P.

PRABBU SANKAR AP/CSE 1 VEL TECH MULTI TECH

INTRODUCTION TO BLOCKCHAIN

A blockchain is a peer-to-peer distributed ledger technology. Which is an immutable,

decentralized, encrypted, distributed ledger technology.

What is a blockchain

 A blockchain is a datastructure, which is a growing list of data blocks.

 The data blocks are linked together, such that old blocks cannot be removed or altered.

The name comes from its structure, in which individual records, called blocks, are linked
together in single list, called a chain. Blockchains are used for recording transactions made
with cryptocurrencies, such as Bitcoin, and have many other applications.
Each transaction added to a blockchain is validated by multiple computers on the Internet
(Miners). These systems form a peer-to-peer network.

Key Characteristics / Benefits of Blockchain Technology:

 Open: Anyone can access blockchain.
 Distributed or Decentralised: Not under the control of any single authority.
 Efficient: Fast and Scalable.
 Permanent: Once a transaction is done, it is persistent and can’t be altered.
 Time-saving: No central Authority verification needed for settlements making
the process faster and cheaper.
 Cost-saving: A Blockchain network reduces expenses in several ways. No
need for
third-party verification. Participants can share
assets directly. Intermediaries are reduced.
 Tighter security: No one can temper with Blockchain Data as it shared among
millions of Participant. The system is safe against cybercrimes and Fraud.
 Secure: There is no unauthorized access to Blockchain made possible through
Permissions and Cryptography.
 Transparent: Because every node or participant in Blockchain has a copy of the
Blockchain data, they have access to all transaction data.

Contents of a Block.
Blockchain starts with a block. Each block stores the following information in it:
1. Index: Position of the block in blockchain. Index of genesis block is 0.
2. Time stamp: The time when that particular block was created.
3. Hash: Numeric value that uniquely identifies data just like our fingerprints.
4. Previous hash: Hash value of the previous block. For genesis block, this value is 0.
5. Data: Data stored on the node. For example, transactions.
6. Nonce: It is a number used to find a valid hash. To generate this number, the
processing power is used.
Applications of Blockchains
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Blockchain can be used in practically all those scenarios where middlemen are involved.
Here are some of the use-cases.

1. Cryptocurrency: this is the most well-known use of Blockchain. By implementing

Blockchain, parties are able to transact with each other without the involvement of any bank.
For instance, a person sitting in the United States can transfer bitcoins to one based out of
India without intervention from any bank. This lead to the creation of a lot of
cryptocurrencies, Bitcoin being the most popular one.

2. Advertising: Currently, companies like Google and Facebook control almost all of the
digital advertising traffic of the world. However, Blockchain can potentially eliminate that.
Here, Google and Facebook are essentially middlemen that control the advertising ecosystem.
Using Blockchain the producers and the consumers can be connected directly through a
decentralized system.

Real Estate: In the Real Estate industry, there are middlemen in the form of brokers who
often charge exorbitant fees for pairing the buyer with the sellers. Using Blockchain, such
middlemen can be eliminated to save the cost. Basically, instead of relying on centralized
advertising/listing portals, a Blockchain can be used where the producers (advertisers or real-
estate sellers) can provide their ads/listings and consumers can see them directly without any
middlemen.

3. Healthcare: The health records of patients can be securely stored in a Blockchain so that
when the patient visits another doctor, he/she can directly share those records with the new
doctor. The best part about using Blockchain here is that there is no need for a centralized
portal where these records are stored. Therefore, the cost can be lowered significantly. Health
records could include a lot of things like:
 Diagnostic by doctor
 Medical History
 Lab reports

4. Voting: Online voting has been resisted by many due to concerns such as security and
fraud. Blockchain can successfully eliminate these concerns as it will present a clear record of
the votes that have been cast. The tamper-proof feature of a blockchain makes it difficult to
hack a
blockchain-enabled voting system. With blockchain, the voting process can be carried out
comfortably from the confines of the voter’s homes. This may result in a significant rise in
voter turnout.

5. Insurance: Arguably the greatest blockchain application for insurance is through smart
contracts. These contracts allow customers and insurers to manage claims in a transparent and
secure manner. All contracts and claims can be recorded on the blockchain and validated by
the network, which would eliminate invalid claims, since the blockchain would reject multiple
claims on the same accident.

6. Media: Media companies have already started to adopt blockchain technology to eliminate
fraud, reduce costs, and even protect Intellectual Property (IP) rights of content - like music
records.
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7. Taxes: Blockchain tech could make the cumbersome process of filing taxes, which is
prone to human error, much more efficient with enough information stored on the blockchain.

3 Pillars of Blockchain Technology

 Decentralization: In a decentralized system, the information is not stored by one single
entity. In fact, everyone in the network owns the information.
 Transparency: Because every node or participant in Blockchain has a copy of the
Blockchain data, they have access to all transaction data.
 Immutability: It means that once something has been entered into the blockchain, it
cannot be tampered with.
Disadvantages of current transaction system:
 Cash can only be used in low amount transaction locally.
 Huge waiting time in the processing of transactions.
 Need to third party for verification and execution of Transaction make the process
complex.
 If the Central Server like Banks is compromised, whole System is affected including the
participants.
 Organization doing validation charge high process thus making the process expensive.

A short history of Bitcoin.

 2008: The first description of Bitcoin was published in 2008 by an individual or a group
under the pseudonym “Satoshi Nakamoto” in a now very famous white paper.
 2009: The Bitcoin Network goes live and the first Bitcoins are mined.
 2010: The first cryptocurrency stock exchange for trading Bitcoin is launched.
 2011: One Bitcoin equals one USD.
 2013: One Bitcoin now equals 100 USD.
 2014: Microsoft starts accepting Bitcoin as payments.
 2017: One Bitcoin equals 10'000 USD.

Bitcoin does not equal Blockchain.

 Bitcoin is a currency and a system that uses a blockchain as underlying datastructure,

which can be used for many things, including cryptocurrencies.
 Blockchain is the underlying data structure.

What is Consensus?

Consensus means achieving a state of a decision on which all network participants

agree. For example, a group of friends decides on a trip to Goa without conflicts. Here, reaching
a decision to visit Goa together is a state of consensus or mutual agreement.

However, getting a no-conflict decision agreement by each person in a group seems far-fetched.
Maybe someone wants to go to Manali instead. How could a group of friends possibly reach a
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consensus? Moreover, how can numerous strangers achieve consensus in a network?

In order to avoid centralization and conflicts among members, the system requires a
consensus mechanism or algorithm.

What is Consensus Mechanism?

A consensus algorithm is a way to keep network members synchronized under democracy. With
decentralization, each network member has equal power to make decisions in the system. Hence,
rules need to be established for network members (or nodes) to implement new changes to the
system with a global agreement.

“The purpose of the Consensus mechanism in a decentralized network is to allow a group

of independent nodes to distribute the right to update as well as validate the change in the
network equally. Therefore, decide on the next update of a decentralized network.”

In a blockchain, each participant shares the exact same copy of the network transactions, which
helps them stay synchronized and connected.

How Does Consensus Work?

There is a number of consensus mechanisms to operate on a decentralized network. Each

algorithm has its own way of reaching a global agreement on a network update.

Generally, consensus protocols form at least 51% of participants in the network to agree on the
upcoming change. If they agree, the network system gets updated with the new change. Else, it
rejects the change by mutual agreement.

Let’s see what the renowned consensus algorithms do to reach a global network agreement?
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Types of Consensus Mechanisms

Following are the consensus mechanisms used in various blockchain networks:-

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Proof of Work (PoW)

PoW is a popular consensus algorithm used by Bitcoin and Ethereum networks. Here, miners (or
block adders) have to do heavy mathematical computations to find a right hash by changing
the nonce of the block. The miner who finds the hash below the difficulty level gets the chance
to add his block to the network. Hence, takes the reward.

It’s a puzzle-friendly way to reach consensus by using high computational power. Afterward,
already present network participants valid transactions in the block added by the miner.

Blockchains using PoW algorithm: Bitcoin, Ethereum, Dogecoin, Litecoin, Zcash, Horizon,
and many more.

Proof of Stake (PoS)

PoS consensus eliminates the high energy consumption by PoW. PoS uses a staking
mechanism in which miners (or validators) hold some of their earned coins in the network to
get selected for adding a block.

It’s not an initial consensus algorithm for a network. It can only be implemented after a network
gets a good amount of participants (or nodes).

Blockchains using PoS algorithm: Polkadot, EOSIO, Cardano, Ethereum 2.0, and many more.

Delegated Proof of Stake (DPoS)

DPoS improves the PoS mechanism by introducing voting for delegates. Here, network
participants vote for the trusted delegates (or miners) using their coins. Then, based on a
random selection, one voted delegate gets the chance to add its block.
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Blockchains using the DPoS algorithm: EOS, Lisk, Ark y Tron

Proof of Importance (PoI)

PoI uses importance scores to select the one block harvester out of all participants. It aims to
eliminate favors toward rich stakeholders in PoS consensus. The importance score depends on
your quality transactions and reputation in the network.

Blockchain using PoI algorithm: New Economy Movement (NEM)

Proof of Capacity (PoC)

PoC uses the disk or storage capacity for mining a block in a decentralized network. It
exchanges the computation factor with disk space. The PoC motivates miners to collect a list of
all the possible nonce and block hashes before the actual mining.

At the time, the miner just uploads the calculated files of possible hashes to the network. PoC
reduces the time taken to add and validate the block of transactions.

Blockchains using PoC algorithm: Burstcoin, Storj, Chia, and SpaceMint.

Proof of Elapsed Time (PoET)

PoET mechanism uses time-lottery-based concepts. It distributes random waiting times to

each miner. For that waiting time the miner node sleeps, the first woken up node (or short
waiting time node) gets the chance to add its block to the network.
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Afterward, the block verification takes place by network validators, and a new block gets added.

Blockchain using PoET algorithm: Hyperledger Sawtooth

Proof of Activity (PoA)

Proof of Activity (PoA) combines PoW and PoS mechanisms. First, the miners must do the
heavy computation to add an empty block with header information and reward address.

Afterward, one empty block gets chosen based on the number of coins they hold in their
respective accounts. Then, the miner of that empty block gets the chance to add its transactions
to the block. Moreover, the transactions are verified by network validators.

Proof of Authority (PoA)

Proof of Authority (PoA) consensus utilizes by private or permissioned blockchain networks.

PoA highly depends on the reputation of the miner or the network participant who wishes to
add a new block of transactions. Here, miners stake their reputation instead of coins.

Blockchain using PoA algorithm: VeChain

Proof of Burn (PoB)

PoB allows miners to add their block by sending some of their coins to an unspendable
account. This process of sending your earned coins to an escrow account is called burning the
coins.
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PoB eliminated the burnt coins permanently from regular transactions. Hence, they become
unspendable even by its owner.

The more coins a miner burns, the higher his chances of adding his new block of transactions to
the network. Burning coins brings virtual mining rights to the miner.

Blockchain using PoB algorithm: Slimcoin

Byzantine Fault Tolerance (BFT)

BFT aims to resolve Byzantine Generals’ decisional puzzle. It’s based on the communication
problem generals of different armies might have to decide to attack or retreat at the same time.

BFT mechanism regulates the communication between nodes using hashes, digital signatures,
and metadata. It embraces the synchronization among nodes of a decentralized network.

Blockchains using BFT algorithm: Hyperledger Fabric and Zilliqa

Pros and Cons of Consensus Mechanisms

PROS CONS

– Few of the mechanisms consume high

– Establishing global agreement in a
power and energy, leading to environmental
distributed network.
hazards.
– Create protection and security against
– Some of the mechanisms are susceptible
intruder attacks.
to 51% attacks and Sybil attacks.
– Mechanisms are available for both
– The constant fear of turning a
permission and permissionless blockchain
decentralized network into a centralized
networks.
one.
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9 Components of the Decentralised Ecosystem that we Need to Build a Decentralised Society

Decentralised Ecosystem

Last year, Sir Tim Berners-Lee revealed his new vision, one where the internet becomes
decentralised again as he originally had envisioned it. His technology is called Solid POD. It will
allow every internet user to store their own data, be it video; articles; wearable tracking data or
comments, and share that with anyone or any website that has connected to the Solid ecosystem.

Using the Solid POD, the user will remain in full control over their data and who has access to it
and who not. A great new initiative that will hopefully bring us closer to a decentralised society
where data is owned by those who created it, privacy is protected, security is a given, and
distributed ledger technology will enable trustless transactions among individuals, organisations
and things.

However, distributed ledger technology, which includes blockchains, is still a very nascent
technology, and the complete ecosystem is still under development. To achieve a decentralised
society, many more components need to be built, requiring global standards and significant
investments. I estimate that it will take another 3–5 years before the ecosystem is ready for full-
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scale, enterprise adoption. Fortunately, many startups are working on various components of this
decentralised ecosystem.

1. Infrastructure layer

Those applications that aim to create an infrastructure layer on which others can develop
applications. Public blockchains include Ethereum, EOS, and Nxt, while private blockchains
include Ripple, Hyperledger, MultiChain, and Chain.

2. Consensus mechanisms

Required to ensure the state of the network and determining which node can validate transactions.
There are numerous consensus algorithms available, ranging from Proof of Work, Proof of Stake
and many others.
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3. Distributed computing

Using distributed ledger technology to distribute your computing requirements. Basically, cloud
computing but then decentralised. Examples include Golem and Sonem.

4. Distributed storage

Distributed data storage is especially important when you want to be sure that data can always be
accessed, regardless of restrictions some countries have. Examples include Storj, IFPD, and
FileCoin.

5. Privacy and identity

Services that are focused on developing a self-sovereign identity and ensuring that data of internet
users is kept private and personal. Examples include Sovrin, uPort, Civic, and Blockstack.

6. Money transactions

There are three different types of tokens: currency, utility, or security tokens. Currency tokens,
meaning cryptocurrencies, are used to make financial transactions, and the most well-known is, of
course, Bitcoin. Others include ZCash, Bitcoin Cash, or Monero.

7. Wallets

Of course, all those cryptocurrencies need to be kept somewhere. Wallets are the bank accounts of
the crypto world. You can have hot wallets (connected to the internet) or cold wallets
(disconnected from the internet). Examples include MyEtherWallet, Jaxx, Exodus, or Trezor.

8. Exchanges

Like with stocks in companies, tokens need to be exchanged, so there is a range of centralised and
decentralised exchanges. Centralised exchanges have the risk of being hacked, which is not
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possible with a decentralised exchange. Examples of centralised exchanges include Bitfi- nex,
Bitstamp, Coinbase, or Kraken. Examples of decentralised exchanges include 0x, bisq, bitshares,
or EtherDelta.

9. Industry applications

Every industry can use DLT to improve collaboration, enable provenance, speed up transaction
settlements, or enable transparency. Examples per industry include:

· Healthcare — hashed health, MedRec, Gem, or Nebula Genomics.

· Legal — Integra Ledger, Aragon, or Otonomos.

· Media — Steem.it, Akasha, Synereo, or Backfeed.

· Internet of Things — IOTA, Chain of Things, Atonomi, or IoT Chain.

· Real estate — Ubiquity, Meridio, ManageGo, or Atlant.

· Banks — Change, Bitwala, Bancor, or Moni.

· Insurance — Etherisc, Immediate, Fidential, or B3i.

· Supply chain — Everledger, Blockverify, Omnichain, or Provenance.

· Logistics — ShipChain, CargoX, FreshTruf, or OriginTrail.

· Energy — LO3 Energy, PowerLedger, Grid Singularity, or SolarCoin.

· Retail — Lolli, Shopin, Ripe.io, or Beam.

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Decentralized Platforms

Blockchain has revived the decentralized application development space as it offers

collaboration in a trust-less environment with its strong cryptography foundation. Today’s
decentralized platforms have taken advantage of the blockchain revolution and made it core to
the implementation. There are many decentralized platforms on the horizon but in this article, we
will discuss a few of them that are fast gaining popularity. Here is the list of platforms that we
will cover:

 Blockstack.org
 eos.io
 tron.network

You can find more details on these platforms and related decentralized application
on https://www.dapp.com/
Blockstack
Blockstack is blockchain-based decentralized computing network and application ecosystem.
Following are the key highlights of Blockstack:

 Develop decentralized applications with popular programming languages like JavaScript

and iOS Swift
 Keep authentication on blockchain
 Keep application user data off the blockchain
 Cryptocurrency associated with Blockstack is STX
 Total number of apps is around 250

You can get started developing applications for Blockstack

at https://docs.blockstack.org/develop/zero_to_dapp_1.html
EOS
EOS is a platform to develop blockchain-based applications through an operating system-like
construct. Following are the key highlights of EOS:

 Provide authentication, databases, asynchronous communication

 Use C++ as a smart contract programming language
 WebAssembly virtual machine executes a smart contract
 Cryptocurrency is EOS
 Total number of apps is around 462

You can get started with application development with EOS at https://developers.eos.io/eosio-
home/docs
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TRON
TRON is a decentralized technology-based reliable smart contract platform. Following are the
key highlights of TRON:

 Use solidity programming language for smart contract

 Use distributed storage protocol and GRPC
 Web technologies like JavaScript to interact with smart contract
 Cryptocurrency associated with TRON is TRX
 Total number of apps around 459