BlockchainINT R O DUCTION TO DIG ITA L L E DG ER T E CHNOLO GY

Agenda

• What is Distributed Ledger ?

• Cryptography

• What is Blockchain?

• Nodes and mining

• Introduction to Blockchain implementations

What is a Ledger?

Ledger

• Ledger is a record keeping book that stores all transactions of an organization.

• Records contracts, payment, movements of assets etc.

• Organizations can track its economic history.

• As a digital ledger, Blockchain stores the transactional data.

DLT: Distributed Ledger Technology

Embedding Distributed Ledger Technology

• In contrast to today's traditional networks, distributed ledger eliminate the need for central authorities to certify ownership and clear transactions.

• Distributed Ledger Networks can be open by verifying anonymous actors of the network.

• They can be closed and require actors in the network to be already identified.

• Well known existing uses for the distributed ledger technology are public networks like Bitcoin, Ethereum etc.

Centralized Decentralized

• One entity records the data.

• The central entity has all the power.

• Full authority to fine or reward.

• Complete Trust with the entity.

• Everyone records the data.

• Everyone has equal power.

• Fair and transparent system.

• Trustless.

CryptographyT E CHNO LOG IES L E VE R AGED B Y TO DAY’ S B LO CKCHA INS

Cryptography

• Cryptography is the method of disguising and revealing, otherwise known as encrypting and decrypting, information through complex mathematics.

• The information can only be viewed by the intended recipients and nobody else.

• Different cryptographic methods exists and its an evolving field of mathematics.

• Elliptic Curve Cryptography is a public-key cryptography employed by most if not all Blockchain. This is stronger than RSA encryption.

Cryptographic Hash Function

• A cryptographic hash function takes an input (or 'message') and returns a fixed-size alphanumeric string. The string is called the 'hash value', 'message digest', 'digital fingerprint', 'digest' or 'checksum'.

• Most Blockchain use SHA256 (Secure Hashing Algorithm) as hashing function, which gives 256 bits long hash.

Symmetric Key Cryptography

Asymmetric/Public Key Cryptography

Digital Signature Creation

Digital Signatures Verification

Merkle Trees

• A merkle tree, otherwise called a hash tree, is a data structure of hashes used to record data onto a blockchain in a secure and efficient manner. The concept was patented by Ralph Merkle in 1979.

What is Blockchain?

What is Blockchain ?

• Blockchain is a distributed and decentralized ledger that stores data such as transactions between individuals.

• Ledger is publicly shared across all the nodes of its network.

• The storage itself consists of multiple blocks of data chained together like the links of a physical chain.

Blockchain

Blockchain• Each block contains a set of transactions.

• Every block is identified by an unique hash value.

• The unique hash for the block is generated not only from the data we want to store, but also additional metadata about the block such as when it was created and its position in the chain.

• There is also one more very crucial data point used to generate the hash of a new block: the unique hash of the last block is also used as part of the input that the new block uses to generate its hash.

• This means that the last block is an integral part of creating the new block's hash value.

• In addition, the block itself will now have a reference to the last block hash value as part of its public data. Links from block to block are created because each new block makes a reference to the last block's value.

• This reference to the last block's value links the last block to the new one. And as more blocks are created, eventually we have this chain of blocks creating the Blockchain.

Blockchain DemoHT T PS:/ /BLO CKCHA IN.A DESSO.CH

Nodes and Mining

Nodes

• A node is a device on a blockchain network, that is in essence the foundation of the technology, allowing it to function and survive.

Nodes and Mining

• The role of a node is to support the network by maintaining a copy of a blockchain and, in some cases, to process transactions.

• Nodes willingly to contribute their computing resources to store and validate transactions they have the chance to collect the transaction fees and earn a reward in the underlying cryptocurrency for doing so. This is known as mining.

• Processing these transactions can require large amounts of computing and processing power, meaning that the average computer’s capabilities are inadequate.

Consensus Protocols

• As a term, ‘consensus’ means that the nodes on the network agree on the same state of a blockchain, in a sense making it a self-auditing ecosystem.

• Firstly, consensus protocols allow a blockchain to be updated, while ensuring that every block in the chain is true as well as keeping participants incentivized.

• Secondly, it prevents any single entity from controlling or derailing the whole blockchain system. The aim of consensus rules is to guarantee a single chain is used and followed.

Widely used consensus protocols

• Proof of work

• Proof of Stake

• Delegated Proof of Stake

Crypto Wallet

• Blockchain wallet is a computer program that allows to monitor and conduct cryptocurrency. Don’t think of it as a physical item that stores your currency like a regular wallet does.

• In crypto wallets transactions are recorded on the blockchain.

• It can be compared to how an email account works. You might say that you can store and receive cryptocurrencies like emails.

• If someone sends you cryptocurrency, it means it is assigned to the address of your blockchain wallet but recorded in a distributed ledger.

• There are few hardware as well as many software wallets available.

• Hardware wallets are the most secured wallets, as the security is in built in the hardware itself.

BitcoinFIR ST WE L L K NO WN IMPL E MENTATIO N O F DLT

Bitcoin• Bitcoin was developed by Satoshi Nakamoto in 2008.

• Its an open-source, public, Blockchain based decentralized distributed ledger technology.

• Bitcoin network became publicly available in year 2009.

• It is the first widely used implementation of decentralized DLT network.

• Bitcoin cryptocurrency is transacted in the network.

• Bitcoin employs Proof of Work consensus where miner nodes get rewarded to process the transactions.

• Block duration is 10 minutes.

• Millions of nodes support Bitcoin Network.

EthereumA L SO K NO WN A S B LO CKCHA IN 2.0 IMPL EME NTAT IO N

Ethereum• An open-source, public, blockchain-based distributed computing platform

and operating system featuring smart contract (scripting) functionality.

• Uses a modified version of Nakamoto (PoW) consensus via transaction-based state transitions.

• Provides a decentralized Turing-complete virtual machine, the EthereumVirtual Machine (EVM).

• EVM can execute scripts using an international network of public nodes.

• Ether is a cryptocurrency whose blockchain is generated by the Ethereumplatform.

• "Gas", an internal transaction pricing mechanism, is used to mitigate spam and allocate resources on the network.

Ethereum (Contd…)

• Developers use Solidity language to create and publish smart contracts which will run inside Ethereum Virtual Machine.

• Ethereum blockchain applications are usually referred to as DApps(Decentralized Applications), since they are based on the decentralized Ethereum Virtual Machine, and its smart contracts.

• ERC-20 is a technical standard used for smart contracts on the Ethereum Blockchain for implementing tokens.

• ERC-721 Supports creation of non fungible tokens which are used in creating virtual assets.

Ethereum (Contd…)• More than 250 live DApps, with hundreds more under development.

• Digital Signature Algorithms

• Securitized tokens

• Digital Rights Management

• Crowdfunding

• Prediction markets

• Remittance

• Online gambling

• Social media platforms

• Financial exchanges

• Identity systems.

• Medical Data Healthcace

Other Blockchains

Well known Blockchains and Technologies

• Bitcoin Cash – Fork of Bitcoin

• Litecoin

• EOS

• IOTA

• Hyperledger: A project with several open source blockchains and related tools to support the collaborative development of blockchain—based distributed ledgers.

References

• Must watch video for Bitcoin: https://www.youtube.com/watch?v=Lx9zgZCMqXE

• Hands on Blockchain Demo: https://blockchain.adesso.ch

• Elliptic Curve Cryptography: https://www.youtube.com/watch?v=dCvB-mhkT0w

• Good reference to understand Blockchain: https://lisk.io/academy/blockchain-basics

• Ethereum Official site: https://ethereum.org/

https://www.youtube.com/watch?v=Lx9zgZCMqXEhttps://blockchain.adesso.ch/https://www.youtube.com/watch?v=dCvB-mhkT0whttps://lisk.io/academy/blockchain-basicshttps://ethereum.org/

Tools

• Bitcoin Blockchain explorer: https://blockexplorer.com

• Ethereum Blockchain explorer: https://etherscan.io/

• Bitcoin Wallet generator: https://www.bitaddress.org

• Ethereum Wallets: https://www.myetherwallet.com/ and https://metamask.io/

https://blockexplorer.com/https://etherscan.io/https://www.bitaddress.org/https://www.myetherwallet.com/