1.

INTRODUCTION TO
BLOCKCHAIN
Dr. Sunayana Shivthare
 Agenda
2

 Foundational Computing Concepts (Client-Server

systems vs Peer to Peer Systems)
 Evolution of Blockchain
 Blockchain Vs Database
 Essentials of Blockchain (Blockchain generations, types
of blockchain, benefits and challenges of blockchain
usage)
 Types of Networks
 Layered Architecture of Blockchain Ecosystem
1. Introduction to BlockChain
 Agenda
3

 Components of blockchain
 Cryptography (private and public keys, Hashing &
Digital Signature)
 Consensus Mechanisms
 Cryptocurrency, Digital Currency Bitcoin and
Ethereum
 Smart Contracts
 Blockchain use cases
1. Introduction to BlockChain
 Foundational Computing
Concepts
4

 Client-Server systems
 Peer to Peer Systems

1. Introduction to BlockChain
 Client-Server Systems
5

1. Introduction to BlockChain
6

1. Introduction to BlockChain
 Client-Server Systems
7

1. Introduction to BlockChain
 Client-Server Systems
8

 This model are broadly used network model.

 In Client-Server Network, Clients and server are
differentiated, Specific server and clients are present.
 In Client-Server Network, Centralized server is used
to store the data because its management is
centralized.
 In Client-Server Network, Server respond the services
which is request by Clients.
1. Introduction to BlockChain
 Peer to Peer Systems
9

1. Introduction to BlockChain
10

1. Introduction to BlockChain
 Peer to Peer Systems
11

 This model does not differentiate the

clients and the servers, In this each and
every node is itself client and server.
 In Peer-to-Peer Network, Each and every
node can do both request and respond
for the services.

1. Introduction to BlockChain
 Client-Server systems vs Peer
to Peer Systems
12

1. Introduction to BlockChain
 Database
13

 Generally a database is a data structure

which is used for storing information.
 It is a organized collection or storage of data
which is able to store a new data or access a
existing data.
 The data stored in a database can be
organized using a database management
system.
1. Introduction to BlockChain
14

 The database administrator can modify

the data stored in the database.
 A database is implemented using the
client-server network architecture.

1. Introduction to BlockChain
15

1. Introduction to BlockChain
 Centralized Networks
16

 A centralized system has a centralized

control with all administrative authority.
 Such systems are easy to design,
maintain, impose trust, and govern, but
suffer from many inherent limitations.

1. Introduction to BlockChain
 Limitations
17

 They have a central point of failure, so

are less stable.
 They are more vulnerable to attack and
hence less secured.
 Centralization of power can lead to
unethical operations.
 Scalability is difficult most of the time.
1. Introduction to BlockChain
 Decentralized Networks
18

 A decentralized system does not have a

centralized control and every node has equal
authority.
 Such systems are difficult to design, maintain,
govern, or impose trust.
 However, they do not suffer from the
limitations of conventional centralized
systems.
1. Introduction to BlockChain
 Advantages
19

Decentralized systems offer the following advantages:

 They do not have a central point of failure, so more

stable and fault tolerant Attack resistant.

 As no central point to easily attack and hence more

secured Symmetric system with equal authority to

all.
 So less scope of unethical operations and usually

democratic in nature.
1. Introduction to BlockChain
 Distributed Networks
20

 A distributed network is a collection of multiple,

independently run networks that are collectively
managed.
 Every node is independent and interconnected with
each other.
 Each network within a distributed network
architecture can interact with others for the
purpose performance gains and automated
resource sharing.
1. Introduction to BlockChain
 Block Chain
21

1. Introduction to BlockChain
 Blockchain is a ledger
22

1. Introduction to BlockChain
23

 Blockchain is chain of blocks.

1. Introduction to BlockChain
24

1. Introduction to BlockChain
 Blockchain
25

 A blockchain is a growing list of records, called blocks,

that are linked using cryptography.
 Each block contains a cryptographic hash of the
previous block, a timestamp, and transaction data.
 Here, modification of data is not permissible by design.
 It allows decentralized control and eliminates the risks
of modification of data by other parties with sufficient
access to the system.

1. Introduction to BlockChain
 Blockchain
26

 Blockchain is a peer-to-peer system of transacting

values with no trusted third parties in between.
 It is a shared, decentralized, and open ledger of
transactions.
 This ledger database is replicated across a large
number of nodes.
 This ledger database is an append-only database
and cannot be changed or altered.
1. Introduction to BlockChain
 Blockchain
27

 It means that every entry is a permanent

entry.
 Any new entry on it gets reflected on all
copies of the databases hosted on
different nodes.
 There is no need for trusted third parties
to serve as intermediaries to verify,
secure, and 1.settle the transactions
Introduction to BlockChain
 Transaction through an intermediary
vs. peer-to-peer transaction
28

1. Introduction to BlockChain
 What do Block contains?
29

1. Introduction to BlockChain
 What do Block contains?
30

1. Introduction to BlockChain
 What do Block contains?
31

1. Introduction to BlockChain
 Hash
32

1. Introduction to BlockChain
 Previous Hash
33

1. Introduction to BlockChain
 Genesis Block First Block
34

1. Introduction to BlockChain
 History Tracking of
information
35

1. Introduction to BlockChain
 To keep information
unique
36

1. Introduction to BlockChain
 Misuse/Change in
information
37

1. Introduction to BlockChain
 If we try to change the data of any
block
38

1. Introduction to BlockChain
 Next all blocks become
invalid
39

1. Introduction to BlockChain
 Essentials of Blockchain
40

 Blockchain is a decentralized, shared and

trusted distributed ledger or database
that consists of encrypted ‘blocks’ of
information added to chain of existing
blocks of records.
 A Blockchain is an immutable public
ledger for recording transactions.
1. Introduction to BlockChain
41

 A Blockchain ledger stores all of the

transactions processed in peer to-peer
Blockchain network.
 Blockchain’s transactions are called
‘immutable’ because once inserted in a
block, they become permanent and cannot
be modified even by the authors, without
the alteration of all subsequent
1. Introduction to BlockChain
 What is Blockchain?
42

 A blockchain is a constantly growing

ledger which keeps a permanent record of
all the transactions that have taken place
in a secure, chronological, and immutable
way.

1. Introduction to BlockChain
43

 Let's breakdown the definition,

 Ledger: It is a file that is constantly growing.
 Permanent: It means once the transaction goes inside a blockchain,
you can put up it permanently in the ledger.
 Secure: Blockchain placed information in a secure way. It uses very
advanced cryptography to make sure that the information is locked
inside the blockchain.
 Chronological: Chronological means every transaction happens
after the previous one.
 Immutable: It means as you build all the transaction onto the
blockchain, this ledger can never be changed.
1. Introduction to BlockChain
44

 A blockchain is a chain of blocks which

contain information.
 Each block records all of the recent
transactions, and once completed goes into
the blockchain as a permanent database.
 Each time a block gets completed, a new
block is generated.
1. Introduction to BlockChain
 Why Blockchain?
45

 Automated Operations:
 In Blockchain networks, operations are fully
automated through software implications.
 Private companies are not needed to oversee the
operations.
 Open-source Technology: All operations
within a Blockchain network are carried out by
the open-source community.
1. Introduction to BlockChain
46

 Secure: It is impossible for anyone to

tamper with transaction or ledger
records present in Blockchain.

1. Introduction to BlockChain
47

 Distributed Architecture:
 Blockchain works in distributed mode in
which records are stored in all nodes in the
network.
 If one node goes down, it doesn’t impact the
other nodes or records.

1. Introduction to BlockChain
48

 Worldwide Adaptation: Blockchain has been

adopted worldwide and has the backing of many
investors from both banking and non banking
sectors.
 Flexible:
 The Blockchain network can be programmed using
the basic programming concepts.
 This flexibility makes Blockchain networks easy to
operate on.
1. Introduction to BlockChain
 Key differences between Blockchain and
a Database
49

1. Introduction to BlockChain
50

1. Introduction to BlockChain
51

1. Introduction to BlockChain
 Evolution of Block Chain
52

 Block chain Technology is introduced in

1990’s.
 In 1991 two scientiests Stuart Haber
and W. Scott Stornetta introduced
this concepts.
 But actually it was implemented in 2008
by Satoshi Nakamoto in the form of
Bitcoin. 1. Introduction to BlockChain
53

1. Introduction to BlockChain
 Blockchain Version
54

 The brief description of the evolution of

blockchain technology and
its versioning from 1.0 to 3.0 are
explained below.

1. Introduction to BlockChain
55

 Blockchain 1.0: Currency

 Blockchain 2.0: Smart Contracts

 Blockchain 3.0: DApps

1. Introduction to BlockChain
 Characteristics of Blockchain Technology
56

1. Introduction to BlockChain
 Concepts of Blockchain
Technology
57

 A Blockchain consists of a number of blocks, each

containing data relating to digital assets and a hash
header that links it to the previous block in the chain.
 The blocks in Blockchain are linked together, and new
blocks can be added and removed, following process of
consensus.
 Also, those involved the transaction can share the
distributed digital ledger without needing a centralized
intermediary.
1. Introduction to BlockChain
58

 A genesis block/main block is the first block of

the Blockchain.
 A Blockchain consists of a number of blocks,
each containing data relating to digital assets
and a hash header that links it to the previous
block in the chain.
 The blocks in Blockchain are linked together,
and new blocks can be added and removed.
1. Introduction to BlockChain
59

 Also, those involved the transaction can

share the distributed digital ledger
without needing a centralized
intermediary.
 A genesis block/main block is the first
block of the Blockchain.

1. Introduction to BlockChain
 Basic Terms of Blockchain
Technology
60

 Block is a data structure that stores records,

a set of transactions that is then shared
among all nodes in the network.
 A block contains block header(metadata) and
block data(list of validated and authentic
transactions).
 Chain is term for sequence of blocks
arranged in a specific order.
1. Introduction to BlockChain
61

 Transaction refers to the smallest

building block of Blockchain system.
 Transaction in a Blockchain represents
interaction between parties that is
transfer of currency between two users.
 Each block in a Blockchain can contain
zero or more transactions.
1. Introduction to BlockChain
62

 The cryptographic hash functions takes input data

like text,image can be any size and returns outputs of
fixed size.
 In Blockchain network used for asymmetric-key
cryptography in secured system.
 It consists of public key and private key of two pair of
key systems.
 The encryption key is public and decryption key is
private key.
1. Introduction to BlockChain
63

 In Blockchain network, the addresses

are used only once, using cryptographic
hash function.
 Ledgers is a collection of transactions,
every user maintains their own copy of
the ledger.

1. Introduction to BlockChain
64

 Consensus models determining the next block in the

system, verify and construct a valid block and add to
chain, by computing a cryptographic block hash then
generating new currency.
 A fork (new branch of sequence of blocks) in
Blockchain is to impart change in the previous version
or apart from existing protocol of the Blockchain.
 Smart contracts are the code and data deployed in
the Blockchain network.
1. Introduction to BlockChain
 Types of Blockchain
65

 Before we get into details of the different types of

blockchains, let us first learn what similarities do they
share.
 Every blockchain consists of a cluster of nodes
functioning on a peer-to-peer (P2P) network system.
 Every node in a network has a copy of the shared ledger
which gets updated timely.
 Each node can verify transactions, initiate or receive
transactions and create blocks.
1. Introduction to BlockChain
 Types of Blockchain
66

1. Introduction to BlockChain
67

1. Introduction to BlockChain
 1. Public Blockchain
68

1. Introduction to BlockChain
 1. Public Blockchain
69

 A public blockchain is a non-restrictive,

permission-less distributed ledger system.
 Anyone who has access to the internet can sign in
on a blockchain platform to become an authorized
node and be a part of the blockchain network.
 A node or user which is a part of the public
blockchain is authorized to access current and
past records, verify transactions.
1. Introduction to BlockChain
70

 The most basic use of public blockchains is for mining

and exchanging cryptocurrencies.
 Thus, the most common public blockchains are Bitcoin
and Litecoin blockchains.
 Public blockchains are mostly secure if the users strictly
follow security rules and methods.
 However, it is only risky when the participants don’t
follow the security protocols sincerely.
 Example: Bitcoin, Ethereum, Litecoin
1. Introduction to BlockChain
 2. Private Blockchain
71

1. Introduction to BlockChain
 2. Private Blockchain
72

 A private blockchain is a restrictive or permission

blockchain operative only in a closed network.
 Private blockchains are usually used within an
organization or enterprises where only selected
members are participants of a blockchain network.
 The level of security, authorizations, permissions,
accessibility is in the hands of the controlling
organization.
1. Introduction to BlockChain
73

 Thus, private blockchains are similar in use as a

public blockchain but have a small and restrictive
network.
 Private blockchain networks are deployed for
voting, supply chain management, digital
identity, asset ownership, etc.
 Examples of private blockchains are; Multichain and
Hyperledger projects (Fabric, Sawtooth), Corda, etc.
1. Introduction to BlockChain
 Applications
74

1. Introduction to BlockChain
 3.Consortium Blockchain
75

 A consortium blockchain is a semi-decentralized

type where more than one organization manages a
blockchain network.
 This is contrary to what we saw in a private
blockchain, which is managed by only a single
organization.
 More than one organization can act as a node
in this type of blockchain and exchange information
or do mining.
1. Introduction to BlockChain
76

 Consortium blockchains are typically

used by banks, government
organizations, etc.
 Examples of consortium blockchain are;
Energy Web Foundation, R3, etc.

1. Introduction to BlockChain
 4.Hybrid Blockchain
77

1. Introduction to BlockChain
 4.Hybrid Blockchain
78

 A hybrid blockchain is a combination of the private

and public blockchain.
 It uses the features of both types of blockchains
that is one can have a private permission-based
system as well as a public permission-less system.
 With such a hybrid network, users can control who
gets access to which data stored in the blockchain.

1. Introduction to BlockChain
79

 Only a selected section of data or records from the

blockchain can be allowed to go public keeping the
rest as confidential in the private network.
 The hybrid system of blockchain is flexible so that
users can easily join a private blockchain with
multiple public blockchains.
 A transaction in a private network of a hybrid
blockchain is usually verified within that network.

1. Introduction to BlockChain
80

 But users can also release it in the public

blockchain to get verified.
 The public blockchains increase the hashing
and involve more nodes for verification.
 This enhances the security and transparency of
the blockchain network.
 Example of a hybrid blockchain is Dragonchain
1. Introduction to BlockChain
 Applications
81

1. Introduction to BlockChain
 Sr.N Public Blockchain Private Consortium
o Blockchain Blockchain
1 Anyone can access Not everyone Selected members
82
set of nodes. can access set of can access a set of
nodes. nodes.
2 Not Centralized Centralized Partially Centralized
3 Low Efficiency High Efficiency High Efficiency

4 Any one can make Not everyone Selected members

transactions can make of the consortium
transactions can make
transaction
5 Immutable Mutable Mutable

6 It is a It is a It is a permissioned
permissionless 1. Introduction to BlockChain
permissioned blockchain.
 Benefits of Blockchain
Technology
83

1. Digital freedom and

Decentralization :
 The entire Blockchain network is a
decentralized one as it gives every user its
digital freedom.
 There is no central authority that controls
all the other users in the network.
 Every node is independent in functioning.
1. Introduction to BlockChain
84

2. New-age Technology Integration:

 Blockchain provides the universal infrastructure which is

flexible to integrate with all sorts of old as well as new

technologies.
 It has various applications in the domain of voting,

banking, commodity trading, supply chain

management etc.
 In addition to this, the concept of Blockchain, smart

contracts and distributed ledger system works perfectly

well for the Internet of Things(IoT).
1. Introduction to BlockChain
85

3. Anonymity and Privacy:

 The Blockchain network has tight

security techniques for the transaction to

take place securely.
 For users that use Blockchain for

cryptocurrencies like Bitcoin, can do so

anonymously keeping their privacy and
security ensured.
1. Introduction to BlockChain
86

4. Security:
 Blockchain technology is highly secured.

 The security method in the Blockchain is cryptography

that ensures that hackers cannot change or tamper with

the data records stored in the blocks of the Blockchain.
 Encrypted hash functions link all the blocks in the

Blockchain and so it is impossible to do fraud or

unauthorized transactions in the Blockchain network.

1. Introduction to BlockChain
87

5. No Intermediaries:
 Due to the point-to-point nature of the

blockchain network, transaction take place

directly between two nodes without mediator.
 There is no need for an intermediary like

paypal,any bank to facilitate transaction

between two parties.
1. Introduction to BlockChain
88

6. Immutable Data:
 One cannot change a data record or

information that is once stored or added as

a block in the Blockchain.
 The data in the Blockchain is immutable

that is no one can make changes in it and it

gets a permanent place in the Blockchain.
1. Introduction to BlockChain
89

7.Transparency:
 The digital distributed ledger system provides a

great deal of transparency to all those who are

part of the network.
 Each node in a network has its own copy of the

ledger and has the right to verify transactions.

 Due to this, no one can hide their details and

trasactions from the other users.

1. Introduction to BlockChain
90

8. Low Transaction Cost:

As there are no intermediaries in a
transaction within the Blockchain network,
the transaction costs are also lower.

1. Introduction to BlockChain
91

9.Fatser Processing:
 In Blockchain technology speed of the

transaction increased to very high extent.

 Before this ,the overall banking process

takes around 2 to 3 days to resolve but after

the introduction of Blockchain, the time
reduce to nearly minutes or even seconds.
1. Introduction to BlockChain
 Limitations of Blockchain
Technology
92

1. Higher Cost:
 The underlying cost of implementing

Blockchain Technology is huge.

1. Introduction to BlockChain
93

2. Scalability:
 Blockchains are not scalable.

 The transactions in Blockchain are

completed depending on the network

congetion means, the more people or
nodes join the network,the chances of
slowing down is more.
1. Introduction to BlockChain
94

3. Immutable:
 In Blockchain one cannot make any

modifications/updations to any of the

records.
 The data once return in a block cannot

be removed or erased.

1. Introduction to BlockChain
95

4. Private Keys:
 To access the assets or the information

stored by the user in the Blockchain,

they need private keys.
 If a user who forgets its private key in

Blockchain are eventually logged out of

their wallet and no one can get it back.
1. Introduction to BlockChain
96

5. Expertise Knowledge:
 Implementing and managing a

Blockchain project is hard.

 It requires thorough knowledge from the

business to go through the whole

process.

1. Introduction to BlockChain
97

6. Interoperability:
 There are multiple types of Blockchain

networks which work differently, trying

to solve problem in their own unique way
which leads to interoperability issues
where these chains are not able to
communicate effectively.
1. Introduction to BlockChain
 Challenges of Blockchain
98

 Blockchain requires thousands of hours of human

manpower and money for design of software and
back-end programming which is needed for
integration of Blockchain to existing business
networks.
1. Scalability: Blockchains are having trouble
effectively supporting a large number of users on
the network. There is need to increase capacity of
Blockchain.
1. Introduction to BlockChain
99

2. Security:
 The Blockchain maintains confidentiality

to protect users from hackers and hence

provide privacy.
 But the Blockchain network can be used

for illegal activities and trade purposes.

1. Introduction to BlockChain
100

4. Cost:
 The Blockchain Technology does not come free.

 To validate transactions,Bitcoin uses the “proof

of work(PoW)” system.
 The Bitcoin requires appreciable amount of

computational power to validate transactions.

 This requires money to process the things.

1. Introduction to BlockChain
101

5. Privacy:
 The Bitcoin Blockchain is designed to be

publicly visible.
 All the information pertaining to a

transaction is available for anyone to

view.

1. Introduction to BlockChain
102

1. Introduction to BlockChain
103

1. Introduction to BlockChain
 Layered Architecture of Blockchain
Ecosystem
104

 There are five layers of Layered

Architecture of blockchain.

1. Introduction to BlockChain
105

1. Introduction to BlockChain
 1. Hardware Infrastructure
Layer
106

1. Introduction to BlockChain
 1. Hardware Infrastructure
Layer
107

 Blockchain is the P2P network of

computers that computes transactions,
validates and stores them in an ordered
form in a shared ledger.
 This results in a distributed database that
records all the data, transactions and
various relevant information.
1. Introduction to BlockChain
 1. Hardware
Infrastructure Layer
108

 Each computer in a P2P network is

known as node.
 Nodes are accountable for validating
transactions, organizing them into
blocks, broadcasting them to the
blockchain network, and it keeps on.

1. Introduction to BlockChain
 1. Hardware
Infrastructure Layer
109

 While reaching consensus the nodes

commit the block to the blockchain
network and update their local ledger
copy.
 Notably nodes are the core of this layer.
 When a device gets connected to a
blockchain network then it is termed and
used as a node
1. Introduction to BlockChain
 2.Data layer
110

1. Introduction to BlockChain
 2.Data layer
111

1. Introduction to BlockChain
112

 Data structure of a blockchain are represented as a

linked-list of blocks where transactions are ordered.
 The blockchain's data structure includes two primary
elements i.e pointers and a linked list.
 Pointers are the variables that refers to the
location of another variable and
 Linked list is a list of chained blocks where each
block has data and pointers to the previous
block.
1. Introduction to BlockChain
113

 Transactions are digitally signed in blockchain to

ensure the security and integrity of the data stored into
it.
 Transactions are signed using a private key and anyone
having the public key can verify the signer.
 The digital signature checks for tampering of
information.
 Digital signatures guarantee unity as the data that is
encrypted is also signed.
1. Introduction to BlockChain
114

 Therefore, any tampering will invalidate the

signature.
 As the data is encrypted it cannot be detected.
 Even if it is detected it cannot be tampered again.
 A digital signature secures the sender's or owner’s
identity as well.
 Hence, signatures are legally associated with the
owner and cannot be rejected.
1. Introduction to BlockChain
 The following diagram shows the connected
list of blocks present in a blockchain:
115

1. Introduction to BlockChain
 3. Network layer
116

1. Introduction to BlockChain
 3. Network layer
117

 The network layer which is also known as the P2P layer is

the one that is responsible for internode communication.
 Network layer takes care of discovery, transactions, and
block propagation.
 This layer can also called as propagation layer.
 This P2P layer ensures that nodes can discover each other
and able to communicate, propagate and synchronize with
each other to maintain valid current state of the
blockchain network.

1. Introduction to BlockChain
 4.Consensus layer
118

 P2P network is a computer network where nodes are

distributed and share the network’s workload to reach the end
goal.
 Nodes perform transactions in the blockchain.
 There are two kinds of nodes i.e full node and light node.
 Full nodes guarantees the verification and validation of
transactions, mining and enforcement of consensus rules.
 Light nodes only keep the header of the blockchain
and can send transactions.

1. Introduction to BlockChain
119

1. Introduction to BlockChain
120

 The consensus layer is the core to the

existence of blockchain platforms.
 The consensus layer is the most critical and
crucial layer for any blockchain.
 Consensus layer is responsible for validating
the blocks, ordering the blocks and
ensuring everyone agrees on it.
1. Introduction to BlockChain
 5.Application Layer
121

1. Introduction to BlockChain
122

 The application layer comprised of

 smart contracts,
 chaincode and
 DApps.

1. Introduction to BlockChain
123

 Application layer is further divided

into two sub-layers
i) Application Layer
ii) Execution Layer.

1. Introduction to BlockChain
124

 Application layer comprise of the

applications that are used by end users to
interact with the blockchain network.
 It comprises of scripts, APIs, user interfaces
and frameworks.
 For these applications blockchain network is
the back-end system and they connect with
blockchain network via APIs.
1. Introduction to BlockChain
125

 Execution layer is the sublayer which consists of

smart contracts, underlying rules and chaincode.
 A transaction travels from application layer to
execution layer however the transaction is
validated and executed at the semantic layer.
 Applications send instructions to execution layer
which performs the execution of transactions and
ensure the deterministic nature of the blockchain.

1. Introduction to BlockChain
 Components of Blockchain
126

1. Introduction to BlockChain
 1.Node Application
127

 A node application specify that every

computer, connected to the internet, if
its wants to participate in.

1. Introduction to BlockChain
 2. Distributed/Shared
Ledger
128

 The distributed ledger means the shared database

and contents accessible to the participants of a
particular Blockchain system.
 The shared ledger lists down the rules or guidelines
that need to be followed.
 For example if we are running a Bitcoin node
application, then we have to follow by all the rules
set down in the program code of the Bitcoin node
application.
1. Introduction to BlockChain
 Consensus Algorithm
129

 Consensus algorithms are one of major

components of a Blockchain system and
they play a vital role in the Blockchain
performance and security.
 The consensus algorithm provides
stability and security to the data in the
Blockchain
1. Introduction to BlockChain
130

1. Introduction to BlockChain
 Core Components of Blockchain
Architecture
131

1.Transaction is the smallest building block of a

Blockchain system(records, information etc) that
serves as the purpose of the Blockchain.
2. Block is a data structure used for keeping a
set of transactions which is distributed to all
nodes in the network.
3. Chain is a sequence of blocks in a specific
order.
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132

4. Node is a user or computer within the

Blockchain architecture.
5. Consensus is a set of rules and
arrangements to carry out Blockchain
operations.
6. Miners are the specific nodes which perform
the block verification process before adding
anything to the Blockchain structure.
1. Introduction to BlockChain
 Cryptography
133

 Cryptography is an essential for Blockchain

technology.
 The role of cryptography in Blockchain in
terms of maintaining the trust and eliminating
intermediates.
 Cryptography is the science and art of
transforming messages to make them
secure and immune to attacks.
1. Introduction to BlockChain
 How cryptography works?
134

1. Introduction to BlockChain
135

1. Introduction to BlockChain
 Plain text and Ciphertext
136

 The message to be encrypted is called plaintext.

 The secrete message which is being transmitted.
 It is the output of the Encryption process.
 Encryption is the process of transforming plaintext
to ciphertext using an Encryption algorithm.
 Decryption is the process of transforming
ciphertext to plaintext using the Decryption
algorithm.
1. Introduction to BlockChain
 Cipher
137

 Encryption and decryption algorithms

are referred to as a cipher.
 It is used to refer to various categories of
cryptography algorithms.

1. Introduction to BlockChain
 Key
138

 In terms of Cryptography, a key is a number (s)

that operates an algorithm.
 The process of message encryption requires an
encryption algorithm, an encryption key, and
the plaintext which forms the ciphertext.
 The process of message decryption requires a
decryption algorithm, a decryption key, and the
ciphertext which gives the plaintext.
1. Introduction to BlockChain
 Private and Public Keys
139

 Public keys are designed to be public

and do not to be protected
 They can be freely given to anyone or
even posted on the internet.
 The private key must be kept
confidential and never shared.

1. Introduction to BlockChain
 Categories of Cryptography
140

 Cryptography algorithms are categorized

into two types: Symmetric Key and
Asymmetric Key.

1. Introduction to BlockChain
 Symmetric Key
141

 It is also called Secret Key or Private

Key cryptography.
 In this sender and receiver use the same
key for encryption and decryption.
 The key is shared by the sender and
receiver and must be kept secret.

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142

1. Introduction to BlockChain
 Asymmetric Key
143

 It is also called Public Key cryptography.

 In this sender and receiver use two keys for encryption
and decryption.
 These keys are private key and public key.
 The public key is known to both sender and receiver.
 When Alice has to send a message to Bob then he uses a
public key for encryption.
 After receiving the message by Bob he uses a private key
for the decryption of a message.
1. Introduction to BlockChain
144

1. Introduction to BlockChain
 Comparison
145

 We can take Encryption and Decryption as electronic

locking and unlocking.
 In Symmetric-key Cryptography the sender of the message
encrypt the message using a key and the receiver of the
message decrypts the message using the same key.
 In Asymmetric key Cryptography, the sender of the
message encrypts the message using one key, and the
receiver of the message decrypts the message using
another key.

1. Introduction to BlockChain
146

1. Introduction to BlockChain
 Modern cryptography in Blockchain
has the following objectives or goals:
147

 Confidentiality : Only the intended or authorized

recipient can understand the message. It can also
be referred to as privacy or secrecy.
 Data Integrity : Data cannot be modified by any
one intentionally or by unintended/accidental errors.
 Though data integrity cannot prevent the alteration
of data, it can provide a means of detecting whether
the data was modified.

1. Introduction to BlockChain
148

 Authentication : The authenticity of the

sender is assured and verifiable by the
receiver.
 Non-repudiation : The sender, after
sending a message, cannot deny later that
they sent the message. This means that
an entity (a person or a system) cannot
refuse the ownership of a previous
1. Introduction to BlockChain
 Hashing
149

 Hashing refers to the concept of taking

an arbitrary amount of input data, apply
some algorithm to it, and generating a
fixed-size output data called the hash.

1. Introduction to BlockChain
150

 Hash Functions
 Hash functions are used to provide the
functionality of a single view of
blockchain to every participant. And
generally, blockchains use the SHA-256

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151

1. Introduction to BlockChain
152

 A hash function takes an input string (numbers, alphabets,

media files) of any length and transforms it into a fixed length.

 The fixed bit length can vary (like 32-bit or 64-bit or 128-bit or
256-bit) depending on the hash function which is being used.

 The fixed-length output is called a hash.

 This hash is also the cryptographic by product of a hash algorithm

1. Introduction to BlockChain
153

 The hash algorithm has certain unique properties:

 It produces a unique output (or hash).
 It is a one-way function.
 In the context of cryptocurrencies like Bitcoin the blockchain uses
this cryptographic hash function's properties in its consensus
mechanism.
 A cryptographic hash is a digest or digital fingerprints of a
certain amount of data.
 In cryptographic hash functions, the transactions are taken as
an input and run through a hashing algorithm which gives an
output of a fixed size.
1. Introduction to BlockChain
154

 Hashing in Blockchain assures the users that the data

transmitted is not changed.
 This can be done by comparing the hash values of the
input data.
 Most of the Blockchain implementation uses Secure Hash
Algorithm(SHA) that generates output of size 256-bits.
 SHA-256 hashing algorithm produces an output of 32
bytes(256-bits) usually displayed as 64 hexadecimal
characters.
1. Introduction to BlockChain
155

 Other than SHA-256, Keccak and

RIPEMD-60 are some other hashing
algorithms used in Blockchain network.
 Hashing techniques are used for various
operations in Blockchain such as
address creation, securing block
data and block header etc.
1. Introduction to BlockChain
156

 Hashing is a technique to convert any function that

can be used to map data of arbitrary size to data of
fixed size.
 The function which is used to perform this
computation is called a hash function.
 When a user sends a message to another user over a
network, a hash of the intended message is generated
and encrypted by using a hash function, and is sent
along with the message.
1. Introduction to BlockChain
157

 The result of the hashing is known as a digest or hash.

 When the message is received ,the receiver decrypts
the hash as well as the message.
 Then , the receiver creates another hash from the
message.
 If the two hashes(received and created) are identical
when compared, then it can be said that a secure
transmission has occurred and the message has been
correctly received
1. Introduction to BlockChain
158

1. Introduction to BlockChain
 SHA-256
159

 A Bitcoin's blockchain uses SHA-256

(Secure Hash Algorithm) hashing
algorithm.

 In 2001, SHA-256 Hashing algorithm was

developed by the National Security
Agency (NSA) in the USA.
1. Introduction to BlockChain
16
0

1. Introduction to BlockChain
16
1

1. Introduction to BlockChain
 Digital Signature
162

 Digital signature is major parts of asymmetric-key cryptography.

 When A sends a message to B, B must verify the sender's
identity.
 He must be certain that the message is from A and not
from C (third person).
 B can request that A electronically sign the communication.
 We can say that an electronic signature can establish A's
identity as the message's sender.
 This sort of signature is known as a digital signature.
1. Introduction to BlockChain
163

 A digital signature is a mathematical

scheme for presenting the authenticity of
digital messages or documents.

1. Introduction to BlockChain
164

 A valid digital signature gives a

recipient reason to believe that the
message was created by a claimed
sender (authentication), that the
sender cannot deny having sent the
message (non-repudiation), and
that the message was not altered in
1. Introduction to BlockChain
165

Messag
Encrypt
e
ed Hash

1. Introduction to BlockChain
166

Messag
e

Encrypt
ed Hash

1. Introduction to BlockChain
167

1. Introduction to BlockChain
168

 Signatures generated on the Blockchain are

referred as digital.
 Digital signatures are an initial building block
in Blockchains, they are in the first place used
to verify the authenticity of transactions.
 Digital signatures is a particular type of
electronic signature that encrypts the signed
document.
1. Introduction to BlockChain
169

 Digital signature is a digital code which included

with an electronically transmitted document, with
this digital code we can verify first of all whether
the content of the document is authenticated or
not.
 Digital signatures are used in Blockchain where
the transactions are digitally signed by senders
using their private key before broadcasting the
transaction to the network.
1. Introduction to BlockChain
 What Is a Consensus
Mechanism?
170

 In any centralized system, like a database holding

key information about driving licenses in a country,
a central administrator has the authority to
maintain and update the database.
 The task of making any updates—like
adding/deleting/updating names of people who
qualified for certain licenses—is performed by a
central authority who remains the sole in-charge of
maintaining genuine records
1. Introduction to BlockChain
171

• Public blockchains that operate as

decentralized, self-regulating systems
work on a global scale without any single
authority.
They involve contributions from hundreds
of thousands of participants who work on
verification and authentication of
transactions1.occurring on the blockchain,
Introduction to BlockChain
 What Is a Consensus
Mechanism?
172

1. Introduction to BlockChain
173

1. Introduction to BlockChain
174

 A consensus mechanism refers to any

number of methodologies used to
achieve agreement, trust, and security
across a decentralized computer
network.

1. Introduction to BlockChain
175

1. Introduction to BlockChain
176

1. Introduction to BlockChain
 Consensus mechanisms
Algorithms
177

 Proof-of-work (PoW)
 Proof-of-stake (PoS)
 Proof-of-Authority(PoA)
 Proof-of-Elapsed Time(PoET)
 Proof-of-Deposite(PoD)
 Proof-of-Capacity(PoC)
1. Introduction to BlockChain
178

 In the context of
blockchains and
cryptocurrencies,
1. proof-of-work (PoW)

2. proof-of-stake (PoS)

are two of the most

prevalent consensus
mechanisms.
1. Introduction to BlockChain
179

1. Introduction to BlockChain
 1. Proof of work (PoW)
180

 The proof of work (PoW) is a common consensus

algorithm used by the most popular cryptocurrency
networks like bitcoin and litecoin.
 It requires a participant node to prove that the work
done and submitted by them qualifies them to receive
the right to add new transactions to the blockchain.
 However, this whole mining mechanism of bitcoin
needs high energy consumption and a longer
processing time
1. Introduction to BlockChain
 1. Proof of work (PoW)
181

1. Introduction to BlockChain
 Proof of stake (PoS)
182

 The proof of stake (PoS) is another common consensus

algorithm that evolved as a low-cost, low-energy
consuming alternative to the PoW algorithm.
 It involves the allocation of responsibility in maintaining
the public ledger to a participant node in proportion to
the number of virtual currency tokens held by it.
 However, this comes with the drawback that it
incentivizes cryptocoin hoarding instead of spending.

1. Introduction to BlockChain
 Cryptocurrency
183

1. Introduction to BlockChain
 Cryptocurrency
184

1. Introduction to BlockChain
185

1. Introduction to BlockChain
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1. Introduction to BlockChain
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1. Introduction to BlockChain
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1. Introduction to BlockChain
189

1. Introduction to BlockChain
 Cryptocurrency – Meaning and
Definition
190

 Cryptocurrency, sometimes called crypto-

currency or crypto, is any form of currency
that exists digitally or virtually and
uses cryptography to secure
transactions.
 Cryptocurrencies don't have a central
issuing or regulating authority,
instead using a decentralized
1. Introduction to BlockChain system
 What is Cryptocurrency?
191

 Cryptocurrency is a digital payment system that

doesn't rely on banks to verify transactions.
 It’s a peer-to-peer system that can enable
anyone anywhere to send and receive payments.
 Instead of being physical money carried around
and exchanged in the real world, cryptocurrency
payments exist purely as digital entries to an
online database describing specific transactions.
1. Introduction to BlockChain
192

 When you transfer cryptocurrency funds,

the transactions are recorded in a public
ledger. Cryptocurrency is stored in digital
wallets.

1. Introduction to BlockChain
193

 Cryptocurrency received its name because

it uses encryption to verify transactions.
 This means advanced coding is involved in
storing and transmitting cryptocurrency
data between wallets and to public ledgers.
 The aim of encryption is to provide security
and safety.
1. Introduction to BlockChain
194

 The first cryptocurrency was Bitcoin,

which was founded in 2009 and remains
the best known today.

1. Introduction to BlockChain
 Cryptocurrency examples
195

 Bitcoin:
 Founded in 2009, Bitcoin was the first
cryptocurrency and is still the most commonly
traded.
 The currency was developed by Satoshi
Nakamoto – widely believed to be a pseudonym
for an individual or group of people whose
precise identity remains unknown.
1. Introduction to BlockChain
196

 Ethereum:
 Developed in 2015, Ethereum is a
blockchain platform with its own
cryptocurrency, called Ether (ETH) or
Ethereum.
 It is the most popular cryptocurrency
after Bitcoin.
1. Introduction to BlockChain
197

Litecoin:
 This currency is most similar to bitcoin

but has moved more quickly to develop

new innovations, including faster
payments and processes to allow more
transactions.

1. Introduction to BlockChain
198

Ripple:
 Ripple is a distributed ledger system that

was founded in 2012.

 Ripple can be used to track different kinds

of transactions, not just cryptocurrency.

 The company behind it has worked with

various banks and financial institutions.

1. Introduction to BlockChain
199

 Cryptocurrencies run on a distributed public ledger

called blockchain, a record of all transactions updated
and held by currency holders.
 Units of cryptocurrency are created through a process
called mining, which involves using computer power
to solve complicated mathematical problems that
generate coins.
 Users can also buy the currencies from brokers, then
store and spend them using cryptographic wallets.
1. Introduction to BlockChain
 Bitcoin
200

 Launched in 2009, Bitcoin is the world's

largest cryptocurrency by market
capitalization.
 Bitcoin is created, distributed, traded,
and stored with the use of a
decentralized ledger system, known as a
blockchain.
1. Introduction to BlockChain
201

 Bitcoin's history as a store of value has

been turbulent; it has gone through
several cycles of boom and bust over its
relatively short lifespan.
 As the earliest virtual currency to meet
widespread popularity and success,
Bitcoin has inspired a host of other
cryptocurrencies
1. Introductionin its wake.
to BlockChain
 Ethereum (ETH)
202

 Ethereum (ETH), is a decentralized software platform

that enables smart contracts and decentralized
applications (dApps) to be built and run without any
downtime, fraud, control, or interference from a third
party.
 The goal behind Ethereum is to create a
decentralized suite of financial products that anyone
in the world can freely access, regardless of
nationality, ethnicity, or faith.
1. Introduction to BlockChain
203

 This aspect makes the implications for

those in some countries more compelling,
as those without state infrastructure and
state identifications can get access to bank
accounts, loans, insurance, or a variety of
other financial products.

1. Introduction to BlockChain
 Smart contracts
204

 Smart contracts are simply programs stored on a

blockchain that run when predetermined conditions
are met.
 They typically are used to automate the execution
of an agreement so that all participants can be
immediately certain of the outcome, without any
intermediary’s involvement or time loss.
 They can also automate a workflow, triggering the
next action when conditions are met.
1. Introduction to BlockChain
205

 Smart contracts work by following simple “if/when…

then…” statements that are written into code on a
blockchain.
 A network of computers executes the actions when
predetermined conditions have been met and verified.
 These actions could include releasing funds to
the appropriate parties, registering a vehicle,
sending notifications, or issuing a ticket.

1. Introduction to BlockChain
206

 The blockchain is then updated when the

transaction is completed.
 That means the transaction cannot be changed,
and only parties who have been granted
permission can see the results.
 Within a smart contract, there can be as many
stipulations as needed to satisfy the participants
that the task will be completed satisfactorily
1. Introduction to BlockChain
 Benefits of smart
contracts
207

 Speed, efficiency and accuracy

 Once a condition is met, the contract is
executed immediately.
 Because smart contracts are digital and
automated, there’s no paperwork to process
and no time spent reconciling errors that
often result from manually filling in
documents.
1. Introduction to BlockChain
208

 Trust and transparency

 Because there’s no third party involved,
and because encrypted records of
transactions are shared across
participants, there’s no need to question
whether information has been altered for
personal benefit.
1. Introduction to BlockChain
209

 Security
 Blockchain transaction records are encrypted,
which makes them very hard to hack.
 Moreover, because each record is connected
to the previous and subsequent records on a
distributed ledger, hackers would have to alter
the entire chain to change a single record.

1. Introduction to BlockChain
210

 Savings
 Smart contracts remove the need for
intermediaries to handle transactions
and, by extension, their associated time
delays and fees.

1. Introduction to BlockChain
 Applications of smart
contracts
211

1. Insurance: Smart contracts can identify false

claims and prevent forgeries.
2. Copy Righted Content: Smart contracts can
protect ownership rights such as music or books.
3. Transportations: Shipment of goods can be
easily tracked using smart contracts.
4. Employment Contract: Smart contracts can
be helpful to facilitate wage payments
1. Introduction to BlockChain
 Blockchain Use Cases
212

 Blockchain technology’s core characteristics

include decentralization, transparency,
immutability, and automation.
 These elements can be applied to various
industries, creating a multitude of use cases.
Here are what we believe to be the most
pertinent blockchain use cases for enterprises,
institutions, and governments.
1. Introduction to BlockChain
213

 Capital Markets
 Central Bank Digital Currencies
 Decentralized Finance
 Digital Identity
 Energy and Sustainability
 Finance
1. Introduction to BlockChain
214

 Government and Public sector

 Healthcare and Lifesciences
 Insurance
 Law
 Media and Entertainment
 Real Estate
1. Introduction to BlockChain
215

 Social Impact
 Sports
 Supply Chain Management

1. Introduction to BlockChain