Introduction to Blockchain

Technology
Computer Network
• A system that connects two or more computing devices for transmitting
and sharing information.
• Computing devices : everything from a mobile phone to a server.
connected using physical wires such as fiber optics, but they can also
be wireless.
Types of Computer Network
• Personal area network (PAN): network used by just one person to
connect multiple devices, such as laptops to scanners, etc.
• Local area network (LAN): connects devices within a limited
geographical area, such as schools, hospitals, or office buildings.
• Campus area network (CAN): collection of interconnected LANs.
Used by larger entities such as universities and governments.
• Wide area network (WAN): Cover larger areas such as large cities,
states, and even countries.
Key Objectives of Creating and Deploying a
Computer Network
• Resource Sharing
• Resource Availability and Reliability
• Cost Savings
• Performance Management
• Increased Storages
• Streamlined collaboration & communication
• Secured Remote access.
Web 1.0
• Static Websites: static pages connected to a system via hyperlinks
• No user server communication.
• The content comes from the server's filesystem, not a relational
database management system
• Read only web.
Web 2.0
• Improved user interaction over Web 1.0
• Dynamic content that responds to the user’s input
• Web applications introduced
• Functions such as online documents, video streaming, etc.
• Everything moves online; information and apps are stored on servers
• Interactive advertising and pay-per-click
• Cloud computing operations
• Centralized data
• Read and Write Web
Web 3.0
• Intelligent, web-based functionalities and applications
• Decentralized processes
• A fusion of Web technology and Knowledge Representation
• Behavioral advertising and engagement
• Edge computing
• Live videos
• The Internet of Things (IoT)
• Semantic searches
• Read, Write, and Control Web
Centralized vs Decentralized vs Distributed
Systems

Source: berty
Centralized
• All users are connected to a central network owner or “server”.
• Follows client- server architecture.
• The central owner stores data, which other users can access, and also user information.

• Pros
Simple deployment
Can be developed quickly
Affordable to maintain
Practical when data needs to be controlled centrally

• Cons
Prone to failures
Higher security and privacy risks for users
Longer access times to data for users who are far from the server
Decentralized Systems
• No -one central owner. Instead, they use multiple central owners, each of which usually
stores a copy of the resources users can access.
• Vulnerable to crashes as a centralized one but more tolerant to faults

• Pros
Less likely to fail than a centralized system
Better performance
Allows for a more diverse and more flexible system

• Cons
Security and privacy risks to users
Higher maintenance costs
Inconsistent performance when not properly optimized
Distributed Systems
• Similar to a decentralized but eliminates centralization
• Users have equal access to data, though user privileges can be enabled when
needed.
• Pros
Fault-tolerant
Transparent and secure
Promotes resource sharing
Extremely scalable

• Cons
More difficult to deploy
Higher maintenance costs
 Centralized Decentralized Distributed

Fault tolerance: Low Moderate High

Maintenance: Low Moderate High

Scalability: Low Moderate High

Development: High Moderate Moderate

Evolution Low High High

Blockchain Vs Database
• A database is software that is used to store and retrieve data.
• A Blockchain is a decentralized, distributed database or ledger that is replicated and
synchronized across computers on a network.
• Purpose is similar but not so similar in other properties.
Properties Blockchain Traditional
Data Storage Yes Yes
Querying Yes Yes
Concurrent Access Yes Yes
Data Integrity and Yes Yes
Consistency
Cryptography In-built Not in-built
Control Decentralized Centralized
Consistency Consensus ACID
Advantages of Blockchain
• Web 3.0 integration : Enables decentralized applications
• Immutable data: Each transaction in a Blockchain is cryptographically hashed to
keep it from being tampered with.
• Fault Tolerant: Distributed structure minimizes the risk of single point of failure.
• Advanced Security & Trust: principles of cryptography, decentralization, and
consensus to create a highly secure nearly impossible to tamper with.
• Improved efficiency: Transparency and smart contracts in blockchain make such
business transactions faster and more efficient.
• Faster auditing : records are chronologically immutable, i.e all records are
always ordered by time. Enabling audit processing much faster.
Applications of Blockchain
• Finance and Banking
• Supply chain Management
• Healthcare
• Real Estate
• Voting Systems
• Intellectual Property Rights and Copyrights
• Energy Sector
• Gaming
• Insurance
• Education and many more..
 Distributed Ledger Technology (DLT)
The idea of a distributed ledger is not totally new, and many organizations do maintain data at
different locations. However, each location is typically on a connected central system, which
updates each one of them periodically. This makes the central database vulnerable to cyber-crime
and prone to delays since a central body has to update each distantly located note.

• Distributed Ledger Technology (DLT) refers to a type of database that is spread across a
network of computers.
• Each computer in the network has a copy of the database, and all copies are updated
simultaneously when a new transaction is added.
• DLT is used to create decentralized systems that do not rely on a central authority to process
transactions.
• The most well-known example of DLT is blockchain, which is the technology that powers
cryptocurrencies like Bitcoin.
• Other examples of DLT include Hashgraph, Tangle, and Corda.
DLT decentralized Applications & Database
Private Vs Public DLT
Examples of decentralized Applications & Databases are:
BitTorrent, Interplanetary File System(IPFS), and eMule.

DLT network groups individual practice that administrates the guidelines for participation,
authenticates the record of transactions, and manages the ledger.
This sharing can be public or private.
Public DLT allows entry by any user, party, or node.
Private DLT entry is based on permission control.
Public DLT utilize high distributed consensus
Blockchain - Introduction
A blockchain is a digital, decentralized, distributed public ledger database where blocks
are linked cryptographically, and transactions are digitally signed and managed using
consensus model.
Each block contains a timestamp and a link to the previous block, forming a chain of
blocks that cannot be altered once they are added to the blockchain.
 Key vocabulary while discussing Blockchain
Blockchain: a decentralized, distributed ledger that records transactions on multiple computers so that the record
cannot be altered retroactively without the alteration of all subsequent blocks and the consensus of the network.
Cryptocurrency: a digital or virtual currency that uses cryptography for secure financial transactions.
Bitcoin: a decentralized cryptocurrency that uses peer-to-peer technology to facilitate instant payments. It is the first and
most widely used cryptocurrency.
Distributed ledger: a ledger of digital transactions that is stored and maintained by a network of computers rather than
a central authority.
Mining: the process of adding transaction records to a blockchain's public ledger. In the case of Bitcoin, mining
involves solving complex mathematical problems in exchange for a reward in the form of cryptocurrency.
Node: a computer that participates in the operation of a blockchain network.
Smart contract: a self-executing contract with the terms of the agreement between buyer and seller being directly
written into lines of code. The code and the agreements contained therein are stored and replicated on the blockchain
network.
Consensus: the agreement of the majority of nodes on a blockchain network to the validity of a transaction or block of
transactions.
Hash: a unique fixed-size alphanumeric string that represents the contents of a block in a blockchain.(SHA-256)
Private key: a secret piece of data that is used to access the cryptocurrency stored in a wallet. It should be kept secret and
secure, as it allows the owner to spend or transfer their cryptocurrency.
• Block : Block is used to store the transaction along with their hash value and data.
• Transaction : Any state change occurred in a blockchain .
• Token : Digital asset
• Node : Each computer connected to the blockchain network.
• Solidity : Programming language for writing smart contracts in Ethereum
• Miner : The nodes which perform mining
• Wallets : Digital wallet to store, send and receive cryptocurrencies and other digital assets.
 Blockchain integrate with
following innovations

Blockchain

Smart Consensus
P2P network cryptography
contracts mechanism

Key Characteristics
Open: Anyone can access blockchain.
Distributed or Decentralised: Not under the control of any single authority.
Efficient: Fast and Scalable.
Verifiable: Everyone can check the validity of information because each node maintains a copy of the
transactions.
Permanent: Once a transaction is done, it is persistent and can’t be altered.
Transparent: Everyone can see
Peer-to-Peer Model

P2P Network

Client Server Network

Cryptography
• Blockchain uses Public-Key Cryptography/ Asymmetric Cryptography

• Two Key – Public Key and Private Key to Encrypt and Decrypt.
• To be used in combination.
• Public Key cannot decrypt a message encrypted by a public Key and Vice versa.
• Ensures Confidentiality and Integrity.
Distributed Consensus
• A procedure to reach a common agreement in a distributed or decentralized multi-agent
platform.
• Vital role in decentralized systems, ensuring reliability, fault tolerance.
 The History of Bitcoin

2008 2009 2010 2011

Idea was published Start of the Bitcoin Fist cryptocurrency One Bitcoin equals one
under the pseudonym Network stock exchange is USD
Satoshi Nakamoto launched
A P2P Electronic Cash
System

2013 2014 2017 Bitcoin ≠ blockchain

Is an Is the underlying
1 Bitcoin equals Microsoft accepts 1 Bitcoin equals datastructure,
application of
100 USD Bitcoin 10,000 USD which can be
blockchain
technology used for many
2013 2016 things, including
2018---- cryptocurrencies
Blockchain 2.0 : Blockchain 3.0 :
Blockchain 4.0 : The
Ethereum and Smart Distributed Applications
Future
Contracts
Fundamentals of Blockchain
Public Key Cryptography

Shares public key to bob

Wallet

Encrypts and Sends

Wallet

Verified
 Characteristics of Blockchain
Data immutability: This is the top-most feature as it ensures that no data is corrupted. How
this works is that every node on the system has a copy of the ledger. So, to alter any data,
there must be an unanimous agreement of every node. This makes blockchain secure and
transparent.
Decentralized: Blockchain is decentralized, meaning that no authority or government, a
group of persons, or a single individual controls this technology. Rather, it is a group of
nodes that manage the whole transaction.
Single source of truth: In a blockchain, there is only one source of truth, the distributed
ledger. So, to know who owns what, or to study a particular transaction, you only need to go
to one place.
Transparency or provenance: Every transaction, be it tangible or non-tangible, can be traced
from the start to the finish with blockchain.
Consensus algorithm: Every blockchain technology has a consensus algorithm which makes
the blockchain technology highly effective. All the actions are verified and approved on the
blockchain using the consensus algorithm.
 Characteristics Cont..
Distributed Shared Ledger: A Ledger is a record of all relevant transactions. A shared
ledger allows the authorized participants to access monitor and analyze the state of a
transaction in its lifecycle.
Security: SHA – 256 cryptography algorithm is used for hashing. Further fixed-length has
output value is generated irrespective of the input data length. This makes it difficult to
hack. Also, the components that go into block generation increases the difficulty level for
hacking.
Auditability (Provenance): The chain acts as a trail of the transactions. Timestamp helps in
proving the sequence. The Blockchain acts as an archive. The blocks are read-only for their
lifetime. Therefore the system facilitates Auditability and Provenance any time.
Anonymous: It is true that every transaction is transparent and open to the public, but the
actual persons are kept anonymous through the addresses.
For example, suppose a person sends a sum of money, the receiver will know that the sender
is linked to a bitcoin address, but they will not know the actual address. There are several
reasons for this one of them is privacy.
Privacy and Security: Privacy in the blockchain is one of the key aspects of the features of
blockchain. The network allows the users to keep their data in control while also providing
a secure data storage option.
Traditional Vs Blockchain Transactions
ARCHITECTURE OF BLOCKCHAIN
Block in a Blockchain
• Fundamental Component of Blockchain with a Block header and a
body.
• Block Body- has list of transactions that are to be part of the block.
(Merkle Trees)
• Structure of a Bitcoin Block includes:
• Magic Number
• Block Size
• Block Header
• Transaction Counter
• Transactions
 Structure of a Block

Magic Number Size

Version Merkle Root

Hash of block Timestamp

N H7

Nonce Difficulty
Target
H5 H6

Transaction Counter
H1 H2 H3 H4

List of Transactions T1 T2 T3 T4

Block N+1 Block N+2 Merkle Tree

• Magic Number: 4-byte field that always contains the value 0xD9B4BEF9 indicating the starting of
the block.
• Block Size: 4 –byte field sets a cap on the data contained in the block. (Ex: 1MB for bitcoin Block)
• Block Header: 80-byte field consist of 6 components:
• Version
• Hash of Previous Block
• Nonce
• Merkle Root
• Timestamp
• Difficulty
• Transaction Counter: Ranges from 1-9 bytes indicating the number of transactions in the block.
• Transaction List: Variable size field. All transaction upto 1MB
Block Header
• Version: 4 byte indicating the version number of Bitcoin Protocol used in the network and typically contains
value 1.

• Previous Hash Pointer: First block of a Blockchain is called Genesis Block and has no parent. 32-byte field
containing 256-bit hash address of the previous block header and previous block’s hash.

• Merkle root: 32-byte field represents the aggregate of all the hash values of the transactions into a 256-bit
single hash value.

• Timestamp: 4-byte field contains the timestamp of the current block to arrange the block chronologically.

• Nonce: 4-byte field containing 32-bit random value that is altered to achieve different level of difficulty.
Calculated using trial and error method.

• Target/Bits: 4-byte field containing the target difficulty of the current block. i.e how difficult the target hash
will be to find.
Merkle Tree
• Merkle trees, also called hash trees, are a type of data structure used in computer science
and cryptography. They are used to efficiently verify the integrity of large sets of data,
such as a blockchain.

• A Merkle tree is a binary tree, where each leaf node contains a hash of a data block, and
each non-leaf node contains the hash of its child nodes. The root of the tree is called the
Merkle root, and it is a single hash that represents all the data in the tree.
Constructing a Merkle Tree
• Split the data into blocks.
• The leaf nodes of the tree are then the hashes of these blocks.
• Hashes of all the other blocks will be combined from their immediate branches and
generate one large hash value.
Merkle Tree- Purpose
• Merkle Tree has two major purposes:
• Efficiently verifying that a large amount of data is unchanged and finding exactly where
any changes may have occurred.
• Efficiently proving that a piece of data is present in a larger data set.
Verifying the Data Integrity
• Merkle Trees can be an efficient way to verify the integrity of large quantities of data.
• Simple method: generate the same tree and then compare the top hash from this to the
top hash from the original data. If they match, then the entire data is a match, and if they
differ, then there is some inconsistency in the data.
Proving Data Presence
• Merkle Tree helps to efficiently prove that a piece of data is present in the original set.

• To prove that we have block C, we would

provide the hash for this block and hashes
“4” and “12”.
• The other system can then combine our
hash for block C with the provided hash
“4” to produce hash “34”, then combine
this with hash “12” to produce hash
“1234”.
• If this matches, we have successfully
proven that we have block C.
 Blockchain Demo
[Link]
[Link]
Layers of Blockchain
• includes
• Smart contracts, decentralized applications (dApps), and
other software that run on top of the Blockchain
network
Guarantees that all nodes in the network concur on the validity
of each transaction. Uses PoW, PoS to validate and add
transactions.
Connects nodes, propagates transactions, and distributes
data throughout the network

Transaction details are stored.

Physical components that support the Blockchain network, such

as computers and servers
Types of Blockchain
• There are four major types of Blockchain architecture grouped under two categories.
 Public Blockchain
It is a permissionless distributed ledger on which anybody can join and conduct
transactions.
It is a non-restrictive form of the ledger in which each peer has a copy. This also
means that anyone with an internet connection can access the public Blockchain.
This user has access to historical records and the ability to perform mining
operations.
These complex computations must be performed to verify transactions and add
them to the ledger.
On the blockchain network, no valid record or transaction may be altered. Because
the source code is usually open, anybody can check the transactions, uncover
problems, and suggest fixes.
 Advantages & Disadvantages of Public Blockchain
Advantages
Trustable: Public Blockchain nodes do not need to know or trust each other because the proof-of-work procedure ensures
no fraudulent transactions.

Secure: A public network can have as many participants or nodes as it wants, making it a secure network. The higher the
network's size, the more records are distributed, and the more difficult it is for hackers to hack the entire network.

Open and Transparent: The data on a public blockchain is transparent to all member nodes. Every authorized node has
a copy of the blockchain records or digital ledger.
Disadvantages
Lower TPS: The number of transactions per second in a public blockchain is extremely low. This is because it is a large
network with many nodes which take time to verify a transaction and do proof-of-work.

Scalability Issues: Its transactions are processed and completed slowly. This harms scalability. Because the more we try
to expand the network's size, the slower it will become.

High Energy Consumption: The proof-of-work device is expensive and requires lots of energy. Technology will
undoubtedly need to develop energy-efficient consensus methods.
Uses of Public Blockchain
• Voting: Governments can use a public blockchain to vote, ensuring
openness and trust.
• Fundraising: Businesses or initiatives can use the public Blockchain to
improve transparency and trust.
 Private Blockchain
• A blockchain network operates in a private context, such as a restricted network,
or is controlled by a single identity.
• While it has a similar peer-to-peer connection and decentralization to a public
blockchain network, this Blockchain is far smaller.
• They are often run on a small network within a firm or organization rather than
open to anybody who wants to contribute processing power.
• Permissioned blockchains and business blockchains are two more terms for them.
 Advantages & Disadvantages of Private Blockchain
Advantages
Speed: Private Blockchain transactions are faster. This is because a private network
has a smaller number of nodes, which shortens the time it takes to verify a
transaction.
Scalability: You can tailor the size of your private Blockchain to meet your specific
requirements. This makes private blockchains particularly scalable since they allow
companies to easily raise or decrease their network size.
Disadvantages
Trust Building: In a private network, there are fewer participants than in a public
network.
Lower Security: A private blockchain network has fewer nodes or members, so it is
more vulnerable to a security compromise.
Centralization: Private blockchains are limited in that they require a central Identity
and Access Management (IAM) system to function. This system provides full
administrative and monitoring capabilities.
Uses of Private Blockchain
• Supply Chain Management: A private blockchain can be used to
manage a company's supply chain.
• Asset Ownership: A private blockchain can be used to track and verify
assets.
• Internal Voting: Internal voting is also possible with a private
blockchain.
 Hybrid Blockchain
• Organizations who expect the best of both worlds use a hybrid
blockchain, which combines the features of both private and public
blockchains.
• It enables enterprises to construct a private, permission-based system
alongside a public, permissionless system, allowing them to choose
who has access to certain Blockchain data and what data is made
public.
• In a hybrid blockchain, transactions and records are typically not
made public, but they can be validated if necessary by granting access
via a smart contract.
 Advantages & Disadvantages of Hybrid Blockchain
Advantages
Secure: Hybrid Blockchain operates within a closed environment, preventing
outside hackers from launching a 51 percent attack on the network.
Cost-Effective: It also safeguards privacy while allowing third-party contact.
Transactions are inexpensive and quick and scale better than a public blockchain
network.
Disadvantages
Lack of Transparency: Because information can be hidden, this type of blockchain
isn't completely transparent.
Less Incentive: Upgrading can be difficult, and users have no incentive to
participate in or contribute to the network.
Uses of Hybrid Blockchain

• Real Estate: Real-estate companies can use hybrid networks to run

their systems and offer information to the public.
• Retail: The hybrid network can also help retailers streamline their
processes.
• Highly Regulated Markets: Hybrid blockchains are also well-suited to
highly regulated areas like the banking sector.
Consortium Blockchain
• In the same way that a hybrid blockchain has both private and public
blockchain features, a Consortium blockchain, also known as a
federated blockchain, does.
• However, it differs because it involves various organizational members
working together on a decentralized network.
• Predetermined nodes control the consensus methods in a consortium
blockchain.
• It has a validator node responsible for initiating, receiving, and
validating transactions. Transactions can be initiated or received by
member nodes.
 Advantages & Disadvantages of Consortium Blockchain

Advantages
Secure: A consortium blockchain is more secure, scalable, and efficient
than a public blockchain network. It, like private and mixed blockchains,
has access controls.
Disadvantages
Lack of Transparency: The consortium blockchain has a lower degree of
transparency. If a member node is infiltrated, it can still be hacked, and
the Blockchain's rules can render the network inoperable.
Uses of Consortium Blockchain
• Banking and Payments: A consortium can be formed by a group of
banks working together. They have control over which nodes will
validate transactions.
• Research: A consortium blockchain can be employed to share
research data and outcomes.
• Food Tracking: It is also apt for food tracking.
Property Public Blockchain Private Consortium
Participants Any Restricted Enterprises
Permission to read data None Centralized/Selective Consortium Members
Authority
Permission to write data None Centralized/Selective Consortium Members
Authority
Permission to create node All Participating nodes Centralized/Selective Consortium Members
Authority
Transaction Throughput Low Very High High
Network Delay High Very Low Low
Consensus Permissionless Permissioned Permissioned
Decentralization Fully Decentralized Partially Partially
Consensus Mechanism PoW,PoS PBFT PBFT, FBA
Application Bitcoin, Ethereum Supplychain Banking, Finance, Supply
chain