Blockchain Technology

Introduction

● It’s been said that blockchain will do for transactions what

the Internet did for information.
● Blockchain allows increased trust and efficiency in the
exchange of almost anything.
● Example- Purchase of House.
“you’ve probably had to sign a huge stack of papers from
a variety of different stakeholders to make that
transaction happen”
● If you’ve ever registered a vehicle, you likely understand
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how painful that process can be.
Introduction

● How challenging it can be to track your medical records.

● Blockchain — most simply defined as a shared, immutable
ledger — has the potential to be the technology that
redefines those processes and many others
● Blockchain is not BitCoin.
● Block Chain is a digital foundation that supports
applications such as Bitcoin.

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What is BlockChain

● Blockchain is a shared, immutable ledger that facilitates

the process of recording transactions and tracking assets
in a business network.
● An asset can be tangible (a house, a car, cash, land) or
intangible (intellectual property, patents, copyrights,
branding).
● Virtually anything of value can be tracked and traded on a
blockchain network

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Tracing Blockchain’s Origin

● Context- Why it is developed

● The need for an efficient, cost-effective, reliable, and
secure system for conducting and recording financial
transactions.
● Throughout history, instruments of trust, such as minted
coins, paper money, letters of credit, and banking
systems, have emerged to facilitate the exchange of value
and protect buyers and sellers.
● Important innovations (for example, telephone lines,
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credit card systems, the Internet, and mobile
Tracing Blockchain’s Origin

● Have improved the convenience, speed, and efficiency of

transactions while shrinking and sometimes virtually
eliminating — the distance between buyers and sellers.
● In spite of this, many business transactions remain
inefficient, expensive, and vulnerable, suffering from the
following limitations:

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Tracing Blockchain’s Origin

● Cash is useful only in local transactions and in relatively

small
● amounts.
● The time between transaction and settlement can be long.
● Duplication of effort and the need for third-party
validation and/or the presence of intermediaries add to
inefficiencies.
● Fraud, cyberattacks, and even simple mistakes add to the
cost and complexity of doing business, exposing all
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participants in the network to risk if a central system —
Tracing Blockchain’s Origin

● Credit card organizations are walled gardens with a high

price of entry. Merchants must pay the high costs of
onboarding, which often involves considerable paperwork
and a time-consuming vetting process.
● Half of the world’s people don’t have access to bank
accounts, requiring them to develop parallel payment
systems to conduct transactions.
● Limited transparency and inconsistent information hinder
the efficient movement of goods in the shipping industry
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Tracing Blockchain’s Origin

● Transaction volumes worldwide are growing exponentially

and will surely magnify the complexities, vulnerabilities,
inefficiencies, and costs of current transaction systems
● To address these challenges and others, the world needs
faster payment networks.

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Tracing Blockchain’s Origin

Course Outcomes
After successful completion of the course, a student will be able to:
● Explain the concepts of Blockchain technology.
● Identify various types of Blockchains and Consensus
Mechanisms, Smart Contracts, and Use cases.
● Use the Blockchain platforms for building solutions to real time
applications.

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 Unit-1 Syllabus
Introduction To Blockchain-
Distributed DBMS – Limitations of Distributed DBMS,
Introduction to Blockchain – History, Definition, Distributed
Ledger, Blockchain Categories –Public, Private, Consortium,
Blockchain Network and Nodes, Peer-to-Peer Network, Mining
Mechanism, Generic elements of Blockchain, Features of
Blockchain, and Types of Blockchain
 Unit-1 Syllabus
● Hash is a Fingerprint of the large amount of data
● Genesis Block-First block in blockchain
● How to timestamp a digital document
 Advantages & Disadvantages of Blockchain
Advantages- It is immutable, transparent, secure, and
decentralized.

Disadvantages-
▪ Scalability- Slow on approving the blocks.
▪ Not every problem could be solved through blockchain
▪ Decentralization
▪ Speed of information flow across the network is slow
What is Blockchain
 What is Blockchain
● Blockchain owes its name to the way it stores transaction data
in blocks that are linked together to form a chain.
● Blocks are cryptographically linked to each other.
 Distributed DBMS
● A distributed database system is a type of database
management system that stores data across multiple computers
or sites that are connected by a network.
● In a distributed database system, each site has its own database,
and the databases are connected to each other to form a single,
integrated system
● The main advantage of a distributed database system is that it
can provide higher availability and reliability than a centralized
database system
● Because the data is stored across multiple sites, the system can
continue to function even if one or more sites fail
 Distributed DBMS
Disadvantages of Distributed Database System :-
● The system becomes complex to manage and control.
● The security issues must be carefully managed.
● The system require deadlock handling during the transaction
processing otherwise the entire system may be in inconsistent
state.
● There is need of some standardization for processing of
distributed database system.
Definition of BlockChain
● Layman's definition: Blockchain is an ever-growing, secure,
shared record keeping system in which each user of the data
holds a copy of the records, which can only be updated if all
parties involved in a transaction agree to update.

● Technical definition: Blockchain is a peer-to-peer, distributed

ledger that is cryptographically-secure, append-only, immutable
(extremely hard to change), and updateable only via consensus
or agreement among peers.
Definition of BlockChain
● Peer-to-peer- means that there is no central controller in the
network, and all participants talk to each other directly
● This property allows for cash transactions to be exchanged
directly among the peers without a third-party involvement,
such as by a bank
● Distributed ledger- a ledger is spread across the network among
all peers in the network, and each peer holds a copy of the
complete ledger.
 Double Spend Problem
● Double spend problem arises when same money can be spent
twice.
● As it is quite easy to make copies of digital data, this becomes a
big issue in digital currencies as you can make many copies of
same digital cash
● How to solve double spending problem??
 What is a Block
● A block is merely a selection of transactions bundled together
and organized logically.
● A transaction is a record of an event, for example, the event of
transferring cash from a sender's account to a beneficiary's
account.
● A block is made up of transactions, and its size varies depending
on the type and design of the blockchain in use.
● A reference to a previous block is also included in the block
unless it is a genesis block
● What is genesis block?
 Attributes of Blockchain
A genesis block is the first block in the blockchain that is
hardcoded at the time the blockchain was first started.
What if genesis block would be deleted?
What are the Attributes of Blockchain?
1. Block header, which is composed of pointer to previous
2. block,
3. Timestamp,
4. Nonce,
5. Merkle root,
6. Block body that contains transactions.
Generic Structure of Block
Generic elements of a blockchain
 Address
● Addresses are unique identifiers used in a blockchain
transaction to denote senders and recipients.
● An address is usually a public key
● addresses are unique
● a single user may not use the same address again and generate
a new one for each transaction
● Newly-created address will be unique
Q. Can We Identify the end user in the Bitcoin?
Ans- End users are usually not directly identifiable, but some
research in removing the anonymity of Bitcoin users has shown that
they can be identified successfully
 Transaction
● A transaction is the fundamental unit of a blockchain. A
transaction represents a transfer of value from one address to
another.
● Block: A block is composed of multiple transactions and other
elements, such as the previous block hash (hash pointer),
timestamp, and nonce.
● Peer-to-peer network: As the name implies, a peer-to-peer
network is a network topology wherein all peers can
communicate with each other and send and
receive messages.
 Scripting or programming language:
● Scripts or programs perform various operations on a transaction
in order to facilitate various functions.
● In Bitcoin, transaction scripts are predefined in a language called
Script.
● Script-sets of commands that allow nodes to transfer tokens from
one address to another.
Q. Script is a limited language? Why?
1. It only allows essential operations
2. does not allow for arbitrary program development
Q. Bitcoin script language cannot be called Turing complete
Q. Bitcoin's scripting language is not Turing complete, whereas
Ethereum Solidity language is.
 State machine:
● A Blockchain can be viewed as a state transition mechanism.
● A state is modified from its initial form to the next one.
● States Example- transaction, execution, validation, and finalization
process.

Node-
● A node in a blockchain network performs various functions
depending on the role that it takes on.
● A node can propose and validate transactions
● Can perform mining to facilitate consensus and secure the blockchain
● Nodes can also perform other functions such as simple payment
verification (lightweight nodes), validation
● Nodes are miners who create new blocks
 Smart contract
● These programs run on top of the blockchain and be executed when
certain conditions are met.
● These programs are enforceable and automatically executable
● The smart contract feature is not available on all blockchain
platforms
 How a Block Chain Generated

How a Block Chain Generated

BlockChain Process
 1. Transction Initiated
▪ A node starts a transaction by first creating it and then digitally
signing it with its private key
▪ The transaction data structure usually consists of some logic of
transfer of value, relevant rules, source and destination
addresses, and other validation information.
▪ Transactions are usually either a cryptocurrency transfer (transfer
of value) or a smart contract invocation that can perform any
desired operation.
▪ A transaction occurs between two or more parties.
2. Transaction is validated and broadcast

▪ A transaction is propagated (broadcast) usually by using data-

dissemination protocols, such as the Gossip protocol, to other
peers that validate the transaction based on preset validity
criteria.
▪ Before a transaction is propagated, it is also verified to ensure
that it is valid.

3. Find new block: When the transaction is received and validated by

special participants called
▪ miners on the blockchain network, it is included in a block, and
the process of mining starts.
▪ This process is also sometimes referred to as “finding a new
 4. New block found
▪ New block found: Once a miner solves a mathematical puzzle (or
fulfills the requirements of
▪ the consensus mechanism implemented in a blockchain), the
block is considered “found” and
▪ finalized. At this point, the transaction is considered confirmed
 5. Add new block to the blockchain:
▪ The newly created block is validated, transactions or smart
contracts within it are executed, and it is propagated to other
peers.
▪ Peers also validate and execute the block. It now becomes part of
the blockchain (ledger), and the next block links itself
cryptographically back to this block. This link is called a hash
pointer.
BlockChain Process
Transaction Execution in Blockchain
 How blockchain works

1. Creating Block- Stage-1

● A node starts a transaction by first creating and then digitally signing
it with its private key.
● A transaction can represent various actions in a blockchain.
● Most commonly this is a data structure that represents transfer of
value between users on the blockchain network.
● Transaction data structure usually consists of some logic of transfer of
value, relevant rules, source and destination addresses, and other
validation information
 How blockchain works
2. A transaction is propagated (flooded) by using a flooding
protocol, called Gossip protocol, to peers that validate the
transaction based on preset criteria.
3. Usually, more than one node are required to verify the
transaction.
4. Once the transaction is validated, it is included in a block,
which is then propagated onto the network. At this point, the
transaction is considered confirmed.
5. The newly-created block now becomes part of the ledger, and
the next block links itself cryptographically back to this block.
This link is a hash pointer
 Blockchain Architecture

Blockchain Architecture
The layered architectural view of a generic blockchain
 The layered architectural view of a generic blockchain

▪ 1.The lowest layer is the Network layer, which is usually the

internet and provides a base communication layer for any
blockchain.
▪ 2. A P2P (peer-to-peer) network runs on top of the Network
layer, which consists of information propagation protocols such as
gossip or flooding protocols.
▪ 3. After this comes the Cryptography layer, which contains
crucial cryptographic protocols that ensure the security of the
blockchain. These cryptographic protocols play a vital role in the
integrity of blockchain processes, secure information
dissemination, and blockchain consensus mechanisms.
▪ This layer consists of public key cryptography and relevant
components such as digital signatures and cryptographic hash
functions.
 The layered architectural view of a generic blockchain
▪ 4. Consensus layer, which is concerned with the usage of various
consensus mechanisms to ensure agreement among different participants
of the blockchain.
▪ This is another crucial part of the blockchain architecture, which consists
of various techniques such as SMR, proof-based consensus mechanisms.
▪ Or traditional (from traditional distributed systems research) Byzantine
fault-tolerant consensus protocols.
▪ 5. Execution layer, which can consist of virtual machines, blocks,
transactions, and smart contracts.
▪ This layer, as the name suggests, provides execution services on the
blockchain, and performs operations such as value transfer, smart
contract execution, and block generation.
▪ Virtual machines such as Ethereum Virtual Machine (EVM), Ethereum
WebAssembly (ewasm), and Zinc VM provide an execution environment for
smart contracts to execute.
 The layered architectural view of a generic blockchain

▪ 6. Applications layer, which is composed of smart contracts,

decentralized
▪ applications, DAOs, and autonomous agents.
▪ This layer can effectively contain all sorts of various user-level
agents and programs that operate on the blockchain.
▪ Users interact with the blockchain via decentralized applications.
Types of Blockchain
 Public Blockchain
● This blockchain is a permissionless, non-restrictive, distributed ledger system
● anyone who is connected to the internet can join a blockchain network and
become a part of it
● The basic use of such blockchain is for exchanging cryptocurrencies and
mining
Example- Bitcoin, Litcoin and Ethereum
Merits:
○ Complete trustable and transparent
○ No intermediaries
○ Secured
Demerits:
○ Scalability issues
○ Lack of transaction speed
○ Consumes a lot of energy
 Private Blockchain
● A private blockchain is a permission and a restrictive blockchain that
operates in a closed network.
● It is best suited for enterprises and businesses

Example-
▪ Corda, Hyperledger Fabric, Hyperledger Sawtooth
Merits:
○ Higher transaction per second (TPS)
○ Highly scalable
Demerits-
● Less secured compared to Public blockchains
● Less decentralized.
● Achieving trust is difficult
 Consortium Blockchain
● Where there is a need for both types of blockchains, i.e., public and
private.
● In this type, there is more than one central in-charge.
● More than one organization involved.
● Organization provides access to pre-selected nodes for reading, writing,
and auditing the blockchain.
● Since there is no single authority governing the control, it maintains
decentralized nature
Examples
Energy Web Foundation, IBM Food Trust are examples of such blockchain.
 Consortium Blockchain
Merits:
● Best suited for organizational collaboration.
● Offers scalability and much secured
● More efficient when compared to public blockchains
● Better customizability and control over resources
Demerits:
● Less transparent
Conclusion: Which is the Best Blockchain?
Features of a blockchain
Features of a blockchain
1. Distributed consensus:

This mechanism allows a blockchain to present a single version

of the truth, which is agreed upon by all parties without the
requirement of a central authority.
2. Transaction verification:
Any transactions posted from the nodes on the blockchain are
verified based on a predetermined set of rules. Only valid
transactions are selected for inclusion in a block.
Features of a blockchain
3) Platform for smart contracts:

A blockchain is a platform on which programs can run to execute

business logic on behalf of the users. Not all blockchains have a
mechanism to execute smart contracts; however, this is a very
desirable feature, and it is available on newer blockchain platforms
such as Ethereum and MultiChain.
4) Transferring value between peers:
Blockchain enables the transfer of value between its users via
tokens. Tokens can be thought of as a carrier of value.
Features of a blockchain
5. Smart property
It is now possible to link a digital or physical asset to the
blockchain in such a secure and precise manner that it cannot
be claimed by anyone else.
You are in full control of your asset, and it cannot be double-
spent or double-owned.

6. Provider of security: The blockchain is based on proven

cryptographic technology that ensures the integrity and
availability of data.
How Mining Works
What is mining?
What is mining?
● Mining is the process that Bitcoin and several other
cryptocurrencies use to generate new coins and verify new
transactions.
● It involves vast, decentralized networks of computers
around the world that verify and secure blockchains
● In return for contributing their processing power,
computers on the network are rewarded with new coins.
● The miners maintain and secure the blockchain, the
blockchain awards the coins, the coins provide an
incentive for the miners to maintain the blockchain.
How does mining work?

● You might have considered trying bitcoin mining

yourself.
● A decade ago, anyone with a decent home computer
could participate.
● But as the blockchain has grown, the computational
power required to maintain it has increased.
● (By a lot: In October 2019, it required 12 trillion times
more computing power to mine one bitcoin than it did
when the first first blocks were mined in January
2009.)
● Bitcoin mining is unlikely to be profitable for these days.
Can Anyone become a Miner

● Virtually all mining is now done by specialized companies

or groups of people who band their resources together.
● Can a hacker become the miner? And create the security
threat.
How Mining Works

● Specialized computers perform the calculations

required to verify and record every new bitcoin
transaction and ensure that the blockchain is secure.
● Verifying the blockchain requires a vast amount of
computing power, which is voluntarily contributed by
miners.
● Bitcoin mining is a lot like running a big data center.
How Mining Works

● Companies purchase the mining hardware and pay for

the electricity required to keep it running (and cool).
For this to be profitable, the value of the earned coins
has to be higher than the cost to mine those coins.
● What motivates miners? The network holds a lottery.
Every computer on the network races to be the first to
guess a 64-digit hexadecimal number known as a
“hash.”
How Mining Works

● On average, this happens every ten minutes.) As of

late 2020, the reward was 6.25 bitcoin – but it will be
reduced by half in 2024, and every four years after.
● In fact, as the difficulty of mining increases, the
reward will keep decreasing until there are no more
bitcoin left to be mined.
● There will only ever be 21 million bitcoin. The final
block should theoretically be mined in 2140.
How Mining Works

● On average, this happens every ten minutes.) As of

late 2020, the reward was 6.25 bitcoin – but it will be
reduced by half in 2024, and every four years after.
● In fact, as the difficulty of mining increases, the
reward will keep decreasing until there are no more
bitcoin left to be mined.
● There will only ever be 21 million bitcoin. The final
block should theoretically be mined in 2140.
Proof of Work & Proof of
Stake
What Does Proof-of-Stake (PoS) Mean

● The owners offer their coins as collateral—staking—for

the chance to validate blocks and earn rewards
● Validators are selected randomly to confirm transactions
and validate block information
● This system randomizes who gets to collect fees rather
than using a competitive rewards-based mechanism like
proof-of-work
● To become a validator, a coin owner must "stake" a
specific amount of coins.
● For instance, Ethereum requires 32 ETH to be staked
before a user can operate a node
What Does Proof-of-Stake (PoS) Mean

● Blocks are validated by multiple validators, and when a

specific number of validators verify that the block is
accurate, it is finalized and closed.
How Is Proof-of-Stake Different From Proof-of-Work?

● Blocks are validated by multiple validators, and when a

specific number of validators verify that the block is
accurate, it is finalized and closed.
● Under PoS, block creators are called validators.
● A validator checks transactions, verifies activity, votes
on outcomes, and maintains records
● Under PoW, block creators are called miners.
● Miners work to solve for the hash, a cryptographic
number, to verify transactions.
● In return for solving the hash, they are rewarded with a
coin.
How Is Proof-of-Stake Different From Proof-of-Work?

● To "buy into" the position of becoming a block creator,

you need to own enough coins or tokens to become a
validator on a PoS blockchain.
● For PoW, miners must invest in processing equipment
and incur hefty energy charges to power the machines
attempting to solve the computations.
How Is Proof-of-Stake Different From Proof-of-Work?
Proof of Work Vs Proof of Stake
Questions

Q. Can Blockchain solve any problem?

Q. Miner solves a problem to get the honour of adding the
new block. What type of problem it solves.
Q. Is the problem be logical or Brute Force.?
Q. What is 51% Attack?
Q.What is the size of block?
Q. If size exhausted whether a new block is created.
Q.What is Markle Tree
Q. Demo of Bitcoin-https://www.blockchain.com/explorer
Tokenized and Tokenless
Blockchains
Tokenized and Tokenless Blockchains
● In the world of blockchain technology, a tokenless
ledger is a type of distributed ledger that operates
without using a cryptocurrency or digital token.
Instead, it uses a different mechanism to record and
validate transactions.
● In a token-based ledger, such as the Bitcoin
blockchain, a cryptocurrency (in this case, Bitcoin) is
used as a means of transferring value and recording
transactions.
● tokenless ledgers don’t rely on a token or
cryptocurrency to transfer value or validate
transactions.
Tokenized and Tokenless Blockchains
● A tokenless ledger can use various mechanisms to
record and validate transactions. For example, some
tokenless ledgers use a system called “proof of
stake” (PoS) to validate transactions. In a PoS
system, the network participants (known as
“validators”) are selected based on the amount of
cryptocurrency they hold or “stake” in the network.
These validators are then responsible for validating
transactions and adding them to the ledger.
Tokenized and Tokenless Blockchains
● Other tokenless ledgers use a system called “proof
of authority” (PoA), where a group of trusted
validators are responsible for validating
transactions and adding them to the ledger. This
approach is often used in private blockchain
networks where participants are known and trusted.

In general, tokenless ledgers have several advantages

over token-based ledgers. For example, they don’t
require the use of a cryptocurrency or digital token,
which can reduce transaction fees and make the
network more accessible to a wider range of users
Tokenized and Tokenless Blockchains
● Other tokenless ledgers use a system called “proof
of authority” (PoA), where a group of trusted
validators are responsible for validating
transactions and adding them to the ledger. This
approach is often used in private blockchain
networks where participants are known and trusted.

In general, tokenless ledgers have several advantages

over token-based ledgers. For example, they don’t
require the use of a cryptocurrency or digital token,
which can reduce transaction fees and make the
network more accessible to a wider range of users
Tokenized and Tokenless Blockchains
However, tokenless ledgers also have some drawbacks.
For example, they may be less secure than token-based
ledgers since they don’t have the same level of built-in
incentives for network participants to maintain the
integrity of the ledger.

Additionally, since tokenless ledgers don’t use a

cryptocurrency, they may be less useful for certain
types of applications, such as those that require a
means of transferring value
How do tokenless ledgers work?
Tokenless ledgers operate on a consensus mechanism
that allows network participants to validate
transactions and record them on the ledger. These
consensus mechanisms can vary, but they typically
involve a process of validating transactions through the
agreement of network participants.

One common mechanism used in tokenless ledgers is

the Proof of Stake (PoS) consensus mechanism. In a
PoS system, validators are selected based on the
amount of cryptocurrency they hold or “stake” in the
network
Validators are incentivized to act honestly, as any malicious or fraudulent behavior could result in the loss
of their stake in the network.
How do tokenless ledgers work?
Another mechanism used in tokenless ledgers is the
Proof of Authority (PoA) consensus mechanism. In a
PoA system, a group of trusted validators is selected to
validate transactions and add them to the ledger. These
validators are typically selected based on their
reputation, credentials, or stake in the network. Once a
validator confirms a transaction, it is added to the
ledger.
How do tokenless ledgers work?
Tokenless ledgers also use cryptography to secure the
network and protect against fraudulent behavior.
Transactions are verified through a process of digital
signatures and encryption, which ensures that only
authorized parties can access and modify the ledger.
How do tokenless ledgers work?
Examples of tokenless ledgers
Hyperledger Fabric
R3 Corda:
Proof of Authority
▪ Blockchain networks are broadly divided into 2 categories–
Permissionless (Eg, Bitcoin, Ethereum, etc.)
and Permissioned (Hyperledger, Ripple, Corda, etc.).
▪ Permissionless blockchain networks allow external
parties to mine a new block of transactions to the network
without any permission.
▪ However, the system follows a consensus algorithm and
several protection protocols to ensure the safety of the
network.
▪ On the other hand, Permissioned blockchain networks
have pre-authorized and selected participants.
▪ Hence, no external party is allowed to participate in the
Proof of Authority
▪ PoA consensus mechanism was tossed by the co-founder of
Ethereum, Gavin Wood, in 2017. PoA modifies the
traditional proof of stake (PoS) mechanism.
▪ Proof of Authority (PoA) is a reputation-based
consensus mechanism
▪ provides high performance and fault tolerance.
▪ PoA is an improvisation on the Proof of Stake (PoS)
mechanism.
▪ Similar to PoS, PoA also uses the concept of digital signing
to verify participant identities.
▪ However, PoA asks for network participants’
reputations at stake instead of staking coins.
Proof of Authority
▪ With the PoA algorithm, each miner (or network participant
who wishes to add their new block of transactions) has
to prove their reputation and authority on the
network.
▪ Hence, PoA leverages the value of identities in a
private network.
▪ In order to gain the reputation of becoming a miner, a
participant (or node) should cross the preliminary
conditions.
How does the PoA Algorithm work?
▪ PoA provides the right to generate a new block for those
nodes who have proven their authority with reference to
their identity in the network. Here, nodes eligible to create
a new block are known as Validators.
How can a node become a validator in the PoA mechanism?

• The process of selecting validators requires a lot of

verification. Hence, it’s hard to become a validator with
PoA consensus.
• Verified, valid, and trustworthy network identity
• No criminal record
• Good moral standards
• Stay committed to the network
How can a node become a validator in the PoA mechanism?
• The validators are the authenticated miners of the
network.
• There are a limited number of block validators which
makes the system highly scalable.
• The blocks of transactions are verified and approved by
pre-approved network participants who serve
as moderators.
• Here, blocks generate in a predictable sequence
concerning the number of validators and their
reputation in the network.
• VeChain is one of the popular blockchains using the PoA
algorithm
How can a node become a validator in the PoA mechanism?
Benefits of Proof of Authority (PoA)
• Unlike Proof of Work, PoA doesn’t require high
computational power resources.
• PoA consumes less time and energy compared to PoW and
PoS.
• It possesses a greater speed of validating transactions.
Hence, a higher transaction rate.
• PoA supports a limited number of validators which makes it
highly scalable.
• Assured protection against 51% of attacks on the network.
• PoA is a great choice of permissioned or private blockchain
networks.
Limitations of Proof of Authority (PoA)
• Unlike Proof of Work, PoA doesn’t require high
computational power resources.
• PoA consumes less time and energy compared to PoW and
PoS.
• It possesses a greater speed of validating transactions.
Hence, a higher transaction rate.
• PoA supports a limited number of validators which makes it
highly scalable.
• Assured protection against 51% of attacks on the network.
• PoA is a great choice of permissioned or private blockchain
networks.
Limitations of Proof of Authority (PoA)
• The system is highly dependent on validators. Hence,
they need to be picked consciously, not randomly.
• It is not preferred for public networks or
permissionless blockchains.
• PoA consensus algorithm is less decentralized in
comparison to other algorithms.
• As reward collection in a public network is visible to
everyone, it’s easy to predict the balance of an
account which makes it less secure.
• PoA is susceptible to corruption and manipulation.
• The mechanism automatically filters out the non-active or
non-committed validators, which makes participants less
Proof of Elapsed Time (PoET) Definition, Purposes, Vs. PoW
▪ Proof of elapsed time (PoET) is a blockchain network consensus
mechanism that prevents high resource utilization and energy
consumption; it keeps the process more efficient by following a fair
lottery system.
▪ The algorithm uses a randomly generated elapsed time to decide
mining rights and block winners on a blockchain network.
Proof of Elapsed Time (PoET) Definition, Purposes, Vs. PoW
• Proof of elapsed time (PoET) is a consensus algorithm developed by Intel
Corporation that enables permissioned blockchain networks to determine who
creates the next block.
• PoET follows a lottery system that spreads the chances of winning equally
across network participants, giving every node the same chance.
• The PoET algorithm generates a random wait time for each node in the
blockchain network; each node must sleep for that duration.
• The node with the shortest wait time will wake up first and win the block, thus
being allowed to commit a new block to the blockchain.
• The PoET workflow is similar to Bitcoin's proof of work (PoW) but consumes less
power because it allows a node to sleep and switch to other tasks for the
specified time, thereby increasing network energy efficiency.
Proof of Elapsed Time (PoET) Definition, Purposes, Vs. PoW
• The PoET network consensus mechanism needs to ensure two crucial factors.
First, it ensures that the participating nodes genuinely select a time that is
indeed random and not a shorter duration chosen purposely by the participants
to win.
• Second, it establishes that the winner has completed the waiting time.1
• Proof of elapsed time uses much less energy than proof of work since it randomly selects a
node instead of using all the miners on a network in a competition.
How Does PoET Work?
• Based on the principle of a fair lottery system where every node is equally likely
to be chosen, the PoET mechanism spreads the chances of winning across the
largest possible number of network participants.
• Under PoET, each participating node in the network must wait for a randomly
chosen period; the first to complete the designated waiting time wins the new
block. Each node in the blockchain network generates a random wait time and
sleeps for that specified duration.
• The one to wake up first—that is, the one with the shortest wait time—wakes up and
commits a new block to the blockchain, broadcasting the necessary information to the
whole peer network. The same process then repeats for the discovery of the next block.
How Does PoET Work?
▪ Proof of elapsed time does not promote decentralization and openness like proof of work
does because it requires a certificate to be issued to anyone that wants to join the network.
▪ PoET Mechanism assigns an amount of time to each node in the network
randomly. The node must sleep or do another task for that random wait
time. Whichever node gets the shortest waiting time wakes up and add
their block to the network. Later, the new update information floods among
other network participants.