BLOCK CHAIN

BY
MOHAMED SAFWAN A
KAVIN MANOJ C M
CSE II YEAR
GCE, SALEM
INTERMEDIARIES
Example 1 :Electronic Payment
In case of an electronic payment, (by an individual or a business),
Banks track and record the transaction. While using credit or debit card to a
purchase from a store, third party intermediaries, the seller, and customer’s
bank approve, track and record the transaction for each party in their private
accounts.
Example 2 : Real Estate
Government records the change of property ownership and land rights
when an individual buys a new home. If the records are not maintained there
would be complete chaos, and anyone would claim ownership of anything.
ISSUES WITH PREVAILING SYSTEM

• Banks and governments often add delays and impede the free flow of business due
to the time it consumes to process transactions and regulatory requirements.
Let's understand the critical issues:
• Centralized power - Currently, all the systems are managed by a central governing
authority.
• Private ledgers - Every system has their own private ledgers.
• Prone to corruption/hacking - At the time of reconciliation, the system is prone to
corruption or can get hacked by an external source.
BLOCKCHAIN

• A blockchain is a decentralized, distributed and public digital ledger that is

used to record transactions across many computers so that the record
cannot be altered without the alteration of all subsequent blocks and the
consensus of the network. This allows the participants to verify and audit
transactions inexpensively.
• A blockchain database is managed autonomously using a peer-to-
peer network and a distributed timestamping server.
• It is secure, anonymous, tamper-proof, unchangeable.
EVOLUTION OF BLOCKCHAIN
HOW BLOCKCHAIN CAN HELP?
Blockchain addresses the intermediatory issues by providing the following
features:
• Decentralized Power - Blockchain uses Peer-to-Peer node networking
system.
• Public Ledgers - Every node has its own public ledger with details of all
transactions.
• Immutable hacking - Since same data is available in the distributed network,
hacking is impossible.
• Cryptography - Uses a complex mathematical algorithm to maintain the
blocks in Blockchain.
TYPES OF BLOCKCHAIN

There are 3 man types of blockchain

• Public Blockchain.
• Private Blockchain.
• Consortium/Federal Blockchain.
PUBLIC BLOCKCHAIN
Public blockchain as the name suggests is open to all users in a distributed network.
• Open and transparent mechanism.
• There is no one in-charge, and anyone can participate in reading, writing or
auditing.
• Everyone has the read and write access to the ledger, and participate in the
decision-making process.
• All the users maintain a copy of ledgers on their local nodes.
• As there is no dedicated in-charge, decentralized consensus mechanisms like Proof
of work (POW) and Proof of stake (POS) are used to agree upon the final state of
the ledger.
Examples: Bitcoin, Ethereum, Dash, Lisk, Factom, and Blockstream
PRIVATE BLOCKCHAIN
Private Blockchain as the name claims is a private property of an individual or an
organization.
• It is not decentralized unlike public blockchain; it is just a distributed database.
However, all permissions are kept centralized to an organization.
• This type of blockchain enables an organization to create its own currencies.
• There will be an in-charge who manages read/write or provides selective access to
read or vice versa.
• Consensus or mining rights are achieved through in-charge.
• Main drawback of this kind of blockchain is the beauty of de-centralization, and
open protocols get lost.
Examples: Multichain, Blockstack
CONSORTIUM/FEDERAL BLOCKCHAIN
This model of Consortium blockchain evolved to remove the sole autonomy of
Private blockchains (single party vested interests).
• The Consortium blockchain is controlled by a group of members. (Group of
companies/representative individuals come together and make decisions benefiting
the whole network).
• This is partially a decentralized kind of blockchain.
• Here, all or some of the members will have read access, but only few will have the
write access.
• They are pre-defined set of nodes where the users have access to write the data or
block.
• Quite faster with additional checks to avoid failures.
• Examples: Ripple, R3
HOW BLOCKCHAIN WORKS?
CRYPTOGRAPHY
What is Cryptography?
• Cryptography is a technique which converts plain text into an encrypted text, thus
making it difficult for a third party to manipulate the data.
Cryptography ensures:
• Security of the network
• Transparency in transactions
• Privacy of the individual users
Cryptography uses two processes:
• Encryption: It converts a simple text into a non-readable form.
• Decryption: It converts back the encrypted form into the simple text.
TYPES OF CRYPTOGRAPHY
• Symmetric Cryptography - This method uses only one mutually agreed upon
'Private Key' (Secret key) by the sender and the receiver, both to encrypt and
to decrypt the data. Even though this process is faster, it is easily hackable.
• Asymmetric Cryptography - This method uses a pair of Public key and Private
key. The public key is distributed amongst all the users in the network while
each user has their own private key(secret key). This process is slower, but it
is very secured and cannot be hacked.
Asymmetric cryptography primarily uses two types of algorithms.
• Sign-Verify: Uses the concept of Hashing.
• Encrypt-Decrypt
Cryptography is implemented in blockchain because blockchain uses
advanced level encryption so that it is highly secure.
CRYPTOCURRENCIES
• Cryptocurrency is a combination of Cryptography and Currency.
• Cryptocurrency is the digital currency that uses the encryption techniques
• to regulate the generation of monetary units and
• verify the transfer of funds independent of any central authority.
• Some of the trending cryptocurrencies are Bitcoin, Litecoin, Ripple,
Ethereum, Zcash, etc.
• Among these, Bitcoin is the world's latest trending digital currency.
BITCOINS
• Bitcoin was invented by a pseudonymous group of people under the name
Satoshi Nakamoto as open-source software in 2009.
• First Decentralized cryptocurrency
• Used cryptography to control its creation and management
• Created and held electronically in a peer to peer open ledger (public
blockchain).
How to procure Bitcoins?
• Buying them on an Exchange.
• As the exchange of products and services.
• Creating new ones as a reward for a process (Mining).
BITCOIN MINING
• In simple words, mining is verification of bitcoin transactions.
Example:
• Hemi wants to buys Computer from David using bitcoin.
• To make sure his bitcoin is genuine, miners begin to verify the transaction.
• The transaction is approved only after Miners looks into the transaction
history of Hemi to verify if Hemi has enough valid bitcoins.
• Once approved, this transaction is updated in the public ledger as a new
block, and the message is propagated to all the users in that
blockchain/network.
• The Miner who validates the transaction first gets to place the next block
into the blockchain. To incentivize mining, the miners are rewarded with
newly released bitcoins.
LIMITATIONS OF BITCOINS

• Bitcoin, the most hyped digital currency, has some limitations.

• Bitcoin value is highly volatile and keeps fluctuating.
• As, it is a new digital currency, many businesses are sceptical to accept this
as a payment method.
• It involves high risk of unknown technical flaws.
• Lack of customer support.
ADVANTAGES OF BLOCKCHAIN

Game Theory
• Miners are responsible for validating a transaction and adding new blocks.
• Miners could have a lot of inclination to use this power for their personal
gains and if they do choose to cheat, they can cause chaos in the system.
• So why don’t they do that? Is it because they are all good and honest?
• This is where the true genius of blockchain comes in. Blockchain uses Game
Theory mechanics to keep the system bulletproof.
UNPRECEDENTED PROCESS: BLOCKCHAIN, THE FUTURE

• Blockchain has the capability to revolutionize the global economy.

• Blockchain technology enables super-fast, super-secure, anonymous, and wholly
transparent validation of transactions.
Creation of an Egalitarian Economy -
• The existing centralized economy is a one-way economy: it's one too many;
controlled by powerful forces with everyone else being the passive recipients.
• Blockchain would provide a neutral platform for a one to one or a many to many,
distributed economy, where everyone is a participant.
• This will build a prosperous society where everyone shares the wealth they create.
FACTS ABOUT BLOCKCHAIN
• "Blockchain raised a business value, which will cross $3.1 trillion by 2030",
according to Gartner’s Blockchain trend insight report 2017.
• Blockchain is expected to disrupt the Banking and financial industry soon.
Experts claim banks could save $8-12 billion annually by leveraging blockchain
technology.
• Dubai is about to become the World's First Blockchain-Powered Government. By
2020, all visa applications, bill payments and license renewals, which account for
over 100 million documents each year, are to be transacted digitally using
blockchain. - Forbes
“COMPUTERS RULE THE WORLD, WE RULE THE
COMPUTERS”
-YES, WE ARE COMPUTER SCIENCE ENGINEERS!