Blockchain

Presenters - Gayantha Mapa, Imal Samarasinghe

 What is Blockchain ?
⚬ Blockchain technology is a structure that stores transactional
records, also known as the block, of the public in several
databases, known as the “chain,” in a network connected
through peer-to-peer nodes.

⚬ In a nutshell, blockchain is a a decentralized and distributed

ledger, allowing for the secure and transparent recording of
transactions across a network of computers.

⚬ Therefore, also known as a ‘Digital Ledger’

⚬ Blocks are continuously growing, and the chain is tamper-free!

Basic Principles
⚬ Decentralization - Eliminates the for a central authority/server. Nodes maintain a copy of the entire
blockchain promoting resilience against single point of failure.

⚬ Distributed Ledger Technology - Transactions are recorded on a ledger distributed across multiple
nodes. Prevents a single entity from controlling the entire system. Therefore, the records are immutable.

⚬ Consensus Mechanisms - Algorithms that maintaining the integrity of the blockchain. Enable nodes to
agree on the validity of transactions.

⚬ Cryptographic Security - Cryptography is employed to secure transactions and control access to the
blockchain, making it extremely challenging for malicious actors to alter the data.
Basic Principles contd.
• Transparency - All participants in the network have access to the entire transaction history,
promoting transparency and accountability while privacy features can be integrated to protect
sensitive info.
History of Blockchain
 History of Blockchain
Origin -
The concept of blockchain originated in 2008 with the publication of a whitepaper titled "Bitcoin: A
Peer-to-Peer Electronic Cash System" by an anonymous person or group using Satoshi Nakamoto.

The whitepaper introduced Bitcoin, the first cryptocurrency, and outlined the foundational principles
of blockchain technology.

It proposed a decentralized system for peer-to-peer transactions without the need for intermediaries

Satoshi Nakamoto introduced the concept of Proof of Work, a consensus mechanism used to validate
and secure transactions on the Bitcoin blockchain.
 History of Blockchain contd.
Evolution –

Launch of Bitcoin (2009): Bitcoin went live in 2009 as the first decentralized cryptocurrency.

Introduction of Altcoins: Following Bitcoin's success, numerous alternative cryptocurrencies (altcoins) were
introduced.
Smart Contracts : Ethereum, introduced in 2013 by Vitalik Buterin, expanded blockchain capabilities by
enabling the execution of programmable smart contracts. Smart contracts are self-executing contracts with
predefined conditions, enabling a wide range of decentralized applications.

Beginning of Enterprise Adoption - Many enterprises began exploring blockchain for applications such as
supply chain management, identity verification, and financial services.
Types of Blockchains
⚬ Public Blockchains - Anyone can participate

⚬ Private Blockchains - Access is restricted to a specific group

⚬ Consortium Blockchains - Hybrid model

Types of Blockchains contd.
Public Blockchain-

Open and permissionless networks where anyone can participate, validate transactions, and
contribute to the consensus process.

Key features are

• No single entity controls the network
• The entire transaction history is visible to all participants.

Examples - Bitcoin , Ethereum

Use cases - Digital currencies, Decentralized finance (DeFi) ,Decentralized applications (DApps)
 Types of Blockchains contd.
Private Blockchain-

Restricts access to a specific group of participants and are often used within organizations or among
known entities.

Key features are

• Generally faster and more scalable compared to public blockchains due to a limited number of
participants.
• More privacy.

Use cases are - Supply chain management, Internal record-keeping and auditing

Example - Corda: A distributed ledger platform designed for financial institutions, focusing on privacy
and interoperability
 Types of Blockchains contd.
Consortium Blockchain-

A hybrid model, combining elements of both public and private blockchains. They involve a group of
organizations collaborating to operate and maintain the network.

Multiple organizations collectively validate transactions and participate in consensus. More

decentralized than a fully private blockchain but less so than a public blockchain.

Use cases are - Industry-specific collaborations, Inter-organizational platforms

Example - R3 Corda Consortium: R3's Corda is often used in consortium settings, such as banking
consortia, where multiple financial institutions collaborate on a shared blockchain.
 Applications of Blockchain
❖ Companies Accepting Bitcoin: Overstock, Microsoft, AT&T, and Shopify allow customers to use
Bitcoin for various services and products as a Digital Currency.

❖ Bitcoin Wallets: Wallets like Coinbase, Ledger, and Trezor enable users to securely store and
manage their Bitcoin.

❖ Various applications, including finance, gaming, and identity verification, are built on the Ethereum
blockchain. Examples : NFT Marketplaces, Axie Infinity game

❖ Platforms like Aave and Compound use smart contracts to facilitate lending and borrowing without
traditional financial intermediaries.
 Applications of Blockchain contd.
IBM Blockchain World Wire provides a cross-border payment network for financial institutions,
leveraging blockchain technology to facilitate faster and more cost-effective transactions.

Walmart has implemented blockchain technology in its supply chain operations to improve food
safety and traceability. Through initiatives like the IBM Food Trust platform, Walmart tracks the
movement of fresh produce and meat from farm to store, enabling real-time visibility into the supply
chain and quicker response to food safety issues.

Microsoft Azure Blockchain Service allows organizations to deploy, manage, and govern blockchain
networks, while Azure Blockchain Workbench provides tools for building blockchain applications.
 Research Directions
in the finance sector-

❖ Researching on a pool-based liquidity protocol to improve decentralized

finance (DeFi) by streamlining lending and borrowing operations.

❖ Still DeFi (Decentralized Finance) protocols like Aave, Compound and

C.R.E.A.M have drawbacks like complexity for beginners, security risks, low
interest rates. So further research is emerging to address those.

❖ Integrating with traditional finance is a trend. Partnerships between DeFi

protocols and traditional institutions can drive mainstream adoption

❖ Assets like NFTs and metaverse/gaming tokens are entering DeFi as

collateral. .
 Research Directions contd.
❖ in the finance sector-

❖ Machine learning and AI are being integrated into DeFi for automated operations like personalized
interest rates, sentiment-based trading
❖ .
❖ Sustainability is becoming important, with some DeFi protocols transitioning to proof-of-stake
consensus that uses less energy.

-K. Košťál, M. W. Bahar, R. Gazdík, and M. Ries, “Advancing Decentralized Finance: A Comprehensive Pool-
Based Liquidity Protocol,” 2023 Fifth International Conference on Blockchain Computing and Applications
(BCCA), Oct. 2023, doi: 10.1109/bcca58897.2023.10338926.
 Research Directions contd.
❖ in the finance sector-

❖ .The block chain has gained a good reputation among people who initially thought it would not
work well.

❖ The trends of De-Fi include the rise of blockchain technology in the financial sector, the use of
cryptocurrency in the Ethereum market, and the emergence of decentralized financial exchanges.

-B. Sriman and S. G. Kumar, “Decentralized finance (DeFi): The Future of Finance and Defi Application for
Ethereum blockchain based Finance Market,” 2022 International Conference on Advances in Computing,
Communication and Applied Informatics (ACCAI), Jan. 2022, doi: 10.1109/accai53970.2022.9752657.
 Research Directions contd.
❖ DeFi aims to provide an open, transparent, censorship-resistant financial system compared to
traditional finance. However, it also comes with risks like bugs/hacks, fraudulent projects, and lack
of regulations.

❖ It also highlights risks specific to DeFi like impermanent loss, liquidations, regulatory uncertainty,
and scams.

❖ Decentralized exchanges based on Automated Market Makers like Uniswap and Sushiswap have
gained popularity over recent years

❖ DeFi aims for transparency, composability between services, and global access, unlike traditional
finance which can be opaque and siloed.

-S. D. Santos, J. Singh, R. K. Thulasiram, S. Kamali, L. J. Sirico, and L. Loud, “A new era of Blockchain-Powered Decentralized Finance (DEFI) - A
review,” 2022 IEEE 46th Annual Computers, Software, and Applications Conference (COMPSAC), Jun. 2022, doi:
10.1109/compsac54236.2022.00203.
Critical Review
❖ Evebthough blockchain technology faces challenges and resistance from traditional financial institutions
and regulatory bodies it will revolutionize the finance industry by offering decentralized and efficient
solutions for payments, lending, trading, and asset management.

❖ Blockchain solutions have improved efficiency, reduced costs, and increased trust in supply chain
operations and it’s proved by the companies like IBM, Walmart.

❖ Decentralized finance (DeFi), represent potential disruptions enabled by blockchain technology. These
disruptions have the potential to reshape industries, redefine business models, and empower individuals
with greater control and access to decentralized ecosystems.

❖ More efforts to mitigate environmental impact through energy-efficient solutions and renewable energy
sources should be concerned as blockchain raises high energy consumptions.
References
1. K. Košťál, M. W. Bahar, R. Gazdík, and M. Ries, “Advancing Decentralized Finance: A Comprehensive Pool-
Based Liquidity Protocol,” 2023 Fifth International Conference on Blockchain Computing and Applications
(BCCA), Oct. 2023, doi: 10.1109/bcca58897.2023.10338926.

2. B. Sriman and S. G. Kumar, “Decentralized finance (DeFi): The Future of Finance and Defi Application for
Ethereum blockchain based Finance Market,” 2022 International Conference on Advances in Computing,
Communication and Applied Informatics (ACCAI), Jan. 2022, doi: 10.1109/accai53970.2022.9752657.

3. S. D. Santos, J. Singh, R. K. Thulasiram, S. Kamali, L. J. Sirico, and L. Loud, “A new era of Blockchain-Powered
Decentralized Finance (DEFI) - A review,” 2022 IEEE 46th Annual Computers, Software, and Applications
Conference (COMPSAC), Jun. 2022, doi: 10.1109/compsac54236.2022.00203.