PROJECT REPORT

ON
BLOCKCHAIN TECHNOLOGY

As a part of Internship programme

(11th June, 2018 to 10th August, 2018)
at
Ministry of Electronics and Information Technology
(Industrial Promotion: Software and Industrial Promotion Division)
New Delhi

Submitted by:
GAURAV SAINI
Btech (IT)
NIT Kurukshetra
 ACKNOWLEDGMENT

I would like to express my sincere gratitude to Shri Rajiv Kumar, Joint Secretary, MeitY and
Shri Ashok Kumar Sharma, Senior Director, IP:S&ITS Division for his valuable guidance and
the great help that he offered me throughout my project. I am grateful for his patience in
explaining me the concepts, which gave me a lot of insight into the subject.
I would like to thank Smt. Manjusha Choursia, Scientist-‘C’ and Shri Diwakar Dhingra,
Scientist-‘B’ for helping me and encouraging me at every moment. I am thankful for his kind
help in providing me all the facilities in Ministry of Electronics and Information Technology.
I am extremely grateful to all other senior officers of MeitY for helping me to complete this
project.
I would like to thank to my parents for encouraging me always and for providing me all the
opportunities.
Table of Contents
1 ABSTRACT............................................................................................................................................... 4
2 INTRODUCTION ..................................................................................................................................... 5
2.1. Types of Blockchain .......................................................................................................................... 6
2.1.1 Public Blockchain ........................................................................................................................ 6
2.1.2 Private Blockchain ....................................................................................................................... 7
2.1.3 Consortium or Federated Blockchain........................................................................................... 7
3 Chronology of emergence of BLOCKCHAIN Technology ................................................................... 8
3.1 Bitcoin ................................................................................................................................................. 8
3.2 Ethereum ............................................................................................................................................. 8
3.3 Aion .................................................................................................................................................... 8
4. NEED OF BLOCKCHAIN ....................................................................................................................... 9
4.1 Example which demonstrate the need of Blockchian ........................................................................ 9
4.1.1 Business Scenario Implemented Using the Database .................................................................. 9
4.1.2 Business Scenario Implemented Using Blockchain ................................................................... 11
5. WORKING of Blockchain ...................................................................................................................... 13
5.1 Banking sector: ................................................................................................................................. 13
6. APPLICATIONS of Blockchain............................................................................................................. 14
6.1 Supply chain management using blockchain .................................................................................... 14
6.2 Use case of blockchain in food ......................................................................................................... 14
6.2.1 Cold chain monitoring ............................................................................................................... 14
6.2.2 Distributed cloud Storage........................................................................................................... 15
6.3. Storj .................................................................................................................................................. 15
6.4 Digital Identity .................................................................................................................................. 15
6.5 Blockchain applications in India ....................................................................................................... 16
7. Storage issue with Blockchain ................................................................................................................ 17
7.1. Storing everything in blockchain itself ............................................................................................ 17
7.2. Decentralized cloud file storages: .................................................................................................... 17
8. CONCLUSION ....................................................................................................................................... 18
9. REFERENCES ....................................................................................................................................... 18
1 ABSTRACT

Blockchain has received extensive attentions recently. Blockchain serves as an immutable ledger
which allows transactions to take place in a decentralized manner. Blockchain based applications
are springing up, covering numerous fields including financial services, reputation system-
Internet of Things (IoT), and so on.
This report presents a comprehensive overview on blockchain technology with a glimpse of
blockchain architecture, working and application of blockchain.
2 INTRODUCTION

The Blockchain technique was originally described in 1991 by a group of researchers and was
initially intended to timestamp digital documents in order to ensure that they stay untampered.
However, the idea went mostly unused until it was adopted by Satoshi Nakamoto in 2008 to
create a digital cryptocurrency Bitcoin.
A blockchain is a chain of digital “blocks” that contains records/ information of transactions.
Each block is connected to all the blocks before and after it by the form of technology known as
cryptography which is used to ensure that data does not get counterfeited.
A blockchain is a decentralised and distributed database of records or public ledger that stores a
registry of assets and transactions in a peer to peer network and is shared among participating
parties. Each transaction in the public ledger is verified by consensus of a majority of the
participants in the system. And, once entered, information can never be erased.
In a Blockchain network, the ledger is distributed and each and every node in the network has a
copy of this ledger (thus known as distributed ledger). These copies contain detail about every
transaction which thus helps in validating the system. The responsibility of maintaining the
ledger is with all the nodes. The nodes in the network are responsible for approving/ rejecting
any transaction through some consensus mechanism.
Each transaction in the public ledger is verified by consensus of a majority of the participants in
the system. And, once entered, information can never be erased. Therefore, Blockchain creates a
shared reality across non-trusted entities through an unforgeable network.

Block, Cryptography and Consensus in the context of blockchain

Block is a container where data/ information’s are stored so a block is like a page of a ledger or
record book. Each time a block is 'completed', it gives way to the next block in the blockchain.
Cryptography is the method of encrypting and decrypting the information through complex
mathematics. The method involves taking unencrypted data, such as a piece of text, and
encrypting it using a mathematical algorithm, known as a cipher. This produces a cipher-text, a
piece of information that is completely useless and nonsensical until it is decrypted.
Consensus algorithm is a process in computer science used to achieve agreement on a single
data value among distributed processes or systems.
1. Blockchain from User’s perceptive
People use a trusted middleman such as a bank to make a transaction. But blockchain allows
consumers and suppliers to connect directly, removing the need for a third party.
Blockchain is a system that allows a group of connected computers to maintain a single updated
and secure ledger.

2.1. Types of Blockchain

There are three types of blockchain which are as follow:-

 Public Blockchain
 Private Blockchain
 Consortium or Federated Blockchain

2.1.1 Public Blockchain

A public blockchain as its name indicates is the blockchain of public, meaning a kind of
blockchain which is ‘for the people, by the people and of the people’
Here no one is in charge and anyone can participate in reading/ writing/ auditing the blockchain.
Another thing is that these types of blockchain are open and transparent hence anyone can
review anything at a given point of time on a public blockchain.
Decision making happens by various decentralized consensus mechanisms.

2.1.1 Example: Bitcoin

In such types of blockchain:
 Anyone can run full node and start mining.
 Anyone can make transactions
 Anyone can review/audit the blockchain
2.1.2 Private Blockchain

Private Blockchain is a private property of an individual or an organization. Unlike public

blockchain here, there is an in-charge who looks after of important things such as read/write or
whom to selectively give access to read or vice-versa.
Example: Bankchain
Bankchain is a platform for banks for implementing blockchain software; it was announced by
SBI in 2017

In such types of blockchain:

 Anyone can’t run a full node and start mining.
 Anyone can’t make transactions on the chain.
 Anyone can’t review/audit the blockchain.

2.1.3 Consortium or Federated Blockchain

In Consortium Blockchain instead of one in-charge, there is more than one in charge. A group of
companies or representative individuals come together and makes decisions for the best benefit
of the whole network. Such groups are also called consortiums or a federation.
Example: Corda
Corda is blockchain platform which is used in businesses.
In such type blockchain:
 Members of the consortium can run a full node and start mining.
 Members of the consortium can make transactions/decisions.
 Members of the consortium can review/audit the blockchain.
3. Chronology of emergence of Blockchain Technology

3.1 Bitcoin: The first blockchain was conceptualized by a person (or group of people)
known as Satoshi Nakamoto in 2008. It was implemented as a core component of the
cryptocurrency bitcoin, where it serves as the public ledger for all transactions on the
network.

3.2 Ethereum: The second generation blockchain is Ethereum, which added Smart Contracts
on top of blockchain. Smart contracts are digital contracts stored in a distributed ledger.
They are computer programs, written with certain logic and stored in a blockchain. As this
sits in a blockchain, the smart contract becomes immutable, making it very hard to tamper
with it and manufacture a fraudulent entry.
Slow transactions, high network fees, and insane amounts of energy consumption have
become synonymous with Bitcoin.
3rd-generation blockchains solve the problems of scalability, speed, and energy efficiency,
by using approaches like Proof of Stake (PoS) validation and off-chain routing.

3.3 Aion: Aion is the third generation blockchain network will integrate different blockchain
networks into a multi-tier hub. It will send data and value between AION-compliant or
Ethereum-compliant networks. It will also enable inter-blockchain communication.
4. NEED OF BLOCKCHAIN

Blockchain is an alternative to the traditional database but the most significant exception is the
decentralized nature of blockchain. While a database requires a central authority to maintain and
mange data, blockchain offers a decentralized approach to storage and verification of data.
Blockchain solves problems such as:
 One no longer needs to rely upon huge servers.
 They are cost effective and fast.
 They reduce the need for more trusted parties because you can implement smart contracts
instead of them.
 Gives options for rights and access management while leveraging the same blockchain
technology and reaping its benefits.
 Reduces redundant work.
 Distributed consensus between interested parties becomes fast even though you are
geographically segregated.
 It solves the double spending problem; Double-spending is a potential flaw in a digital
cash scheme in which the same single digital token can be spent more than once.

4.1 Example which demonstrate the need of Blockchian

4.1.1 Business Scenario Implemented Using the Database

Let’s consider the supply chain use case where multiple parties like manufacturers, logistics,
wholesalers, distributors, and retailers are involved. The movement of a product through the
supply chain is tracked individually by the respective parties.
 Manufacturer
database

Retailer Logistics
database database

Distributor
Wholesaler
database
database

Fig 1. Business scenario implemented using the Database

Each party will have their own database and an application for capturing transactions and the
movement of the product through the chain. The problems with this approach are:-
 Multiple sources of truth: At any point of time, all the databases may not have
 the same data, as it depends on the organizational process involved in updating
the database or the delay in propagating the data across all the parties.
 Human error: The data in one or more of the databases may not sync up due to human
error or application issues. This would lead to a dispute between parties, resulting in
increased cycle time for resolving the conflict.
 Fraudulence: This provides the possibility for parties to modify their database for
business benefits and claim that their data is true.
 Reliance on intermediaries: Depending on brokers or agents increases manufacturing
costs and increases inefficiencies.
 Vulnerability: Due to the involvement of intermediaries and multiple copies of data, the
manufacturer is unable to control fake products being introduced into the chain or
genuine products distributed into the black market.
 Lack of customer focus: The customer finds it extremely difficult to identify whether
the product is genuine.
4.1.2 Business Scenario Implemented Using Blockchain

The same use case implemented using blockchain will involve all parties collectively tracking
the movement of the product through the supply chain.

Manufacturer
Shared Ledger

Retailer Logistics
Shared Ledger Shared Ledger

Distributor Wholesaler
Shared Ledger Shared Ledger

Fig 2 Business scenario implemented using Blockchain

 Each party can have their own application, but there will be a single data store called a
distributed ledger. A single shared data store, which is tamper-evident as it is protected
using cryptographic techniques. All parties will have the same copy of this ledger.
 All parties must give consensus before a new transaction is added to the shared ledger.
 Transactions recorded on the ledger can never be altered.

Benefits of the ledger-based approach are:

 Single source of truth: At any point in time, all the parties will refer to the same data
due to a single shared ledger.

 Early detection of human error: Since all parties need to give consensus, any human or
application errors will be caught early in the chain.

 Security: Treachery by any of the parties will be immediately identified by comparing

the ledger copies of the other parties.
 Disintermediation: Elimination of intermediaries is one of the biggest benefits of the
blockchain. It enables the manufacturers to reduce the overall cost and facilitates to
connect the manufacturer directly with the customer.

 Safety: The manufacturer can ensure that the quality of their products is not comprised.
 Customer centric supply chain: Since blockchain provides the opportunity to connect
the manufacturer directly with the customer; the manufacturer is able to provide a better
customer experience.
 Regulatory compliance: Blockchain improves regulatory compliance through
transparent audits.
5. WORKING OF Blockchain

In the blockchain, a block consists of the data, a hash of the previous block and a hash of the
current block. So when the data (or the hash of the previous block) in a block changes, the hash
of that block would change, which would need the hash in the following block to change as well
and so on. All following blocks need to be updated if one block in the chain is updated. This
becomes a deterrent for the data on a single block to be changed.
The complete blockchain database is available with each of the participating entries in a peer-to-
peer communicating network. When one block needs to be added, that block is sent to all the
participating entries (peers). Each of the participating entries needs to approve that the block is
valid. Once more than 50% of the entries confirm that the block is valid, the block can be added.
5.1 Banking sector: The blockchain process is really quite simple. First, someone requests to
make a transaction — usually using cryptocurrency. Once they do, computers, or “nodes,” jump
to work processing the transaction. When the nodes are finished, blockchain verifies the
transaction, gives it a unique address, completes it, and places it as a new block within the strand
of existing blocks.

•Person(A) wants 2 •The block is

to send money to broadcasted to
person(B) •The transaction is every party in the
represented network
online as a block

1 3

•The money is sent 5 •Those in the

from person(A) to network approve
•The block then
person(B). the transaction is
can be added to
valid
the chain

6 4

Fig 3 Working of Blockchain

6. APPLICATIONS of Blockchain

6.1 Supply chain management using blockchain

 Supply chain management: Supply chain management is the management of the goods
and services which includes all processes that transform raw materials into final products.

 Supply chain: A supply chain is the connected network of individuals, organizations,

resources, activities, and technologies involved in the manufacture and sale of a product
or service. A supply chain starts with the delivery of raw materials from a supplier to a
manufacturer and ends with the delivery of the finished products and services to the end
user.

6.2 Use case of blockchain in food

6.2.1 Cold chain monitoring: Food and pharmaceutical products often need special
storage. see the value in sharing warehouses and distribution centres, instead of each one paying
for its own. Sensors on sensitive products can record temperature, humidity, vibration, and other
items of interest. These readings can then be stored on blockchain. They are permanent and
tamperproof. If a storage condition deviates from what has been agreed, each member of the
blockchain will see it. A smart contract can trigger an action to correct the situation. Depending
on the size of the deviation, this action may be to simply adjust the storage. However, it could
also extend to changing “use-by” dates, declaring products unfit, or applying penalties.

Fig 4 Supply chain Management System using Blockchain

6.2.2 Distributed cloud Storage: Blockchain data storage will become a massive disruptor
shortly (i.e. 3-5 years). Current cloud storage services are centralized — thus you the users must
place trust in a single storage provider. “They” control all of your online assets.
On the other hand with the Blockchain, this can become decentralized.

For instance, Storj is beta-testing cloud storage using a Blockchain-powered network to improve
security and decrease dependency. Additionally, users can rent out their excess storage capacity,
Airbnb - style, creating new marketplaces. Anyone on the internet can store your data at a pre-
agreed price. Hashing and having the data in multiple locations are the keys to securing it.

6.3. Storj - Decentralized Cloud Storage and factom are two start-ups exploring this idea.
After encrypting the data, it is sent out to a network with easy to track basic metadata.

6.4 Digital Identity: Digital security is a massive problem in the world, which is now
estimated to cost the industry about $18.5 billion annually, according to a report released by
Distil Networks. It means for every $3 spent, $1 is going to ad-fraud. Blockchain technologies
make tracking and managing digital identities secure and efficient, resulting in seamless sign-on
and reduced fraud. Be it banking, healthcare, national security, citizenship documentation or
online retailing, identity authentication and authorization is a process intricately woven into
commerce and culture worldwide.

Blockchain Identity Use Cases

 Blockchain technology can be applied to identity applications in the following areas:

 Digital Identities
 Passports
 E-Residency
 Birth Certificates
 Wedding Certificates
 IDs
6.5 Blockchain applications in India

6.5.1 The Telangana Government will utilise blockchain technology to enhance the security of
its digitised revenue/ land records. The move is aimed at ensuring that the state Government’s
data is tamper-proof and secure.
Blockchain will help reduce litigations in courts as well. “A lot of the litigations will be cleared,
and the cost, time and effort of transactions will also decrease considerably.

6.5.2 SBI had formed a banking community called BankChain to explore and implement
blockchain platform in banking. The move is expected to lower the costs associated with the
reconciliation, remittances and trade finance operations in FY19 by about 40-50%. BankChain is
a community of 27 banks from India and the Middle East. ICICI Bank, Kotak Bank, DCB Bank
and Axis Bank are also part of this Community. BankChain aims to reduce fraud and maximise
efficiency, security & transparency in the banking systems.
7. Storage issue with Blockchain

Decentralized blockchain applications have few options to store data till now.
Decentralized storage options are:-
 Storing everything in blockchain itself.
 Decentralized cloud file storages, such as Storj, Sia, Ethereum Swarm, etc.

7.1. Storing everything in blockchain itself:

Storing everything in blockchain is the simplest solution. Currently most of the simple
decentralized applications work exactly this way.
Drawbacks of this approach:
7.1.1. Transactons to blockchain are slow to confirm. It may seem to be fast for money transfer
(anyone can wait a minute), but it is extremely slow for uploading and downloading the data/
media.
7.1.2. It is immutable. The immutability is the strength of blockchain that gives it high
robustness but it is a weakness for data storage. User may change their profile or replace their
photo, still all the previous data will sit in blockchain forever and can be seen by anyone. The
immutability results in one more drawback – the capacity. If all the applications would keep their
data in blockchain, the blockchain size will grow rapidly, exceeding publicly available hard drive
capacity.

7.2. Decentralized cloud file storages:

There are also decentralized cloud file storages. From the user’s point of view these storages are
just cloud storages like Dropbox, for example. The difference is that the content is hosted on
user’s computers who offer their hard drive space for rent, rather than in data-centerd. Example:-
Sia, Storj, Ethereum Swarm. There is no need to stay online to share files anymore. Just upload
the file and it will be available in the cloud. These storages are highly reliable, fast enough, have
enormous capacity.
8. CONCLUSION

Blockchain technology’s concepts and features can be broadly extensible to a wide variety of
situations. These features apply not just to the immediate context of currency and payments
(Blockchain 1.0), or to contracts, property, and all financial markets transactions (Blockchain
2.0), but beyond to segments as diverse as government, health, science, literacy, publishing,
economic development, art. Depending upon the requirement of the application either RDBMS
or Blockchain can be used. Blockchain is suited when there is need of transparency, reliability
immutability and publically accessibility. RDBMS is suited for centralised applications.

9. REFERENCES

 [Link]
 [Link]
 [Link]
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