MC4013 Cryptocurrency and blockchain technologies

UNIT 4 HYPERLEDGER
Hyperledger Fabric:
Introduction - Fabric v/s Ethereum – Hyperledger Iroha - Features of Iroha.
Hyperledger Sawtooth:
Components of sawtooth - Proof of Elapsed time.
Introduction
What is Hyperledger Fabric?

Hyperledger Fabric is an open-source enterprise-grade framework.

It relies on permissioned distributed ledger technology to provide much-needed
applications and solutions.
As it is open-source, anyone can join the project and contribute to it. At the
core, Hyperledger Fabric is configurable and modular. This means that
enterprises can work seamlessly using the framework. All of these desirable
features make Hyperledger Fabric a great choice!
Hyperledger allows the components to be plug-n-play.

It is a private and permissioned Blockchain system which means Unlike, in

Permissionless(or public network) systems that allow unknown identities to
participate in the network, the members enroll through Membership Service
Provider (MSP).

It also offers the ability to create channels, allowing a group of participants to

create a separate ledger of transactions.

Since Fabric is the permissioned Blockchain it has some major advantages over
other blockchain systems.

Key Benefits of Hyperledger Fabric

Hyperledger Fabric Model

Following are the key features of Hyperledger Fabric that fulfill its promise of
customizable enterprise Blockchain
 Assets: Enable the exchange of monetary value over the network
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 Chaincode: Partitioned from transaction ordering, limiting the required

levels of trust and verification across node types, and optimizing
network scalability and performance
 Ledger Features: Encodes the entire transaction history for each
channel, and includes SQL-like query capability Privacy through
 Channels: Enable multi-lateral transactions with the high degrees of
privacy and confidentiality
 Security & Membership Services: In Permissioned membership
participants know that all transactions can be detected and traced by
authorized regulators and auditors
Consensus: Allow network starters to choose a consensus mechanism that best
represents the relationships that exist between participants.
Participants in Hyperledger Blockchain Network
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Fabric Architecture
 Blockchain developer codes Application and Smart Contract
 He deploys the app on a server and smart contract on a peer
using DEPLOY
 A registered user interacts with the app sending order (INVOKE) or
retrieving information (QUERY) through the smart contract
 Smart contract can emit an event subscribed by the app
How Hyperledger Works?

Hyperledger Fabric was designed to be a truly modular, scalable and secure

foundation for industrial Blockchain solutions. Maybe the most notable change
in the upgrade from Fabric version0.6 to Fabric 1.0 is that the peers are now
decoupled into two separate runtimes with three distinct roles.
Types of Peers
1. Committer peer: Commits transactions, maintains ledger and state
2. Endorsing peer: Receives a transaction proposal for endorsement,
responds granting or denying endorsement
3. Ordering peer: Approves the inclusion of transaction blocks into
the ledger and communicates with peer and endorsing peer nodes.

Transaction Life-cycle of Hyperledger Fabric

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Use Case on Hyperledger Fabric

Hyperledger can host almost any type of business network. With the scalability
as an advantage, a number of use cases are being developed on the Fabric.
Use Case: Interoperability of Assets
Description: Interoperability of assets means the exchange of assets among a
group of people.
Problem statement: If an organization requires 20,000 units of asset B but
instead owns 10,000 units of asset A, it needs a way to exchange asset A for
asset B. Though the current market might not offer enough liquidity to fulfill
this trade quickly, there might be plenty of liquidity available between asset A
and asset C, and also between asset C and asset B.
Now there are market limits on direct trading between A & B, so what can be
the probable solution?
Solution: In this case, a chain network connects buyers with “buried” sellers,
finds the best match (which could be buried under several layers of assets), and
executes the transaction. So basically a business network of a group of
individuals can be set up on the Hyperledger Fabric and the assets can be
exchanged among the buyer and the sellers.

So the strategic goals of Hyperledger to build business solutions on blockchain

technology sharply separates it from currency based blockchains. This might be
mundane to some, but also more straightforward to the technology.
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Hyperledger vs Ethereum

Features Hyperledger Ethereum

Platform for B2C
Preferred platform for
Purpose businesses and generalized
B2B businesses
applications
Confidential
Confidentiality Transparent
transactions
Mode of Peer Private and Public/Private and
Participation Permissioned Network Permissionless Network
Pluggable Consensus PoW Algorithm:
Consensus
Algorithm: No mining Consensus is reached by
Mechanism
required mining
Programming Chaincode written in Smart Contracts written in
Language Golang Solidity
No built-in Built-in cryptocurrency
Cryptocurrency
cryptocurrency called Ether
What is Ethereum?
Ethereum is an open source distributed public blockchain network. It
allows decentralized apps to be built on it with the help of Smart Contract
functionality.

Vitalik Buterin developed Ethereum

as an extension to the original core
blockchain concept. He improvised
Bitcoin’s protocols to support
applications beyond currency
issuance. Its major breakthrough is
the ability to easily write and deploy Smart Contracts. These are actually bits of
code that are executed on the network. Hence, this platform could help
developers to write programs for building decentralized organisations.
Anyone across the globe can connect with Ethereum blockchain and can
maintain the current state of the network. Therefore, Ethereum is also widely
referred to as the “World Computer”.

What is Hyperledger?
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“Hyperledger is an open source development project to benefit an ecosystem of

Hyperledger based solution providers and users. It is focused on blockchain
related use cases that will work under a variety of industrial sectors.“ – Brian
Behlendorf (Executive Director, Hyperledger)

Every business and industry is distinctive in their own way and the applications
serving to their needs must be personalized. The Ethereum Blockchain works
with a very generalized protocol for everything that runs on its network. You
can think of Hyperledger, on the other hand, as a software for people to develop
their own personalized blockchains tending to the needs of their businesses.
Hyperledger is an open source collaborative project hosted by The Linux
Foundation. It is neither a tool nor a platform like Ethereum. It’s an umbrella
strategy with multiple platforms for developing enterprise solutions.

Hyperledger vs Ethereum: Key Differences

Purpose:
The most essential distinction between Hyperledger and Ethereum is the intent
they are designed for.
Ethereum runs the Smart Contracts on the EVM for applications that are
attributed to being decentralized and are for mass consumption.
On the other hand, Hyperledger leverages blockchain technology for business.
It is designed to support pluggable implementations of components delivering
high degrees of confidentiality, resilience and scalability. Hyperledger has a
modular architecture and provides a lot of flexibility in how you want to use it.
Its extensible architecture provides futuristic solutions for enterprise
blockchains.

Confidentiality:
Let’s say Andy runs a pie manufacturing industry on blockchain.
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Through Hyperledger, it is possible for Andy to sell pies to Bobby at a

discounted price while keeping their agreement confidential from Andy’s other
customers.

Such an arrangement would not be possible if Andy was using Ethereum for the
same. Because Ethereum is absolutely transparent and every transaction is
visible to everyone on the network.
Thus, Hyperledger allows confidential transactions. Consequently, it gives
businesses the flexibility and security to make transactions visible to select
parties having correct encryption keys.

Mode of Peer Participation:

Let’s take a look at the mode of operation of Hyperledger vs Ethereum.

Ethereum can be either public or private without any permissions whereas
Hyperledger is a private and permissioned network.
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This means that in Ethereum, anybody can participate in the network at any
time. But Hyperledger has a predefined community of participants, and access
to the network is restricted only to them. One requires permission to join the
network. This mode of participation has a profound impact on how consensus is
reached.

Consensus Mechanism:

With Ethereum, all the network participants (or nodes) have to reach consensus
over all the transactions. This is irrespective of whether a node takes part in a
particular transaction or not. Presently, Ethereum’s establishes its consensus
mechanism by mining based on the Proof-of-Work (PoW) algorithm. All the
nodes have to agree upon a common ledger and all of them have access to all
entries ever recorded.
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In contrast, Hyperledger allows nodes to choose between No-op (no consensus

needed) and an agreement protocol (PBFT) whereby two or more parties can
agree on a key in such a way that both influence the outcome. This precludes
undesired third parties from forcing a key choice on the agreeing parties.
Thus, Hyperledger has a fine-grained control over consensus and restricted
access to transactions which results in improved performance scalability and
privacy.

Programming Language:
Another key difference is the use of Smart contracts in Ethereum, written in a
high-level contract-oriented language called Solidity.
However, in Hyperledger you can use the term “chaincode” as a synonym for
smart contract. A chaincode typically handles business logic agreed to by
members of the network, so it may be considered as a smart contract. These
chaincodes are written in Golang, a programming language created by Google.

Cryptocurrency:
Hyperledger doesn’t require cryptocurrencies for transactions. It doesn’t have a
built-in native cryptocurrency like Ethereum’s token, Ether. Hence, there is no
requirement of mining at all. This allows for scalable consensus algorithm that
is capable of handling high transaction rates required by most enterprise
applications. But, looking at both sides of the coin (or token, eh?)
since Ethereum has its own ether, it can be advantageous over Hyperledger in
the use cases which require a cryptocurrency.
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Since Hyperledger is also programmable, it can leverage the embedded logic in

chaincode to automate business processes across your network. You could also
develop custom tokens via chaincode, if required.

Hyperledger Iroha

Iroha is for building secure, robust, and trusted decentralized applications using
the Byzantine Fault-Tolerant (BFT) Consensus algorithm. It provides a set of
fast commands and queries for common operations for digital asset identity
management. Its applications include interbank settlements and logistics.

It is useful for apps like central bank digital currencies, national IDs, logistics
and interbank settlement.

Iroha does not have any native cryptocurrency; instead, its interaction with the
system is permissioned so that only people with access can participate in the
system. Moreover, queries are permissioned, enabling data access control. With
prebuilt commands, Hyperledger Iroha allows users to do tasks like creating and
transferring digital assets.

Iroha is based on a consensus algorithm called Byzantine Fault Tolerant

Algorithm which offers high-performance and allows transactions with low
latency. By limiting the attack vector, Iroha improves the overall security of the
system.

Hyperledger Iroha Network

Hyperledger Iroha network consists of distributed peers/nodes server where
each peer/node has the same identical blockchain which is stored in the database
of that peer/node for storing the information and every peer/node maintains the
same identical protocol to keep the blockchain running into a secured,
distributed and decentralized way.
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Hyperledger Iroha Network

To achieve reliability into the network involving multiple unreliable nodes, a

consensus algorithm is used to achieve agreement on a single data value among
distributed processes or systems.
To preserve a consistent state among the peers within a distributed,
decentralized, private and permissioned network, Iroha uses its own consensus
algorithm called Yet Another Consensus (aka YAC).
You can check out a video with a thorough explanation of the principles of
consensus and YAC implemented in Iroha.
Unlike other Hyperledger frameworks, in Hyperledger Iroha clients need
interaction with any one of the peers and that peer will proceed other operations
with other peers. An Iroha peer has a Torii gateway for client to peer
communication with the help of gRPC system and has a separate internal port
for peer to peer communication.

Applications of Hyperledger Iroha

Using Iroha, a business can create and manage simple digital assets like any
standard cryptocurrency or complex ones like indivisible rights, certificate
authenticity, and patents.

Certifications
Iroha allows building certifying identities, which enables granting as well as
verification of various certificates issued to individuals by educational and
healthcare institutes. A candidate's university degree can be stored on the
blockchain, and any qualifying hiring agency or employer can be given
verification rights to authenticate the candidate's information during the hiring
process.

Digital Avatars
Iroha can also be used to create digital avatars of real-world assets that can be
transacted with zero or low transaction fees. For instance, the current owner of
a vintage car can create a digital asset that represents the vintage car on the
blockchain and then link its ownership to themself. To transfer ownership, they
can then create an offer using a multi-signature transaction, which includes the
cost of transfer in a particular currency. The interested counterparty can accept
the offer on the blockchain and complete the transaction by transferring the
currency to the present owner, and receive the ownership of the car in return.
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Know Your Customer (KYC)

Hyperledger Iroha can also be used in the identity management process needed
for Know Your Customer (KYC) requirements. KYC is a standard requirement
in the financial services industry that establishes guidelines for banks and
investment firms to know their client. For example, KYC helps to establish an
understanding of a client's risk tolerance for investment purposes.
KYC also involves accepting the proper identification and corporate
resolutions during the account opening process as well as understanding the
type of industry and how a business earns its income. KYC is critical to
financial firms in that it helps them ensure their customers are treated properly
but also is designed to prevent fraud and money laundering.
As a result, there is a significant amount of documentation involved in the
KYC process. Instead of a user submitting KYC documents to each institute
separately, they can create the necessary identity on the blockchain, which can
be accessed by the various qualifying institutes as needed for KYC compliance.

Smart Contracts
Iroha offers smart contracts, which are self-executing contracts that contain
terms of an agreement between two parties that is written in code. If one party
satisfies their end of the agreement through the blockchain network, the smart
contract automatically executes the other end of the agreement.4
In this way, Iroha can offer an alternative to Ethereum’s smart contracts, which
may require writing cumbersome code. The same can be achieved quickly and
simply by using the built-in commands in Iroha to complete common tasks
more quickly and with lower complexity and lower risk.

Example of Hyperledger Iroha

Bakong is Cambodia's mobile payment and banking software application (app)

and is the first retail payments system that uses blockchain technology. Bakong
is sponsored by the National Bank of Cambodia, which is the country’s central
bank and is built on Hyperledger Iroha's network.
Bakong allows businesses and individuals the ability to transfer money and buy
from merchants using a smartphone app. Merchants can also make cashless and
secure payments, while banks can make interbank transfers at a lower cost than
typical wire transfers.

Bakong—launched in 2019—was developed by Soramitsu, which is a global

technology company that develops blockchain-based solutions including
domestic and cross-border payment systems.Bakong has since partnered with
more than 20 financial institutions.
Key Features of Iroha Blockchain System
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 Assets and identity management

 Decentralized finance and decentralized exchange
 Role-based access control, Multi signature transactions
 Built-in commands for asset management
 No costly mining and low transactions latency
 Clients need interaction with any one of the peers and that peer will
proceed other operations
 Private and permissioned network

Features of the Hyperledger Iroha.

 It supports programming languages like JS, Java, iOS, Python for writing
applications on a range of platforms like mainframe and mobile.
 It is compatible with operating systems like Linus, Windows, and
MacOS.
 It supports multiple keys or multi-signature functionalities for
transactions in case it requires many signatures in transaction settlement.
 It is an easy to adopt technology for the developer to adopt because of its
modular and plug-in design.
Hyperledger Sawtooth

Hyperledger Sawtooth is an enterprise solution for building, deploying, and

running distributed ledgers (also called blockchains). It provides an extremely
modular and flexible platform for implementing transaction-based updates to
shared state between untrusted parties coordinated by consensus algorithms.
Hyperledger Sawtooth is an open source project under
the Hyperledger umbrella, and works as an enterprise level blockchain system
used for creating and operating distributed ledger applications and networks
particularly for use by enterprises.

 Hyperledger Sawtooth is an open source enterprise blockchain-as-a-

service platform that can run customized smart contracts without needing
to know the underlying design of the core system.
 Hyperledger is an umbrella blockchain development group sponsored by
organizations such as the Linux Project, IBM, Intel, and SAP.
 Hyperledger Sawtooth supports a variety of consensus algorithms,
including Practical Byzantine Fault Tolerance (PBFT) and Proof of
Elapsed Time (PoET)

How Hyperledger Sawtooth Works

Sawtooth enables selective permissions – that is, one can easily deploy certain
select clusters of Sawtooth nodes with different permissions on the same
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blockchain. The ledger stores the necessary details about the permissions,
nodes and identities.
The operating performance of the Sawtooth network is boosted by the
mechanism of parallel transaction execution, which has an upper hand over the
serial execution mechanism that often is a bottleneck when dealing with high
volumes of transactions on many popular cryptocurrency networks.
Sawtooth supports Proof of Elapsed Time (POET) consensus mechanism that
offers benefits of low resource utilization and low energy consumption, and is
commonly used on the permissioned blockchain networks to decide the mining
rights or the block winners on the network. (For more, see Proof of Elapsed
Time.)2
Some real-world examples using Sawtooth-based applications include
Sawtooth Supply Chain, which helps an enterprise keep track of contextual and
logistics-related information of an asset represented on the
blockchain, Sawtooth Marketplace, which helps participants trade in specified
quantities of digital assets on the blockchain, and Sawtooth Private UTXO,
which facilitates digital asset creation and trading, including off-ledger and
privately-held transactions.

Architecture of Hyperledger Sawtooth

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1. Clients

Hyperledger Sawtooth follows an asynchronous client/server pattern. The

pattern is as follows:

 Clients connect to the server and send requests.

 For each and every request, the server responds with 0 or more replies.
 Clients can send multiple requests and need not wait for a reply from
the server.
 Servers can also send multiple replies and need not wait for new
requests.
2. Rest API

Hyperledger Sawtooth provides a pragmatic RESTish API for clients to interact

with a validator using common JSON/ HTTP standards. It is a separate process
which allows for the submission of transactions and reading of blocks with a
common language-neutral interface. The REST API mostly treats the validator
as a black box for submitting transactions and fetching results. It is
comprehensively documented using the OpenAPI specification. It acts as a
single source of truth which documents every aspect of API. It is readable by
both machines and humans. In order to improve quality, the REST API supports
a few common HTTP status codes. Some of the codes are 400, 404, 500, 503,
201, etc. For example, 404 indicates ‘Not Found’ which means the request was
well formed but there is no resource. 503 indicates ‘Service Unavailable’ which
means REST API is unable to contact the validator.
REST API uses a JSON envelope to send metadata back to clients in an easy
and customized manner. If anything goes wrong while processing the request,
the REST API sends back a response envelope with one property: “error.” It
contains three values such as code, title, and message and these explain the
nature of the problem that has occurred. The code is fixed and can’t be altered
whereas the title and the message can be reworded. It also supports query
parameters to help specify how a request to a validator should be formed. Some
parameters have their own specific endpoints and not every endpoint supports
every query. The endpoints include RESTful references to resources available
in the Sawtooth ledger that may be of interest to clients. These might include
blocks, transactions, and RESTish metadata.
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3. Transaction Processors

Transaction processors handle business logic and they have the authority to
allow or decline transactions from being added to the state. When a client
interacts with the network by sending a transaction, these validate the
transactions, apply the changes, and add them into the next block. Validator
nodes make sure if the signature of a transaction is valid.

It also allows adding additional logic in the transaction processor to check more
specific requirements. For a transaction processor to process transactions,
transaction handlers need to be added. Handlers can be summoned in two ways:
one is the “apply method” and the other one is the metadata method. Metadata
helps connect a handler to the processor. However, the bulk of the handler is
made up of apply and its other helper functions.

A transaction processor comprises of two top-level components such as :

 Processor class: Software Development Kit provides a general-

purpose processor class.

 Handler class: It is application-dependent. It contains business logic

for a specific set of transactions. As the transaction processor is a long
running process, it requires an entry point. At the entry point, the
transaction processor class is provided with the address to connect with
the validator and the handler class.

4. Consensus engine

The consensus API of Sawtooth has been entirely redesigned. It has been
moved to a separate process termed the ‘consensus engine.’ It is an interface
which includes the feature of language independence for consensus algorithms.
Consensus engines enable more consensus option for Sawtooth. Network
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deployment tools have been updated. Consensus engine operates on its own
separate processes like REST API and transaction processors.

There are three processors which run in this component:

 Consensus.BlockPublisher– It is equipped only with read-only access

and helps extend the chain by creating candidate blocks. The three
actions which are taken are initialization, checking, and finalizing.

 Consensus.BlockVerifier– It provides block verification functions to

the Block Validator. It helps in verifying if the candidate block was
published by following consensus rules.

 Consensus.ForkResolver– It helps in selecting the next block which

can be the chain head.

5. Validator

In Hyperledger Sawtooth, blocks and batches are validated in a similar way by

authorized nodes. The block validation process checks for on-chain transaction
permissions to verify the entity who is allowed to issue blocks and batches.
Following this, the on-chain block validation rules added through setting
proposals are applied to the block. These batches are then sent to the transaction
scheduler. The network layer is responsible for communication between the
validators of a Sawtooth network. It performs activities such as interconnecting
REST API, transaction processors, and clients. Apart from this, it performs the
major functions of discovering peers on the network, handling transactions,
managing blocks, and working in support of the consensus engines.

Sawtooth supports both serial and parallel scheduling of transactions.

Transaction handling and execution in Sawtooth efficiently and correctly
handles transactions which modify the same state addresses and also
transactions within the same block. Sawtooth has no block level restrictions.
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This helps enhance the performance of transactions and prevents double

spending but still allows multiple transactions which alter the same state values
to appear in a single block. The sawtooth validator process has two major
components such as:

 Chain controller – It maintains a pointer to the last block in the

current chain. It determines whether a chain head should be updated. It
creates a scheduler to calculate new state for the block being published
with a Merkle hash. Merkle hash is compared to the state root of the
block header. If they match, the block is considered valid.

 Block manager and publisher – It is responsible for creating new

candidate blocks. Only valid transactions are added to the next
candidate block.

What is Proof of Elapsed Time (PoET)?

PoET is a consensus algorithm used in a permissioned blockchain network

to decide mining rights and next block miner. FYI, a permissioned
blockchain network requires participants to prove their identity, whether they
are allowed to join. Hence, it needs permission (or invitation) to join
the decentralized network as a new participant ( or node).
The PoET algorithm was developed by Intel Corporation, the processor chip
giant, in early 2016. Intel associated with Linux Foundation in the development
of Hyperledger Sawtooth. They aimed to build a highly scalable private
blockchain network.
Intel introduced PoET as a time-lottery-based consensus
algorithm secured by cryptography. The concept basically motivates the
idealogy of giving equal chances of getting a reward like a lottery.
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PoET Mechanism assigns an amount of time to each node in the network

randomly. The node must sleep or do another task for that random wait time.
Whichever node gets the shortest waiting time wakes up and add their block
to the network. Later, the new update information floods among other
network participants.

The Proof of Elapsed time in blockchain needs to ensure 3 significant factors

for this process to work:

 Ensure that the node or network participant gets the random waiting
time indeed.
 Check if they are not choosing the shortest waiting time on purpose.
 Verify if the node has completed the given waiting time or not.

Let’s dig a bit deeper into working on the Proof of Elapsed Time mechanism.

How does the Proof of Elapsed Time (PoET) Algorithm work?

The time-lottery concept allows everyone in the network an equal chance of

winning the reward and being able to forge a new block to the network.
The PoET controller maintains a stopwatch for each participating node. It
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ensures their waiting time ended, and now they can forge a new block. When
the node wakes up, it submits the block and a cryptographic test to the PoET
controller for verification.
A newly proposed block selects if the controller approves the newly proposed
block by the first woken up node. Else it gets discarded. And then, the selection
process of assigning waiting time starts again.
Let’s break down the process more accurately into steps.

Selection Process

 First,each participating node has to share its certificate by Intel

Software Guard Extension (SGX), which ensures its validity to
generate a new block in the network. After that, they are eligible to get
a timer object.
 The numbers assigned to each node as a timer object (waiting
countdown time) by Intel’s random number generation instruction,
RAND. It generates difficult to detect random numbers.
 Now, the time object given to each participating node activates.
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Generation Process

 Afterthe time object ends and the node wakes up, it’s eligible to forge a
new block to the network.
 The active node generates the hash (using a hash function like SHA-256)
of its block of transactions and submits it for acceptance. It doesn’t
require showing computation work done by the node.
 Afterward, the update gets flooded to the network.
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Therefore ends the iteration of mining a new block in a permissioned

blockchain network using the PoET consensus mechanism.

Proof of Work (PoW) VS Proof of Elapsed Time (PoET)

Proof of Work (PoW) demands computation work from nodes (or miners) to
become eligible for adding a new block. On the other hand, PoET randomly
selects the among participating nodes by distributing waiting time objects. Here,
each node is equally eligible to mine a new block.
PoET is way more time and energy-efficient than PoW. It is backed by one of
the renowned technology giants, Intel corporation, which makes it more trusting
and reliable.

Benefits of Proof of Elapsed Time (PoET)

Following are the advantages of the PoET consensus mechanism:

 PoET can go up to a million transactions per second.

 It is highly energy-efficient and easily scalable.
 It’s a block generation consensus algorithm, unlike proof of stake
(PoS).
 PoET is for privately controlled spaces like business organizations.
 It ensures the same opportunity for network participants with time
object and activation.
 As it’s a permissioned blockchain network, the process of selecting
validators ensures network security against cyber attacks.

Limitations of Proof of Elapsed Time (PoET)

Following are the disadvantages of the PoET consensus mechanism:

 PoET is a permissioned and closed network, unlike Bitcoin and

Ethereum.
 The mechanism highly depends on tools by Intel technology which
might raise compatibility issues with other tools later.