Blockchain Innovations: Technical Aspects and Use

Cases
Haaris Ansari#1, Hamza Khan#2
1
[email protected]
2
[email protected]

Abstract— Blockchain, the foundation of Bitcoin, has received future Internet systems, it is facing a number of technical
extensive attentions recently. Blockchain serves as an immutable challenges. Firstly, scalability is a huge concern. Bitcoin block
ledger which allows transactions take place in a decentralized size is limited to 1 MB now while a block is mined about
manner. Blockchain-based applications are springing up, every ten minutes. Subsequently, the Bitcoin network is
covering numerous fields including financial services, reputation restricted to a rate of 7 transactions per second, which is
system and Internet of Things (IoT), and so on. However, there incapable of dealing with high frequency trading. However,
are still many challenges of blockchain technology such as
larger blocks means larger storage space and slower
scalability and security problems waiting to be overcome. This
paper presents a comprehensive overview on blockchain propagation in the network. This will lead to centralization
technology. We provide an overview of blockchain architechture gradually as less users would like to maintain such a large
firstly and compare some typical consensus algorithms used in blockchain. Therefore the tradeoff between block size and
different blockchains. Furthermore, technical challenges and security has been a tough challenge. Secondly, it has been
recent advances are briefly listed. We also lay out possible future proved that miners could achieve larger revenue than their fair
trends for blockchain share through selfish mining strategy [10]. Miners hide their
mined blocks for more revenue in the future. In that way,
I. INTRODUCTION branches could take place frequently, which hinders
A. Definition blockchain development. Hence some solutions need to be put
Nowadays cryptocurrency has become a buzzword in both forward to fix this problem. Moreover, it has been shown that
industry and academia. As one of the most successful privacy leakage could also happen in blockchain even users
cryptocurrency, Bitcoin has enjoyed a huge success with its only make transactions with their public key and private key
capital market reaching 10 billion dollars in 2016 [1]. With a [11]. Furthermore, current consensus algorithms like proof of
specially designed data storage structure, transactions in work or proof of stake are facing some serious problems. For
Bitcoin network could happen without any third party and the example, proof of work wastes too much electricity energy
core technology to build Bitcoin is blockchain, which was first while the phenomenon that the rich get richer could appear in
proposed in 2008 and implemented in 2009 [2]. Blockchain the proof of stake consensus process.
could be regarded as a public ledger and all committed II. BLOCKCHAIN ARCHITECTURE
transactions are stored in a list of blocks. This chain grows as
new blocks are appended to it continuously. Asymmetric
cryptography and distributed consensus algorithms have been
implemented for user security and ledger consistency. The
blockchain technology generally has key characteristics of
decentralization, persistency, anonymity and auditability.
With these traits, blockchain can greatly save the cost and
improve the efficiency. Since it allows payment to be finished
without any bank or any intermediary, blockchain can be used
Fig. 1: An example of blockchain which consists of a
in various financial services such as digital assets, remittance
continuous sequence of blocks.
and online payment [3], [4]. Additionally, it can also be
applied into other fields including smart contracts [5], public
services [6], Internet of Things (IoT) [7], reputation systems
[8] and security services [9]. Those fields favor blockchain in
multiple ways. First of all, blockchain is immutable.
Transaction cannot be tampered once it is packed into the
blockchain. Businesses that require high reliability and
honesty can use blockchain to attract customers. Besides,
blockchain is distributed and can avoid the single point of
failure situation. As for smart contracts, the contract could be
executed by miners automatically once the contract has been
deployed on the blockchain. Although the blockchain Blockchain is a sequence of blocks, holding a complete list of
technology has great potential for the construction of the transaction records like a conventional public ledger. Figure 1
illustrates an example of a blockchain. With a previous block on a system of debts, its value boils down to how effective it
hash contained in the block header, a block has only one is as a medium of exchange.
parent block. It is worth noting that uncle blocks, which are
children of the block’s ancestors, also have their hashes stored Bitcoin distinguishes itself from fiat currencies through
in the Ethereum blockchain. The first block of a blockchain is mechanisms like the Bitcoin halving that controls its inflation.
called the genesis block, which has no parent block. The This event, occurring approximately every four years, halves
internals of blockchain are explained in detail below. the reward for mining new Bitcoin blocks. This reduction in
A block consists of the block header and the block body, as new Bitcoin creation mimics the scarcity of precious metals,
shown in Figure 2. In particular, the block header includes: potentially increasing Bitcoin's value as its supply diminishes.
(i) Block version: indicates which set of block validation rules
to follow.
(ii) Merkle tree root hash: the hash value of all the
transactions in the block.
(iii) Timestamp: current time as seconds in universal time
since January 1, 1970.
(iv) nBits: target threshold of a valid block hash.
(v) Nonce: a 4-byte field, which usually starts with 0 and
increases for every hash calculation (will be explained in
detail in Section III).
(vi) Parent block hash: a 256-bit hash value that points to the
previous block.
The block body is composed of a transaction counter and
transactions. The maximum number of transactions that a
block can contain depends on the block size and the size of
each transaction. Blockchain uses an asymmetric
cryptography mechanism to validate the authentication of
transactions. Digital signature based on asymmetric IV. TECHNOLOGY BASED ON BLOCKCHAIN
cryptography is used in an untrustworthy environment. We
next briefly illustrate digital signature.
A. NFTs BASED ART
III. DIFFERENCE BETWEEN CRYPTOCURRENCY
AND FIAT An NFT is a digital asset that can come in the form of art,
music, in-game items, videos, and more. They are bought and
Cryptocurrencies are money insofar as they allow sold online, frequently with cryptocurrency, and they are
exchanges between two parties and act as a store of value. generally encoded with the same underlying software as many
However, they also offer features which the traditional money cryptos.
system is unable to offer right now: cryptocurrencies can be Although they’ve been around since 2014, NFTs are gaining
spent and received by anyone, anywhere, at any time notoriety now because they are becoming an increasingly
throughout the world and without the need for a bank or a popular way to buy and sell digital artwork. The market for
government. This is the most revolutionary aspect of NFTs was worth a staggering $41 billion in 2021 alone, an
cryptocurrencies. amount that is approaching the total value of the entire global
fine art market.
Furthermore, fiat money basically equates to debt. When a NFTs are also generally one of a kind, or at least one of a very
central bank issues banknotes, it is simultaneously issuing limited run, and have unique identifying codes. “Essentially,
you, the consumer, a percentage of your government’s debt. NFTs create digital scarcity,” says Arry Yu, chair of the
How is this the case, you might logically ask? Think about Washington Technology Industry Association Cascadia
how, for example, the EU and the United States create money. Blockchain Council and managing director of Yellow
Most of the money a government creates is when loans are Umbrella Ventures.
taken out. Banks create money when people borrow money. This stands in stark contrast to most digital creations, which
Take the case of the US dollar: if no loans were taken out, are almost always infinite in supply.
there likely wouldn’t be any dollars in circulation either. In
other words, without consumers taking out debt to banks, the
US dollar wouldn’t be out there in the world.

While fiat money seems to get a major part of its value from
debt, this is not the case with Bitcoin. Bitcoin has intrinsic
value beyond the trust of its community. Bitcoin doesn’t lean
 Web 3.0 has not yet been emerged at this moment since Web
3.0 is mainly under developing by World Wide Web
Consortium (W3C) to become a reality [11]. Linking of data
in Web 3.0 is achieved with the help of semantic technologies
like Resource Distribution Framework (RDF) and SPARQL3 ,
which have already been used for the development of the
Semantic web.
Databases which are not connected by wires but on the basis
of some common elements like place, concept, age, etc.
Semantic Web is a vision of having data on the web defined
and linked in such a way that it can be used by computers –
not just for display purposes, but using for applications. Tim
Berners-Lee defined it as “If HTML and the Web made all the
Hypothetically, cutting off the supply should raise the value of online documents look like one huge book, RDF, schema, and
a given asset, assuming it’s in demand. inference languages will make all the data in the world look
But many NFTs, at least in these early days, have been digital like one huge database". It is a collaborative effort led by the
creations that already exist in some form elsewhere, like World Wide Web consortium (W3C) and involving a large
iconic video clips from NBA games or securitized versions of number of industrial partners and researchers. Semantic Web
digital art that’s already floating around on Instagram. mainly operates on Resource Description Framework (RDF)
Famous digital artist Mike Winklemann, better known as which is a standard model for data interchange on the web.
“Beeple,” crafted a composite of 5,000 daily drawings to RDF was designed to provide a common way to describe
create perhaps the most famous NFT of 2021, information so it can be read and understood by computer
“EVERYDAYS: The First 5000 Days,” which sold at applications. RDF is written in XML that can be easily
Christie’s for a record-breaking $69.3 million. exchanged between different machines using different
Anyone can view the individual images—or even the entire operating systems. Meantime, RDF joins structure of the web
collage of images online for free. So why are people willing to with Uniform Resource Identifiers (URIs) and allows original
spend millions on something they could easily screenshot or data in each database to form in an original form such as
download? XML, Excel, etc.
Because an NFT allows the buyer to own the original item. The base of Web3.0 applications resides in RDF for providing
Not only that, it contains built-in authentication, which serves a mean to link data, which has been created in Web 2.0 era,
as proof of ownership. Collectors value those “digital from multiple websites or databases. With SPARQL, a query
bragging rights” almost more than the item itself. language for RDF data, applications can access native graph
B. WEB 3.0 based RDF stores and extract data from traditional databases.
Web 3.0 is the second phase of the Web evolution. In Web Web Ontology Language (OWL) is another language which
1.0, producers created contents for the users to use it and share can play a main role in the applications of Web 3.0. OWL and
it. While in Web 2.0, the users equally participated in the RDF are much of the same things, but OWL is a stronger
content creation and it’s sharing . Web 3.0 has changed the language with greater machine interpretability than RDF.
entire process by bringing machines closer to the users and OWL is built on the top of RDF but comes with a larger
producers for more dynamic, interactive and efficient creation vocabulary and stronger syntax than RDF.
of the contents and its management . Pictographic view of this Technology from the Semantic web and data from the Web
web evolution can also be summarized. 2.0 are the two main building blocks of the new Web 3.0. By
integrating these blocks, Web 3.0 seems to comprise of two
platforms, semantic technologies and social computing
environment. Semantic technologies have the open standards
and can be applied on the top of the existing web as shown in
Figure 2.

C. MINING OF CRYPTOCURRENCY

In Web 3.0, the principle is based upon linking, integrating Every Cryptocurrency system that is decribed
and analyzing data from various data sources into new incorporates a distributed public ledger called the Blockchain .
information streams. Researchers, developers and even the A transaction is created when a payer sends some currency to
users are defining Web 3.0 in their own way with one thing in a payee. Mining validates transactions and adds them to this
common i.e. personalization of the Web. Or in other words, public ledger. When a new transaction takes place, the miner
Web 3.0 will be about feeding you the information that you checks if the currency or the particular bitcoin belongs to the
want, when you want it. However, the standard definition of payer, or if the payer is trying to spend twice.The ownership
of the currency is available in the Blockchain,thus enabling This task prevents an offensive miner from forming false
security agaist many fraudulents. A treacherous user may identities and manipulating. • The proof produced is verified
create multiple nodes and try to validate an invalid to cross verify that the particular task has been performed. •
transaction. To prevent this, miners are required to solve a The miner then verifies for the validity of the transactions, and
resource intensive task. Resource intensiveness makes it whether if all the transactions in the block prove valid, the
exclusive for a malicious user to create enough false identities block is posted in the Blockchain
to outnumber benign users and corroborate an invalid Bitcoin: Bitcoin mining uses Proof of Work [5]. The Proof of
transaction. Work algorithm in use is called Hashcash . In Hashcashi , the
miner is required to find a nonce, which, when hashed along
with the hash of the previous blocks, would produce a hash
with a specified number of zeroes at its front . The number of
zeroes determine the complexity metric. The mining process
is complicated as the acceptance is based on the hash size of
the block header and the target value [15]. A target is a 256bit
integer shared by all of the Bitcoin clients; the Lower the
target, higher the complexity
Successful mining of coins using SHA-256 usually requires
hash rates at a giga hashes per second (GH/s) range or higher
[12]. The current average time needed to mine a Bitcoin Block
with SHA-256 is ten minutes [2]. The puzzle is based on a
The resource-intensive task can be any of the following: • Floating Preimage Signature [15]. The miners must refer to a
Proof of Work , which is an easily verifiable result of a section of code stored locally on their computer to solve the
resource intensive task that authorizes that the task has been puzzle [15]. If they successfully solve the problem, then the
performed. • Proof of State , that requires the miner to show algorithm can deduce that they are storing that data (at least
how much currency the miner has a proprietary unit in the for a short time) [15]. Thus, all miners must be storing a piece
system. • Proof of Retrievability, which requires the miner to of the archived data to participate by mining .
show that the data he was given to store is integral and can be
recovered at will. We are not aware of other proof methods at ACKNOWLEGEMENT
present. Details of these Proof systems are discussed below in
section 6 Proof construction requires intensive use of memory The Blockchain project, striving to simplify the complexities
and/or computational power involving a block of RAM’s of managing diverse cryptocurrency portfolios, offers users a
combined together. The proof requirement also confines the powerful tool to navigate the dynamic world of digital assets
total number of transactions that can be validated. Thus, it is seamlessly. Through innovative features and a user-centric
derogatory to slow down the rate of the production to prevent design, the project aims to contribute to the empowerment and
untimely exhaustion. For example, in the case of Bitcoin, each success of cryptocurrency enthusiasts and traders alike.The
block currently introduces 50 new Bitcoins in the system. The success of any project relies on the hard work and dedication
number of new Bitcoins introduced is split for every 210,000 of the team members as well as the support and
blocks. Subsequently, through simple geometric progression, encouragement received. The team expresses gratitude to their
there can be at most 21 million Bitcoins. If the number of project guide, Lecturer Mujibullah Khan, for his invaluable
Bitcoins mined per day were not restricted, the Bitcoin reserve support and guidance throughout the project. Dr. A.K Qureshi
would be exhausted far earlier than predicted. After the limit and Ms. Sameera Khan from M.H. Saboo Siddik Polytechnic
is reached, the number of bits identifying a Bitcoin could be are acknowledged for providing necessary facilities and
increased to create more units the steps involved in mining encouragement.Appreciation is extended to the entire
include: • Initially. a miner performs a resource-intensive task Teaching and Non-teaching staff of the Information
and produces a proof that the work has been done. Technology Department for their constant assistance and
cooperation, emphasizing the collaborative effort in achieving
project success

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