CUM

FUNCTIONEAZA
BLOCKCHAIN

Curs 2
WHAT IS
BLOCKCHAIN

• Blockchain = shared, distributed, and immutable

ledger that records the history of transactions
• It establishes trust, accountability, and transparency.
Blockchain stores information in batches
called blocks. These blocks are linked
together in a sequential way to form a
continuous line.
A chain of blocks.
A blockchain ☺
Each block is like a page of a ledger or a
record book.
BLOCKS
Each block has three elements:
• Data: The type of data depends on what
the blockchain is being used for. In
Bitcoin, for example, a block’s data
contains the details about the transaction
including sender, receiver, number of
coins, and so on.
• Hash: A hash identifies a block and all its
content, in a unique way (like a
signature).
• Hash of previous block: This piece is
precisely what makes a blockchain!
Because each block carries the
information of the previous block, the
chain becomes very secure.
EXAMPLE

• Here’s an example of how a bunch of blocks come together in a blockchain. Say you have three
blocks.

Block 1 contains: Block 2 contains: Block 3 contains:

Data: 10 Bitcoins from Fred Data: 5 Bitcoins from Jack Data: 4 Bitcoins from Mary
to Jack to Mary to Sally
Hash (simplified): 12A Hash (simplified): 3B4 Hash (simplified): C74
Previous hash (simplified): Previous hash: 12A Previous hash: 3B4
000
HOW DOES A
BLOCKCHAIN
SECURE ITSELF?
Hashing

Proof of Work (PoW)

Peer-to-peer distribution
HASHING

• Tampering with a block within a blockchain causes the hash of the block to change. That
change makes the following block, which originally pointed to the first block’s hash, invalid. In
fact, changing a single block makes all the following blocks invalid. This setup gives the
blockchain a level of security.
• NOTE: Using hashing isn’t enough to prevent tampering. That’s because computers these days
are super fast, and they can calculate hundreds of thousands of hashes per second. Technically,
a hacker can change the hash of a specific block and then calculate and change all the hashes of
the following blocks in order to hide the tampering.
PROOF OF WORK

• A proof-of-work (PoW) is a mechanism that slows down the creation of the blocks.
• In Bitcoin’s case, it takes about ten minutes to calculate the required PoW and add a new block
to the chain. This timeline makes tampering with a block super difficult because if you interfere
with one block, you need to interfere with all the following blocks.
• A blockchain like Bitcoin contains hundreds of thousands of blocks, so successfully
manipulating it can take over ten years!
PROOF OF WORK

• Proof of Work requires the people who own the computers in the network to solve a complex
mathematical problem to be able to add a block to the chain. Solving the problem is known as
mining, and ‘miners’ are usually rewarded for their work in cryptocurrency.
• But mining isn’t easy. The mathematical problem can only be solved by trial and error and the odds
of solving the problem are about 1 in 5.9 trillion. It requires substantial computing power which
uses considerable amounts of energy. This means the rewards for undertaking the mining must
outweigh the cost of the computers and the electricity cost of running them, as one computer
alone would take years to find a solution to the mathematical problem.
PROOF OF STAKE

• Consensus protocols - saves substantial computing power resources because no mining is

required. This means that the majority of “nodes” (or computers in the network) must agree
that the transaction is valid.
• Smart contracts - which automatically execute transactions when certain conditions have been
met.
PEER TO PEER DISTRIBUTION

• Blockchains don’t use a central entity to manage the chain.

• Instead, they use a peer-to-peer (P2P) network.
• In public (permissionless) blockchains like Bitcoin, everyone is allowed to join.
• Each member of the network is called a node or a validator. When someone joins the network,
they get the full copy of the blockchain.
WHAT HAPPENS The new block is sent to
everyone in the network.
WHEN SOMEONE
CREATES A NEW
BLOCK/ Each node then verifies the
TRANSACTION IN block and makes sure it hasn’t
been tampered with.
THE NETWORK

If everything checks out, each

node adds this new block to
their own blockchain.
All the nodes in this process create a
consensus. They agree about which blocks
are valid and which ones aren’t. The other
nodes in the network reject blocks that are
tampered with.
• https://www.youtube.com/watch?v=SSo_EIwHSd4
Debunking 8 Myths
about Blockchain
Technology
 1

Blockchain and
Bitcoin are the same
Bitcoin and Blockchain are not the same!

What is it? A crypto-currency A ledger

To simplify & increase the speed of transactions To provide a low cost, safe & secure
Main Aim without much of government restrictions environment for peer-to-peer transactions

Trade Bitcoin is limited to trading as a currency Blockchain can easily transfer anything from
currencies to property rights of stocks

Scope The scope of bitcoin is limited The blockchain is more open to changes & hence has
the backing of many top companies

Strategy Bitcoin focuses on lowering the cost of influencers & Blockchain can be adapted to any change & hence it
reduces the time of transactions but is less flexible can cater to different industries

Status Bitcoin likes to be anonymous & hence even though As blockchain works with various businesses it should
we can see the transactions in the ledger, they are have compliance with KYC & other norms. Hence
numbers which are not in any particular sequence blockchain is very transparent
 2

Blockchain is
Unhackable
Blockchain consumers are often the There are implementation
easiest targets—due to a start-up vulnerabilities introduced when
mentality in which security takes a new applications are built on top
backseat to growth of blockchain.

A majority attack occurs when an actor

owns more than 50% of the network. If they Third-party tools are generally an easier target
exceed 50%,they essentially can process because they have smaller communities and
blocks faster than everyone else—creating fewer resources to secure their code or
their own chains at will. respond to problems. In rare cases we see a
compromise of the implementation itself.
 3

Blockchain will remove

all intermediaries
 Blockchain won't cut out
intermediaries after all
With or without blockchain, national registries will always
require intermediaries that put the data in and the digital
ownership platform will always require middlemen that
would verify your identity (KYC)
 4

Everyone needs
blockchain
Blockchain is not a
one-size-fits-all solution.
In many circumstances a
blockchain is not needed.
 5

There is only
one Blockchain
Types of Blockchains

Not all blockchains are built for business. Some are permissioned, while others are public.
A permissioned network is critical for a blockchain for business, especially within regulated industries.

Public Consortium Private

Anyone having access to the It is a semi-decentralized type of Unlike public blockchains, there is an
internet can become an blockchain where a blockchain entity who governs and looks after
authorized node by signing in to network is managed by more important things like read, insert,
the blockchain platform. than one organization. update and access permissions.
 6

Blockchain is for
database storage
 Main Differences

BLOCKCHAIN VS BLOCKCHAIN DATABASE

Blockchain is a technology that can be implemented A blockchain database is the combination between a
by many engine providers which ensures the blockchain engine and a database engine that
integrity/immutability of a transaction set of single ensures integrity and immutability of a transaction
structured data. within a single-structured data set.

Provides decentralization, but doesn’t support partial Ensures decentralization as well as traditional user
nodes, doesn’t guarantee data encryption and is not maintenance
designed to store files. supports both partial and full nodes and provides
default encryption regardless of the database type.
Blockchain can only be used stand-alone as a
transactional ledger, not as a storage support în A blockchain database can also store files, can be
enterprise environment, only log some transactions used to support enterprise data architecture &
and doesn’t support permission request-based design and any enterprise software product.
access.
Supports permission request-based access and can
work with any blockchain engine and any database
engine
 7

Blockchain’s application
is only restricted to
Fintech sector
Share of respondents
investing at least
US$5 million in
blockchain initiatives.

In nearly every case, planned spending

of at least US$5 million increased or
stayed the same relative to the prior 12
month period.

Survey question: Thinking specifically of blockchain

technology, approximately how much has your organization
or project invested in the next/prior 12 months?
 8

Transitioning to a blockchain infrastructure

entails the construction of a new
framework from the ground up
Modex provides a lightweight
enterprise middleware fusing
any database and blockchain
technologies to offer:

● data integrity
● immutability
● security at scale
 Remaining challenges of
blockchain adoption

Blockchain has an image Corporates are afraid of the Blockchain is still an

problem disruptive character of blockchain immature technology

Blockchain is too much linked with There are organisations that do not like the idea of Lack of scalability
cryptocurrencies in the mind of many. Especially blockchain and its disruptive character. For some it Limited interoperability
crypto has a negative image that is surrounded is a nightmare thinking they will lose market share Integration with legacy systems
by fraudsters, hackers that are using the or will even become obsolete. Lack of blockchain developers
technology for criminal activities. Still slow
Lack of awareness and understanding
Lack of regulatory clarity and good
governance
Blockchain is a costly technology
 Conclusion

1
Blockchain is not the
answer to every
problem. And even
2
No single blockchain will
solve every problem. 3
Different types of
blockchains are better
suited to different needs
when it is the solution, and circumstances.
it’s not one-size-fits-all.