Blockchain

Defn
• A blockchain is a type of distributed ledger technology (DLT) that
consists of growing lists of records, called blocks, that are securely
linked together using cryptography
• Each block contains a cryptographic hash of the previous block, a
timestamp, and transaction data (generally represented as a
Merkle tree, where data nodes are represented by leaves)
• The timestamp proves that the transaction data existed when the
block was created
• Since each block contains information about the previous block,
they effectively form a chain (compare linked list data structure),
with each additional block linking to the ones before it.
Consequently, blockchain transactions are irreversible in that, once
they are recorded, the data in any given block cannot be altered
retroactively without altering all subsequent blocks.
• Blockchains are typically managed by a
peer-to-peer (P2P) computer network for use as a
public distributed ledger
• where nodes collectively adhere to a
consensus algorithm protocol to add and validate
new transaction blocks. Although blockchain
records are not unalterable, since blockchain forks
are possible, blockchains may be considered
secure by design and exemplify a distributed
computing system with high
Byzantine fault tolerance
 Structure and design
• A blockchain is a decentralized, distributed, and often
public, digital ledger consisting of records called blocks
that are used to record transactions across many
computers so that any involved block cannot be altered
retroactively, without the alteration of all subsequent
blocks
• This allows the participants to verify and audit
transactions independently and relatively inexpensively
• A blockchain database is managed autonomously using
a peer-to-peer network and a distributed timestamping
server.
 Logical blockchain layers
• infrastructure (hardware)
• networking (node discovery, information
propagation and verification)
• consensus (proof of work, proof of stake)
• data (blocks, transactions)
• application (smart contracts/
decentralized applications, if applicable)
 Blocks
• Blocks hold batches of valid transactions that
are hashed and encoded into a Merkle tree
• Each block includes the cryptographic hash of
the prior block in the blockchain, linking the
two. The linked blocks form a chain
• This iterative process confirms the integrity of
the previous block, all the way back to the
initial block, which is known as the genesis
block
 Block time
• The block time is the average time it takes for
the network to generate one extra block in
the blockchain. By the time of block
completion, the included data becomes
verifiable. In cryptocurrency, this is practically
when the transaction takes place, so a shorter
block time means faster transactions.
 Hard forks
• is a rule change such that the software
validating according to the old rules will see
the blocks produced according to the new
rules as invalid. In case of a hard fork, all
nodes meant to work in accordance with the
new rules need to upgrade their software. If
one group of nodes continues to use the old
software while the other nodes use the new
software, a permanent split can occur.
TYPES OF BLOCKCHAIN NETWORKS
Public blockchains
• A public blockchain has absolutely no access
restrictions. Anyone with an Internet connection
can send transactions to it as well as become a
validator (i.e., participate in the execution of a
consensus protocol)
• Usually, such networks offer economic incentives
for those who secure them and utilize some type
of a Proof of Stake or Proof of Work algorithm.
 Private blockchains

• A private blockchain is permissioned

• One cannot join it unless invited by the
network administrators. Participant and
validator access is restricted. To distinguish
between open blockchains and other peer-to-
peer decentralized database applications that
are not open ad-hoc compute clusters, the
terminology Distributed Ledger (DLT) is
normally used for private blockchains.
 Hybrid blockchains
• A hybrid blockchain has a combination of
centralized and decentralized features.[
• The exact workings of the chain can vary
based on which portions of centralization and
decentralization are used.
 Sidechains
• A sidechain is a designation for a blockchain
ledger that runs in parallel to a primary
blockchain
• Entries from the primary blockchain (where said
entries typically represent digital assets) can be
linked to and from the sidechain; this allows the
sidechain to otherwise operate independently of
the primary blockchain (e.g., by using an
alternate means of record keeping, alternate
consensus algorithm
 Uses of Blockchain
• Cryptocurrencies
• Smart contracts
• Financial services
• Games
• Supply chain
• Domain names
How Blockchain is Improving Business
Operations
• Audits : Blockchain offers what is essentially a
permanent record of transactions, which
creates an easy-to-follow paper trail for
audits, both internal and governmental. It
guarantees accuracies and solves the problem
of pulling in records from a number of
disparate sources.
• Quality assurance : Blockchain also has
potential when it comes to quality assurance,
especially when something goes wrong. Since
companies can link every facet of the supply
chain, if there is the need for a recall or
investigation into where something went
wrong, blockchain offers a definitive,
contiguous ledger to immediately identify the
problem.
• Securities and commodities trading :
Blockchain promises quicker trading on stock
exchanges, whether in securities or
commodities. The distributed nature of the
technology ensures that a process previously
undertaken over the course of several days is
affirmed and finalized in just several minutes,
greatly streamlining the entire experience.
• Smart contracts : Smart contracts enable a
way for organizations to handle large amounts
of transactions, such as those that run across
supply chains, automatically. They can be used
to integrate services across different
businesses without divulging sensitive or
proprietary information.
 Supply chain management
• Blockchain can track goods and materials
within an organization, as well, such as
throughout the supply chain of a
manufacturing company. As a product leaves
the factory, blockchain could be used to
record its arrival at a warehouse and then its
shipment out to a retail store, for example.
• Voting : Just like currency, votes can be
moved along a blockchain in a neutral,
accurate and secure way. Using blockchain as
a mechanism for consensus-building in
communities and even nations could radically
alter modern notions of democracy and
strengthen the validity of election results.
 DISCUSSION QUESTION
• What are the differences between blockchain
and cryptocurrency?
 CRYPTOCURRENCY
• is a digital currency designed to work as a
medium of exchange through a computer
network that is not reliant on any central
authority, such as a government or bank, to
uphold or maintain it.
 Key concepts of Cryptocurrency
• Transferability : makes transactions with people on
the other side of the planet as seamless as paying with
cash at your local grocery store.
• Privacy When paying with cryptocurrency, you don’t
need to provide unnecessary personal information to
the merchant. Which means your financial information
is protected from being shared with third parties like
banks, payment services, advertisers, and credit-rating
agencies. And because no sensitive information needs
to be sent over the internet, there is very little risk of
your financial information being compromised, or your
identity being stolen.
• Security Almost all cryptocurrencies, including
Bitcoin, Ethereum, Tezos, and Bitcoin Cash are
secured using technology called a blockchain,
which is constantly checked and verified by a hu
• Portability Because your cryptocurrency holdings
aren’t tied to a financial institution or
government, they are available to you no matter
where you are in the world or what happens to
any of the global finance system’s major
intermediaries. ge amount of computing power.
• Transparency Every transaction on the Bitcoin, Ethereum, Tezos,
and Bitcoin Cash networks is published publicly, without exception.
This means there's no room for manipulation of transactions,
changing the money supply, or adjusting the rules mid-game.
• Irreversibility Unlike a credit card payment, cryptocurrency
payments can’t be reversed. For merchants, this hugely reduces the
likelihood of being defrauded. For customers, it has the potential to
make commerce cheaper by eliminating one of the major
arguments credit card companies make for their high processing
fees.
• Safety The network powering Bitcoin has never been hacked. And
the fundamental ideas behind cryptocurrencies help make them
safe: the systems are permissionless and the core software is open-
source, meaning countless computer scientists and cryptographers
have been able to examine all aspects of the networks and their
security.
cryptocurrency is a system that meets
six conditions
• The system does not require a central authority; its state is
maintained through distributed consensus.
• The system keeps an overview of cryptocurrency units and their
ownership.
• The system defines whether new cryptocurrency units can be
created. If new cryptocurrency units can be created, the system
defines the circumstances of their origin and how to determine the
ownership of these new units.
• Ownership of cryptocurrency units can be proved exclusively
cryptographically.
• The system allows transactions to be performed in which
ownership of the cryptographic units is changed. A transaction
statement can only be issued by an entity proving the current
ownership of these units.
• If two different instructions for changing the ownership of the same
cryptographic units are simultaneously entered, the system
performs at most one of them.
 How Does Cryptocurrency Work?
• A cryptocurrency is a digital, encrypted, and decentralized medium
of exchange. Unlike the U.S. Dollar or the Euro, there is no central
authority that manages and maintains the value of a
cryptocurrency. Instead, these tasks are broadly distributed among
a cryptocurrency’s users via the internet.
• You can use crypto to buy regular goods and services, although
most people invest in cryptocurrencies as they would in other
assets, like stocks or precious metals. While cryptocurrency is a
novel and exciting asset class, purchasing it can be risky as you must
take on a fair amount of research to understand how each system
works fully.
• Bitcoin was the first cryptocurrency, first outlined in principle by
Satoshi Nakamoto in a 2008 paper titled “Bitcoin: A Peer-to-Peer
Electronic Cash System.” Nakamoto described the project as “an
electronic payment system based on cryptographic proof instead of
trust.”