This document discusses private blockchains and cryptocurrency design. It summarizes Alexander Chepurnoy's background working on distributed systems and blockchains. It then discusses key aspects of blockchain design like the peer-to-peer network, blockchain data structure, transaction model, and consensus algorithms. It also addresses challenges with implementing private blockchains and the need for formal methods and modular approaches to blockchain development.

1. Blockchain Hackathon Moscow
Alexander Chepurnoy
On Private Blockchains, Technically

2. My Background
● Java then Scala development
● Distributed / P2P systems development
● Nxt Core Developer
● SmartContract.com / Secureae.com cofounder/dev
● Consensus Research member
● Scorex project

3. Fields of Interest
● Distributed & P2P systems
● Blockchain Tech
● Functional Programming (Haskell / Scala)
● Formal Methods (model checking / Coq)
● Finite State Machines and some other topics in CS

4. The Design of a Cryptocurrency
● P2P Network
● Persistent distributed fully-replicate database (aka
Blockchain)
● Transactions operating with tokens grouped within blocks,
a block is a database version
● Consensus algorithm
● Optional: additional layers on top of transactional
layer(mesages, colored coins, code)

5. A Blockchain Structure

6. Consensus About Blockchain
● Proof-of-Work
● Proof-of-Stake
● Hybrid: Proof-of-Work+Proof-of-Activity, Proof-of-
Stake+Proof-of-Activity

7. BlockTree

8. Blockchain As A Database
● Persistent(versioned) database
● Genesis state – initial verion of the database
● Block as state modifier: State(h) * Block → State(h+1)
● Very weak consistency!

9. PoW-based Trustless Database
If adversarial hashing power is less than 50% :
● replicated log and state
● a probability of transaction exclusion from a blockchain is
going down exponentially with time
● a probability of valid trransaction non-inclusion into a
blockchain is going down exponentially with time
● node's state divergence from a canonical one(majority has)
is going down exponentially with time(if exists)
● dependless on who mined a concrete block

10. Private Blockchains
● want to get maximum from the trustless db model
● have non-monetary purposes, usually
● limited number of participants(or just miners)

11. Private Blockchains
are proposed for:
● art objects ownership history
● real estate ownership history (chain of title)
● Inter-banks procedures(clearing etc)
● etc

12. Implementation
● consensus protocol
● transactional model
● incentives model

13. Consensus – PoW
● Not fair(richer parties will take control over a network soon)
● Attacks via outsourcing work to Bitcoin miners
● Why art gallery or real estate agency needs for a lot of
expensive special hardware in addition to the database
software?

14. Consensus - PoS
● Generation rights
● Predefined distribution of generation rights
● Works in practice for few years
● Some security investigations are done...
but more needed! As well as formalizations.

15. Trusted Random Beacon
● Bitcoin / Nxt / other public blockchain could be used as a
trusted source of randomness, to chose next block
generator
● Blocks frequency is the same in both chains
● (SPV) client is needed to be inbuilt in a node

16. Byzantine Agreement Scheme
● A lot of well-known formalized solutions to the distributed
commit problem
● Up to ~5000 participants
● Verification could be costly

17. Transactional Model
● Should be suitable for max performance
● Min transaction size
● Prunable state
● Bitcoin's transactions with multiple inputs & outputs and
scripts attached to both sides probably isn't the most
suitable model for many non-monetary cases

18. Incentives Model
Long-term security
● Why to participate in a network?
● Why to run a fullnode?
● Why to generate a block?
● Why to include transactions in a block?

19. Better Quality of Blockchain Impls
● Modular approach
● Safer languages(Scala/Ocaml, Haskell, Idris/Coq)
● Formal methods usage
● Prototypes before products

20. SCOREX
● The cryptocurrency engine in less than 4K lines of
Scala code
● To make proof-of-concepts FAST!
● Compact code
● Not production-ready
● CC0 license

21. Lagonaki Release
● 100% Proof-of-stake
● Simplified account-based transaction model
● Simple payments only
● Curve25519 for signing
● JSON API
● Command-line client

22. Under The Hood:
● Scala
● Akka
● MapDB
● Spray
● Play Json
● Scalatest
● Logback

23. Questions?
● Articles:
● „On Private Blockchains, Technically“
http://chepurnoy.org/blog/2015/11/on-private-blockchains-technically/
● „On the Way to a Modular Cryptocurrency, Part 1: Generic Block
Structure“
http://chepurnoy.org/blog/2015/10/on-the-way-to-a-modular-cryptocurrency
-part-1-generic-block-structure/
● „A Cryptocurrency Architecture“
http://chepurnoy.org/blog/2015/08/a-cryptocurrency-architecture/
Mail: kushti@protonmail.ch