Connecting The Block Cointelligence Academy by Dr Vince Ming

Connecting the Block
Dr Vince Ming
ACADEMY

This lecture is intended for knowledge sharing and educational
purpose only in order to provide a comprehensive overview and
helping people who wants to find out about the blockchain’s
core concept from a general technical standpoint with the
intention to gain the right perception, the basic know-how and
overall perspective on this emerging technology.
Disclaimer

Attributes in Blockchain
● New class of IT – Network of computers (nodes) collaborate
toward maintaining a shared distributed database / ledger.
● Enables “Trust” between parties that may otherwise not trust
each other – The Immutable record
● Autonomous and self organise for efficient de-centralised
coordination and management system.
● Empowering future token economics via p2p collaboration
between any entities, organisations as well as individuals.

Blockchain 1.0 Revalation
For the first time in the human history, a technology that allows any people
(or any things) from everywhere to come together and “trust” each other,
to transact with large p2p networks without a centralised management.
A “trust” system based on the security measures via:
❑ Computer Code (open and secured)
❑ Protocol (sets of rules or agreements, i.e. Consensus Algorithm)
❑ Cryptography (Hashing & Digital Signature)
* De-centralisation + Immutability *

P2P
electronic cash
The world’s first digital currency that can be held by anybody
(or anything) and can be transferred to anybody (or anything)
without needing the permission!

Blockchain 1.0
Cryptography
( security )
Distributed
Network +
© copyright reserved
https://anders.com/blockchain/

Blockchain Before Bitcoin (BBB)
Three basic Inventions before the Bitcoin:
a) Time Stamping (T)
b) Secure Filling Ledger System – (L)
c) Merkle/Hash – (M)
https://cs.nyu.edu/cs/faculty/shasha/papers/mazpodc.pdf
https://www.anf.es/pdf/Haber_Stornetta.pdf
https://people.eecs.berkeley.edu/~raluca/cs261-f15/readings/merkle.pdf
https://lopp.net/pdf/princeton_bitcoin_book.pdf
https://medium.com/blockstreethq/before-blockchain-there-was-distributed-ledger-technology-319d0295f011
(L)
(T)Txn - x
:
(T)Txn - n M M
B CA
© copyright reserved Created by Dr. Vince Ming S

Bitcoin (BTC) and blockchain
Two Inventions of Bitcoin:
d) Immutable way of recording Txns & Blocks
e) Proof of Work (PoW) – encourage stronger Immutability
(T)Txn - x
:
(T)Txn - n
-
(T)Txn - p
:
(T)Txn - f
(T)Txn - y
:
(T)Txn - g
M
#A #B
#A
#C
#B
M
nonce - A nonce - B nonce - C

From Centralised to Decentralised
Distributed Network
UTXO - TXN creation
Hashing and Digital Signature

The world change from C to D …
Centralised
● Single point of failure / attack
● Censorship applies
● Permissioned system
● Expensive to defend & coordinate
● Non-immutable and private
● Lacks Inter-organisational
collaboration
De-centralised
● Distributed - Duplicated everywhere
● Censorship resistance
● Consensus agreement
● p2p instant direct exchange
● Immutable and transparent
● Autonomous and self-organise
● Vast inter-spaces collaboration
Created by Dr. Vince Ming S

from to owe (£)
:
Alice Bob 20 Alice
Bob Charlie 30
Alice Charlie 10
Bob Alice 50
Charlie Bob 40
Bob
Alice
Alice
Bob
Charlie
signature
Bob Alice 50 Bob
Charlie
Dave
Whiteboard Scenario
Bob
Charlie
Charlie
Alice
Bob
A simple centralised case with a few roommates under the same roof, creating
a simple ledger for monthly settlement of bills and payments, using individual
signature to authorise each transaction and verified by countersigning.

from to owe (£)
:
Alice Bob 20
Bob Charlie 30
Alice Charlie 10
Charlie Bob 40
Bob Alice 50
Alic
e
Bo
bAlic
e
Charli
e
10110101101011101011000111010 …
11101110101101010110010110110 …
10001011101011011101010101100…
11001001111011100100011010110 …
11111011110011011011011100101 …
Charlie Alice 100 Charli11111011110011011011011100101 …
signatureDigital signature
Electronic Spreadsheet
Created by Dr. Vince Ming S© copyright reserved

General Cryptography
S PKey-Pair
Encryption
S
X
Sender:
Decryption
Receiver:
P
A X A
No Authorisation No Verification
https://www.youtube.com/watch?v=8I7BNgD2Yag&t=204s
The keys are mathematical related

Hashing (SHA256)
SHA-256
6D30F39035DA3535
3BE1485844E27DA3
4CC97CED8C79E82B
AE6E2CE39D0B002B
I am a superhero
https://passwordsgenerator.net/sha256-hash-generator/
• SHA256 = Secure Hash Algorithm - 256 bits fix-length output
• Universal Creation – same output with same input
• One-Way math function – practically irreversible
• Easy to create forward, infeasible to calculate backward
• 2256 combinations = (232 =~4 billions) multiply itself 8 times
• A tamper-proof digital footprint (Pseudonymous or Anonymous)
• standard simplified output representation

Digital Signature
Private Key
S
Encryption
Sender:
Verifier:
#X
Hashing
Sig
Digital
Signature
Sig+
Send:
Decryption
Public Key
P
Hashing
#B :
Sig #A :
=
Verify for #X:
#A #B Y/N?
Authorisation & Integrity check
(Non-repudiation)

● Origination – Digital Signature to authorise spending
● Broadcast on network to nearest nodes ( >1 node )
● Validated and Propagated by each & adjacent nodes
● Verified further by Mining, then re-broadcast in block
● Confirmed – by sufficient subsequent blocks (~6)
– Longest chain wins
● Become Permanent – Immutable Record
Transaction flow

Transaction Creation
Encryption
HashingCheque
information
Sig
Digital
Signature
Public Key Hash
Digital Wallet
Public Key
Private Key
Bitcoin Address:
1XPTgDRhN8RFnzniWCddobD9iKZatrvH4

Bitcoin Transaction Creation - UTXO
Input Output
• Pointers to ‘claim’ the
previous UTXO
- TXN no.
- Sequence no.
- Amount (in satoshi)
• Pointers to ‘create’ next UTXO, stating:
- Conditions to be met
- the receiver’s Public Key Hash
- created independently
• Unlocking Script
(ScriptSig)
• Locking Script
(ScriptPubKey)

10 BTC5 BTC
Alice
Transaction I/O
Joe Bob
Ken
7 BTC
Alice
2 BTC
Input Output
To create new UTXO to Bob (& herself)
– Locking with #PB (& #PA )
To spend (or claim) Alice’s UTXOs
– Unlocking with SigA + PA
#PB
#PA
SigA + PA
SigA + PA

Transaction I/O
• Input
• claim UTXO
• Output
• create UTXO
UTXO
• Rights of ownership
locked to new
claimer
• multiple satoshi
• must be consumed
entirely
Coinbase
• Only has Output
• 1st Entry placed by
winning miners to
pay themselves
• creating new
bitcoin.
Bitcoin Transaction Creation

https://btc.com/90ca796b6c686a738171f26ac785d72c5c8fbe72a884b3bddf31056c9b3a7bc9

Alice
Bob
Charlie Dave
Using Digital Signature, everyone can check:
• The authorisation of each TXN
• The authenticity of each TXN
Distributed Network
Using Spreadsheet, everyone can keep track:
• The order and settlement of TXNx
Evolving to a simple distributed network case: transactions
are added and verified remotely in orderly fashion to keep
track of monthly settlement in an open distributed ledger.

Distributed Network
Problems:
When the network grows into hundreds of thousands of nodes as a
Large Distributed Network
a)How can any nodes come and go as they wish and still able to
continually synchronise and update their record?
a)How can the nodes come to a global consensus? How do they
agree on the history of the record?
a)How to prevent the network attacks or fraud problem?
(Altering past records, creating false Txn, Double Spending etc)

• Everyone agrees on only One version of Truth
- “I know that what you see is also what I see”
• All data must be In Sync in near future
- to allow Sufficient Time for ALL Nodes to agree
• Robust verification process via Continuous Chains
- easy to duplicate but extremely hard to cheat
True Consensus

Incentive… is the key
A reward based system using Game Theory in order
to kick start and encourage more nodes to join and
maintain a secured distributed network …

mempool - 1
mempool - 2
mempool - 4
mempool - 3
Distributed Network & Mempool
These validated but “unconfirmed” transactions will be stored in the memory pool of each node
and will be picked subsequently during the “Mining” process to become a “confirmed” transaction.

Creating the Next Block
Mining for the next Block – to get Reward

What is PoW?
• In blockchain, Proof of Work is a consensus algorithm focuses on solving a rather
difficult Mathematical challenge or puzzle in order to produce a verifiable “ Proof ”.
• (e.g. guessing the combination of the lock ~10 digits).
Proof
0000000000000000
00E6485844E27D13
4C1970ED8179E82B
AE6E2CE39D0B1017
• Extremely difficult to solve. However, once it is solved, it is very easy to verify.
• Extremely high electricity energy – opportunity cost outside the system.

Hashing of the Block
SHA256 ( SHA256 { previous-# , Header + Data , Nonce } ) < Target
0000000000000000008fdc9b73cc3d5abc02368dfa7fcdcb04aac7e7c3385b02
Hashing
Difficulty Asymmetry Properties:
• one-way function
• fixed length output
• same in same out
• extreme randomness
Hash of new Block =

Block Structure
ex- Blk #
#Blk
Data
Hash of the Block
• # of previous Block
• Version
• Time Stamp
• Difficulty
• Markle Root
• Nonce
Block
Header
Transactions

TXN
:
Nonce - 2
TXN
:
Nonce - 1
Chain & Block
# 000
TXN
:
previous #
current #
#Blk-0 #Blk-1
Header
+
Data
#Blk-0 #Blk-1 #Blk-2
Nonce - 0
Genesis
Block
Height

TXN
:
TXN
:
TXN
:
Robust against tampering
000052de1a0previous #
current #
00008fdc9b73 000025ec3fe8
00008fdc9b73 000025ec3fe8 000066e8da2
000052de1a0previous #
current #
00008fdc9b73 000025ec3fe8
00008fdc9b73 0000363fefe1 000066e8da2
TXN

blk. 0
genesis
blk. 1
::
blk. X–1
Every 10 minutes
blk. X
Global Consensus & Mining
12.5 BTC – every 10 minutes
winner

Thank You!
Linkedin: Vince Ming
msiyau@yahoo.co.ukEmail:
Vince@Cointelligence.com

Blockchain 2.0
CryptographyDistributed
Network +
Smart Contract
Tokenisation

Blockchain 2.0 Revalation
The significance of new age digital token not only just lies within the “value”
it represents but also defining in itself the “mechanism” and the “reason” of
passing from one bearer to the next. This “mechanism” can be automated
and the “reason” can be programmed for execution of the token passing.
“Token” is always powered by Smart Contract in blockchain by:
❑ Token’s Quantity / Value is created / assigned via Smart Contract
❑ Token’s Conditions for Transfer is programmed within Smart Contract
❑ Token’s Ownership is converted under Smart Contract
* Tokenisation + Smart Contract *

BTC
Alice
Smart Contract
Bob
Bitcoin Ethereum
ETH
Alice Bob
• All nodes validate each transaction • All nodes validate each smart contract

https://etherscan.io/block/5892488

Connecting The Block Cointelligence Academy by Dr Vince Ming

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