Blockchain
What is a Blockchain?
• A blockchain is a growing list of records, called
blocks, that are linked together using
cryptography.[Wikipedia]
Blockchain
• Blocks are cryptographically linked together.
• The first block is called Genesis block
What is there in block?
• Block number
• Previous hash Values.
• Transaction Details
• Hash
• Nonce(Number used only once)
• Timestamp
What actually happens in blockchain?
What is Cryptocurrency?
• 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.
• Cryptocurrency is stored in digital wallets.
• Cryptocurrency received its name because it uses
encryption to verify transactions.
• Example: Bitcoin, Ether
Is Bitcoin same as Blockchain?
• Bitcoin does not equal Blockchain.
• Bitcoin is a currency and a system that uses a
blockchain as underlying data structure, which
can be used for many things, including
cryptocurrencies.
• Blockchain is the underlying data structure.
Terminologies
• Hash Cryptography
• Immutable Ledger
• Distributed P2P network
• Mining
• Consensus Protocol
Hash Cryptography
• Finger print is an identifier of a person.
• Used by forensic team to identify
criminals
• Same principle is applied to digital
documents- here finger prints are SHA256
hash.
SHA256
• Secure Hash Algorithm(SHA) 256 is the
number of bits it take up in memory.
• The hash is always 64 characters long
• The algorithm works for any digital document.
Explore
https://tools.superdatascience.com/blockchain/
hash
Requirements of Hash Algo.
• One way
• Deterministic:
Running the algorithm repeatedly
on same data will produce same output
• Fast Computation
• Avalanche Effect
A minor change will cause huge
change in hash function.
• Must withstand collision
Traditional Ledger
Immutable Ledger
• Immutable ledger in blockchain refers to any
records that have the ability to remain
unchanged.
• It cannot be altered and hence the data
cannot be changed with ease, thereby making
sure that the security is quite tight.
• Immutability means that it is very difficult to
make changes without collision.
• If some attacker tries to alter any block in the
blockchain, all the subsequent blocks will
change as the previous hash function will not
match and hence the attacker will be
identified.
Distributed P2P Network
• Rather than the centralized “Hub and Spoke” type of network,
Blockchain is a distributed peer to peer network. Where each
NODE has a copy of the ledger.
• In a peer-to-peer network, computers on the network are
equal, with each workstation providing access to resources
and data.
Legacy Network Blockchain Network
Centralized DB Distributed Ledgers
What is Mining?
• Mining, in the context of blockchain
technology, is the process of adding
transactions to the large distributed public
ledger of existing transactions, known as the
blockchain.
• Blockchain system will set a target and any
hash higher than target doesn’t work.
• The target is completely arbitrary There is no
economical, logic behind it. Its just the way to
put hurdles on miners.
If the hash is not solved you won’t be considered
as valid miner.
• Miners have to modify the nonce to get the
hash value
• Keep guessing different nonce value until
target is found.
• If the value is found then the miner wins and
the block is accepted at blockchain network
and the miner is rewarded.
Golden Nonce
MemPool
• A mempool (a contraction of memory and pool) is a cryptocurrency node's
mechanism for storing information on unconfirmed transactions. It acts as
a sort of waiting room for transactions that have not yet been included in
a block.
• Mempool has transaction id and value that the miner is going to get. SO
the miner will choose one with highest value.
Typical Mining Station
Important Facts
• Bitcoin mining consumes around 91 terawatt-
hours of electricity annually.
• That's more annual electricity use than all of
Finland, which is a country of 5.5 million
people.
• That's almost 0.5% of all electricity
consumption worldwide, and a 10 times jump
from just five years ago.
What is Consensus?
• By consensus, we mean that a general agreement
has been reached.
• Consider a group of people going to the cinema.
If there is not a disagreement on a proposed
choice of film, then a consensus is achieved. In
the extreme case the group will eventually split.
• In regards to blockchain, the process is
formalized, and reaching consensus means that
at least 51% of the nodes on the network agree
on the next global state of the network.
Consensus Protocols
• Consensus mechanisms (also known as
consensus protocols or consensus algorithms)
allow distributed systems (networks of
computers) to work together and stay secure.
Major challenges to solve in consensus:
• Must protect the system from attacker
• Must ensure that the chain is completed in
blockchain.
Advantages
• Better Transparency
• Enhanced Security
• True Traceability
• Reduced Costs
Drawbacks
• Some Blockchain Solutions Consume Too
Much Energy
• High implementation costs.
• Rise in unemployment.
Thank You
