - Examples

7. What is Bitcoin?
Digital Currency Distributed Ledger Trusted
Irreversible Open
Secure (Identity)
Immediate No Intermediaries Lower Fees

8. Public Key Cryptography in Bitcoin

9. How Secure is it?
 256 bits – 32 bytes, or 64 characters
 E9873D79C6D87DC0FB6A5778633389F4453213303DA61F
20BD67FC233AA33262
 each character is hexadecimal (can hold 16 different case
insensitive values: {0,1,2,3,4,5,6,7,8,9,A,B,C,D,E,F} ), meaning
there are 16^64 possible private key combinations.
 Total number of atoms in the world – 1.33 * 10^50
 The fastest supercomputer will take
5194882658574989737995779322992527357514014.07103807
07 years to make a correct guess

10. SEND BOB
REQUEST
1
Alice wants to send Bob two bitcoin.
Computers known as MINERS verify this transaction (e.g.
check Alice’s balance) and compete to place it into a BLOCK
with other transactions
2
3
To append a block to the chain of prior blocks
(hence “blockchain”), miners solve a MATH
puzzle that requires a lot of computational
power
All this computational power
protects the blockchain against
hackers – it would be difficult and
expensive to falsify transactions
or attack a network
4
Others in the network
check the miner’s work
Once the answer is
verified – when a majority
of miners in the network
approve the block – the
miner who solved the
puzzle gets paid in bitcoin
5
Alice’s transaction gets
added to the blockchain
along with others
6 Bob receives two bitcoin
How bitcoin works?
Alice
Bob
She sends a transaction request to the bitcoin
blockchain, a distributed database running on
thousands of computers globally

11. Bitcoin Facts
 To limit inflation, bitcoin creator Satoshi Nakamoto designed bitcoin
to ultimately have only 21 million bitcoins.
 Size of bitcoin block rewards is halved after the creation of every
210,000 blocks, which takes around four years.
 At bitcoin's inception in 2009, each block reward was worth 50 BTC.
In May 2020, the block reward was halved a third time to 6.25 BTC.
 And as of May 2021, there were already 18.7 million bitcoins in
existence, or nearly 90% of the total planned supply.

12. Blocks
BLOCK 0
Index: 0
Timestamp: 17:15 1/1/2017
Data: “block0data”
Hash: 0xea3dde…55
previousHash: 0
BLOCK 1
Index: 0
Timestamp: 17:15
1/1/2017
Data: “block0data”
Hash: 0xdhryrhf…er
previousHash:
0xea3dde…55
BLOCK 2
Index: 0
Timestamp: 17:15 1/1/2017
Data: “block0data”
Hash: 0xhfhyeywb…21
previousHash:
0xdhryrhf…er

13. The Chain
Blocks are in the
Ledger
Ledger is distributed
around the world!

14. www.blockchain.info

15. Mining for Consensus
• Proof of work
• Consensus mechanism
• Solve math problems
• Computational power needed
• Mining Bitcoin Costs More Energy Than
What 159 Countries Consume in a Year
• A single bitcoin transaction consumes
enough energy to power the average
household for an entire month.
• Alternate Consensus mechanism - Proof of
Stake, PBFT (Practical Byzantine Fault
Tolerant)

16. Types of Blockchain Networks
 Permissionless
 Bitcoin
 Ethereum
 Permissioned
 Hyperledger

17. Smart Contracts

18. Ethereum & Smart Contracts
 Smart Contract is just a phrase used to describe computer code that can facilitate the exchange of money,
content, property, shares, or an
 When running on the blockchain a smart contract becomes like a self-operating computer program that
automatically executes when specific conditions are met.ything of value.
 Because smart contracts run on the blockchain, they run exactly as programmed without any possibility of
censorship, downtime, fraud or third party interference.
 Contracts lives on the Ethereum blockchain
 They have their own Ethereum address and balance
 They can send and receive transactions
 They are activated when they receive a transaction, and can be deactivated
 The Ethereum Virtual Machine runs a turing complete language
 They have a fee per CPU step, with extra for storage

19. Smart Contracts
Traditional
Contracts
Smart Contracts
• Physical Contracts
• Legal language on
printed documents
• Rely on 3rd party for
enforcement
• Time consuming
• Must rely on judicial
system to remedy
conflicts
• Digital
• Coded in computer
programs
• No middlemen
needed
• Automatically
executed, immediate

20. Smart Contract Use Case – Insurance
Industry
AXA’s flight delay insurance product – Fizzy -
Alice is
booking a
flight ticket
Alice buys
flight-delay
insurance
Purchase recorded
on Ethereum
blockchain and a
smart contract
created
Smart
Contract linked
to global air
traffic
database
As soon as a delay
of over two hours is
registered on the
ledger,
compensation is
automatically
triggered.
Benefits –
• Better insurer-customer
relationship
• No need for customer to
file a claim
• Elimination of potential
dispute between insurer
and client
• Automatic

21. Smart Contract Use Case – Music Industry
Blockchain keeps
track of all
ownership rights
Automatic transfer
of royalty payments
with Smart
Contracts
Current State –
• For every song, there are
writer, musicians, managers,
recording artists, publishing
companies …., each can
claim right
• Data siloed in their databases
• Difficult to determine how
much to pay whom and who
owns what rights
• Payments get held up
• Sometimes doesn’t reach
right recipients
Automatic transfer
of royalty payments
with Smart
Contracts
Automatic transfer
of royalty payments
with Smart
Contracts
How blockchain can help
Example: https://ujomusic.com/

22. Hyperledger – Blockchain for Business
Permissione
d Network
Provides
collectively defined
membership and
access rights
within your
business network
Confidential
Transaction
s
Gives businesses
the flexibility and
security to make
transactions visible
to select parties
with the correct
encryption keys
No
Cryptocurrenc
y
Does not require
mining and
expensive
computations to
assure transactions
Programmabl
e
Leverage the
embedded logic in
smart contracts to
automate business
processes across
your network

23. How is Hyperledger Different?
Bitcoin Ethereum Hyperledger Fabric
Cryptocurrency
required
bitcoin ether none
Network public public or permissioned permissioned
Transactions anonymous anonymous or private public or confidential
Consensus proof of work proof of work PBFT
Smart contracts
(business logic)
none yes yes (chaincode)
Language C++
Solidity, Golang, C++,
Python
Golang, Java

24. Issues –
• Limited visibility
• Lacks transparency
• Customer service suffers
Traditional Supply Chain for spare parts
replacement
Example – Car Spare Parts Supply Chain
Spare parts
manufacturer
Car
manufacture
r
Distributor
3PL
Car
Dealershi
p Spare parts
manufacturer
Car
manufacture
r
Distributor
3PL
Car
Dealershi
p
Blockchain enabled Supply Chain for spare parts
replacement
Advantages –
• Real time visibility
• Decreases idle time, increased efficiency, reduced cost
• Better customer service
• Access rights can be implemented

25. Example Use Case – Car Leasing Network

26. Blockchain Decision Path
1
2
3
4
5
6
7
Public Blockchain
Permissioned
Blockchain
Blockchain is not
required
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
1. Need for a shared common database?
2. Multiple parties involved?
3. Parties involved have conflicting incentives
and/or are not trusted?
4. Rules governing participants are not
uniform?
5. Need for an objective, immutable log?
6. Rules of transactions do not change
frequently?
7. Are transactions public?

27. Thank you!!
Questions /
Feedback??

28. Appendix – Use Cases

29. Payments
1. Real-time payments – not 3-6 days, weeks, months
2. Direct Payments – not via 3-4 middle parties
3. Cheaper payments – not 3-30% fees
4. Escrow payments – without risking value to 3rd party
5. Secure payments – Multiple digital signatures

30. Sales & Procurement
1. Real-time payments – fast cash flow
2. Micro payments
3. Pay per unit, time, size, weight, location
4. Automatic payment process

31. Business Process Automation
1. Trigger business processes on blockchain events
1. Create Sales Order at payment
2. Start delivery work flow
3. Create work order
4. Start procurement workflow

32. Supply Chain Management (SCM)
1. Proof of Delivery
2. Proof of Payment
3. Proof of content
4. Certificate of origin
5. Proof of certificate

33. Human Resources
1. Proof of employment
2. Proof of identity
3. Proof of attendance
4. Proof of education
5. Proof of certification
6. Proof of insurance

34. What’s sent in a transaction
 Each coin is associated with its current owner's public key.
 When you send some bitcoins to someone, you create a message
(transaction), attaching the new owner's public key to this amount of
coins, and sign it with your private key.
 When this transaction is broadcast to the bitcoin network, this lets
everyone know that the new owner of these coins is the owner of the
new key.
 Your signature on the message verifies for everyone that the
message is authentic.
 The complete history of transactions is kept by everyone, so anyone
can verify who is the current owner of any particular group of coins.