BMS INSTITUTE OF TECHNOLOGY AND MANAGEMENT

Accredited
1 by NBA and NAAC – ‘A’ Grade

Blockchain Technology
Module 3

Course Coordinator
Dr. M.Sridevi
Asst. Professor & Head
Dept. of MCA
BMSITM, Bengaluru

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2 Hashing in Blockchain
 Blockchain technology is an intricate web of several
technological innovations working together
 Among the most important pieces of the blockchain puzzle
is hashing
 Hashing is a cryptographic function that converts a string
of characters of any length into a unique output, or hash, of
fixed length
 This means that no matter what combination of symbols
are used as the input, they will always produce a one-of-a-
kind string of digits and characters.
 A Bitcoin hash looks like this:
00000000000000000025e2ba026a8ad462b9a693d80fd0887d
ef167f5f888a11
(hash of block 540807)

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3 Hashing Essentials

 Hashing is a method for cryptographically encoding

data
 It produces a fixed-length output from any input
 The same input always produces the same hash
 The input cannot be reconstructed from the hash
 Modern hash functions make it virtually impossible
to produce the same output from two different
inputs

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4 Hashing in
Cryptocurrencies
 Hashing is an integral part of all blockchain-based transactions,
including the trading of cryptocurrency
 Hash functions are necessary in everything from mining blocks
to signing transactions to generating private keys
Bitcoin SHA-256
Bitcoin Cash SHA-256
Ethereum keccak256
Litecoin scrypt
Ripple SHA-512
 A hash function is a mathematical algorithm used to calculate
the hash
 Different cryptocurrencies use different hash functions but all of
them follow the same basic principles of hashing

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5 Main Properties of
Hashing
Hashing produces outputs of fixed length

Input: hello
Output:
2CF24DBA5FB0A30E26E83B2AC5B9E29E1B161E5C1FA7425E
73043362938B9824
Input: It’s a good day to HODL
Output:
6B89D5D4AD6A3364410DD9BAB95FD250EF4A663D9D3C47C
BD7388535A5912E03
Input: The entire novel of Oliver Twist
Output:
4F144CC612CA27E2DD6DFD6663F68BABC3B758D602B5102
BF14E717E823EB741
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6 Main Properties of
Hashing
 Here, the SHA-256 hash function is used to generate
the hashes of two different inputs
 In all three cases, the hash is completely unique,
but its length remains the same
 SHA-256 generates hashes that are 256 bits long,
usually represented as 64 symbols comprised of
numbers 0–9 and letters A–F
 No matter how short or how long the input is – be it
a single word (hello) or even a whole novel (Oliver
Twist by Charles Dickens) – the hash is fixed at 64
characters

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7 Main Properties of
Hashing
Hashing is deterministic
 The same input will always produce the same output
Input: fun
Output:
00C4285274FCC5D6FBA2EE58DAF0D8C2B9B825B68D
35D65D0E90A9BB333A51B5
Input: sun
Output:
27756F050E14A1CB1C1EE867F0EACE9EA4D9FCB81B8
BEE089469F1EBD5FD7B17

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8 Main Properties of
Hashing
Hashing is a one-way function
 It is infeasible to determine what the input was from any
given output
 That is to say, it is virtually impossible to reverse the hash
function with contemporary technology
 The only way to determine what the input was is trying out
random strings until you find the right one
 This method is known as brute force.
 Using brute force to reverse the hash back to the original
string is easier said than done
 Even IBM Summit, currently the fastest computer in the
world, capable of making several trillion calculations per
second, would need many years and an astounding amount
of electricity to find the answer for a single hash

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9 Main Properties of
Hashing
Hashing is resistant to collisions
 A collision occurs when a hashing mechanism produces the
same output for two different inputs
 This is possible in theory for hashing, as the number of unique
hashes is limited but the number of inputs is not
 The probability of collisions is extremely small
 Hashing is thus said to be resistant, but not immune, to
collisions
 SHA-256, the algorithm used by Bitcoin, outputs hashes that
are 256 bits long (a 256 digit-long string of 1s and 0s)
 This means there are a total of 2256 unique hashes that it can
produce
 As soon as the number of inputs is larger than the number of all
possible outputs, let us say 2256+1, at least two of the inputs
will have the same output – that’s a collision.

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10 Concept of Double Spending
 Double-spending is the risk that a cryptocurrency can be used twice or more
 Transaction information within a blockchain can be altered if specific conditions are met
 The conditions allow modified blocks to enter the Blockchain
 If this happens, the person that initiated the alteration can reclaim spent coins
 When a block is created, it receives a hash—or encrypted number—that includes a
timestamp, information from the previous block, and transaction data
 This information is encrypted using a security protocol like the SHA-256 algorithm used
by Bitcoin
 Once that block's information is verified by miners (in proof-of-work consensus), it is
closed, and a new one is created with the timestamp, transaction information, and
previous block's hash
 A Bitcoin is awarded to the miner whose machine verified the hash
 For someone to double spend, a secret block has to be mined that outpaces the creation
of the real Blockchain
 They would then need to introduce that chain to the network before it caught up
 If this happened, then the network would recognize it as the latest set of blocks and add
it to the chain
 The person that did this could then give themselves back any cryptocurrency they had
spent and use it again.
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11 Preventing Double
Spending
 Double spending remains a risk; however, it is minimized by the Blockchain
 The likelihood of a secret block being inserted into the blockchain is very
slim because it has to be accepted and verified by the network of miners
 The only chance a miner with illicit intentions has of inserting an altered
block is to attempt to get another user to accept a transaction using their
secret block and cryptocurrency
 Even then, the likelihood that the modified block will be accepted is very
less
 The blockchain and consensus mechanism move so quickly that the
modified block would be outdated before it was accepted
 Even if it was accepted, the network would still have passed up the
information in the block and would reject it
 Cryptocurrency transactions take some time to verify because the process
involves randomly selecting numbers to solve the complex hash—this also
takes up a great deal of computational power
 It is, therefore, exceedingly difficult to duplicate or falsify the blockchain
because of the immense amount of computing power needed to stay ahead
of all of the other miners on the network
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12 Double Spending
Attacks
 The most significant risk for blockchains comes in the form of
a 51% attack
 It can occur if a miner controls more than 50% of the
computing power that validates the transactions, creates
blocks, and awards cryptocurrency
 If this user—or users—controls a majority of the hashing in the
blockchain, they will be able to dictate transaction consensus
and control the award of currency
 In more popular cryptocurrencies such as Bitcoin, this is very
unlikely due to the number of miners and hashing difficulty it
has reached
 New or forked cryptocurrencies with smaller networks are
susceptible to this attack
 The unconfirmed transaction attack is used to fool
cryptocurrency users
 If you see one of these transactions, you shouldn't accept it
because it can cause an attempted double-spend attack
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13 Mining
 Blockchain mining is a peer-to-peer computer process and is used
to secure and verify bitcoin transactions
 Mining involves blockchain miners who add bitcoin transaction data
to Bitcoin’s global public ledger of past transactions
 In the ledgers, blocks are secured by blockchain miners and are
connected to each other forming a chain
 Bitcoin transactions are generally verified in decentralized clearing
systems wherein people contribute computing resources to verify
the same
 This process of verifying transactions is called mining
 It is probably referred to as mining as it is analogous to mining of
commodities like gold
 A lot of computing power is consumed in the process of mining
bitcoins
 The number of bitcoins that are generated from mining dwindles
over time. In the words of Satoshi Nakamoto, there is only a limited
supply of bitcoins
 Only 21 million bitcoins will ever be created
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14 Mining
 The term ‘Blockchain mining’ is used to describe the process of adding
transaction records to the bitcoin Blockchain
 This process of adding blocks to the blockchain is how transactions are
processed and how money moves around securely on Bitcoins
 It is performed by a community of people around the world called
‘Blockchain miners.’
 Anyone can apply to become a blockchain miner
 These Blockchain miners install and run a special blockchain mining
software that enables their computers to communicate securely with
one another
 Once a computer installs the software, joins the network, and begins
mining bitcoins, it becomes what is called a ‘node.’
 Together, all these nodes communicate with one another and process
transactions to add new blocks to the blockchain which is commonly
known as the bitcoin network
 This bitcoin network runs throughout the day
 It processes equivalent to millions of dollars in bitcoin transactions and
has never been hacked or experienced downtime since its launch in
2009
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15 Types of Mining

 The process of mining can get really complex and a

regular desktop or PC cannot cut it
 Hence, it requires a unique set of hardware and
software that works well for the user
 It helps to have a custom set specific to mining
certain blocks

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16 Individual Mining

 When mining is done by an individual, user

registration as a miner is necessary
 As soon as a transaction takes place, a
mathematical problem is given to all the single
users in the blockchain network to solve
 The first one to solve it gets rewarded
 Once the solution is found, all the other miners in
the blockchain network will validate the decrypted
value and then add it to the blockchain thus
verifying the transaction

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17 Pool Mining

 In pool mining, a group of users works together to

approve the transaction
 Sometimes, the complexity of the data encrypted in
the blocks makes it difficult for a user to decrypt the
encoded data alone
 So, a group of miners works as a team to solve it
 After the validation of the result, the reward is then
split between all users

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18 Cloud Mining

 Cloud mining eliminates the need for computer hardware

and software
 It’s a hassle-free method to extract blocks
 With cloud mining, handling all the machinery, order
timings, or selling profits is no longer a constant worry.
 While it is hassle-free, it has its own set of disadvantages
 The operational functionality is limited with the limitations
on bitcoin hashing
 The operational expenses increase as the reward profits
are low
 Software upgrades are restricted and so is the verification
process

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19 Mining Bitcoins (in

Cloud)
Obtain a bitcoin wallet:
Bitcoins are stored in digital wallets in an encrypted manner.
 This will keep your bitcoins safe.
Secure the wallet:
 Since there is no ownership of bitcoins, anyone who gains access to your blockchain wallet can use it
without any restriction.
 So, enable two-factor authentication and store the wallet on a computer that does not have access to
the Internet or store it on an external device.
Choose a cloud mining service provider:
 Cloud mining service providers allow users to rent processing or hashing power to mine bitcoins
remotely.
 Popular cloud mining service providers are Genesis Mining and HashFlare.
Choose a cloud mining package:
 To choose a package, you will need to decide on how much you are willing to pay and keep your eyes
open to the hashing power the package will offer.
 Cloud mining companies will mostly envisage the Return on Investment (ROI) based on the current
market value of Bitcoins.
Pick a mining pool:
 This is the best shot you can get to earn bitcoins easily.
 There are many mining pools which charge a mere 2 percent of your total earnings.
 Over here, you will have to create workers which are basically subaccounts that can be used to track
your contributions to the pool.
Put your earnings in your own secure wallet:
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 Whenever you witness an ROI, simply withdraw your earnings and put them in your own secure25
wallet.
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20 Mining Bitcoins (on your own)
Purchase custom mining hardware:
 You need to purchase an Application-specific Integrated Circuit (ASIC) miner to mine
bitcoins.
 While purchasing an ASIC Blockchain miner, you should consider its efficacy in
hashing power and take note of its pricing policies.
Purchase a power supply:
 Blockchain miners consume a lot of power.
 So, get a dependable power supply that is compatible with the ASIC miner that you
purchase.
Obtain a bitcoin wallet:
 Bitcoins are stored in digital wallets in an encrypted manner.
 This will keep your bitcoins safe.
Secure the wallet:
 Since there is no ownership on bitcoins, anyone who gains access to your wallet can
use it without any restriction.
 So, enable two-factor authentication and store the wallet on a computer that does
not have access to the Internet or store it in an external device.
Pick a mining pool:
 This is the best shot you can get to earn bitcoins easily.
 There are many mining pools that charge a mere 2 percent of your total earnings.
 01/05/20
Over here, you will have to create workers which are basically subaccounts that
25 can
be used to track your contributions to the pool.
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21 Uses of Blockchain
Mining
a. Validating Transactions
 Bitcoin transactions take place in huge figures every day.
 Cryptocurrencies function without a central administrator and the
insecurity can be substantial with the transactions that transpire.
 With each transaction, new blocks are added to the blockchain in
the network and the validation lies in the mining results from the
blockchain miners.
b. Confirming Transactions
 Miners work the blockchain mining process to confirm whether
the transaction is authentic or not.
 All confirmed transactions are then included in the blockchain.
c. Securing Network
 To secure the transaction network, bitcoin miners work together.
 With more users mining the blockchain, blockchain network
security increases.
 Network security ensures that there are no fraudulent activities
happening with cryptocurrencies.
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22 Proof of Work (PoW)

 Proof-of-Work (PoW) in the blockchain is a consensus

mechanism that allows miners to add a new block to
the network based on calculations made to find the
perfect hash.
 Network participants verify the transactions added
by the new block.
 For a decentralized network like Blockchain, keeping
all network participants in sync is essential.
 Blockchain uses a consensus mechanism to create
governance among all network participants.

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23 Consensus Mechanism

 Consensus means reaching a decision that all network

participants agree on.
 For example, a group of friends agrees to play soccer
without conflict.
 Reaching a decision to play football together is a state
of consensus or mutual agreement here.
 In the case of Blockchain, at least 51% of nodes or
network participants agree on the upcoming change.
 If this happens, the network is updated with the new
change.
 Otherwise, they reject the change by mutual
agreement.

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24 Consensus Mechanism

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25 Proof of Work (PoW)

 PoW plays a significant role in the development of Blockchain

technology.
 The goal is to create an authentication system that is hard to crack.
 The decentralized network works on the principle of distrust but
cooperation.
 Blockchain (decentralized network) is a chain of linearly connected
blocks containing information secured by cryptography.
 Here, each block contains the hash of its previous block to stay
connected.
 Additionally, each block contains several other information such as
timestamp, block height, transaction records, Merkle Root Hash, block
hash, previous block hash, difficulty level, and many more in the block
header.
 The second part contains a set of financial transactions, the hash of
which is eventually converted to a Merkle root.
 So Blockchain is defined as the chain of blocks of transactions.

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26 Proof of Work (PoW)

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27 Proof of Work (PoW)
 Adding a new block to the chain is considered a new update to the current
system.
 It, therefore, requires permission from network participants.
 In order to decide whether to add a new block or not, Proof-of-Work (PoW), a
consensus mechanism, is used.
 Only verified transactions are added to the network.
 In contrast, not all blocks are valid.
 Most proposed block networks are considered invalid.
 The Blockchain protocol defines the validity of a block.
 The blockchain network has an arbitrary “Difficulty” setting managed by the
protocol that changes how hard it is to mine a block.
 Mining here means adding a new block.
 Miners design new blocks in the chain.
 They are externals who want to add their block to the network.
 The work required to develop a valid block is where the value comes from.
 Miners receive rewards in proportion to their share of the computing power they
spend mining a new block.
 The miner proves the work done by mining a valid block.
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 The difficulty level can vary in blockchains such as the Bitcoin network or 25
Ethereum to ensure that blocks are created at regular intervals.
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28 How does PoW algorithm work?

 The Proof-of-Work (PoW) consensus algorithm works

by requiring each miner to overcome a difficulty level
to prove the validity of a block
 A block is marked as “valid” only if the hash value of
the entire block is lower than the difficulty hash.
Block Hash < Hash Difficulty
 The block contains important transaction information
that cannot be changed
 So miners change the nonce to get the hash below
the difficulty threshold
 A nonce is a part of a block that can be changed to
limit the difficulty level
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29 How does PoW algorithm work?

Let’s take an example to understand the working

of PoW
 Harry is a Bitcoin miner who wishes to add his block
of Bitcoin (digital currency) transactions to the
network.
 For his block to be valid, he must change the block
until the hash of his block falls below the difficulty
threshold.

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30 How does PoW algorithm work?

Harry block Hash: 817de9e0c

Hash difficulty: 001000000
Nonce: 8263

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31 How does PoW algorithm work?
Harry will change the nonce until he gets the first 3 digits as zeros.
 After continuously changing the nonce for hours, he finally got the hash.
Harry block Hash: 000383ec5
Hash difficulty: 001000000
Nonce: 6778
 The difficulty threshold has now been reached. Block Hash < Hash
Difficulty.
 Therefore, Harry’s block will be marked as valid and added to the
blockchain.
 For mining a block in the Bitcoin blockchain, Harry gets a few Bitcoins as a
block reward for spending the computing power to find a valid hash
 This process is completely based on chance
 So the miner’s job is to change the nonce value until the total hash of the
block is lower than the difficulty hash.

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32 Advantages of Proof-of-
Work
 A hard-to-find solution
 Easy verification.
 As an initial consensus mechanism, PoW does not need
initial stakes of coins before mining.
 One can start with 0 coins and it will only be positive.
 Ease of implementation compared to other blockchain
consensus mechanisms.
 It is fault tolerant.
 Give miners the opportunity to earn by adding a block.
 PoW is the oldest, most trusted, and most popular
consensus protocol.

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33 Limitations of Proof-of-
Work
 A lot of energy is wasted because only one miner can
finally add their block.
 Massive consumption of resources and energy.
 51% risk of network attack
 A controlling person can get 51% to control the network.
 Spread environmental hazards with attachment
machines.
 PoW is a time and energy wipe-out process.
 It required a lot of hardware costs.
 Risk of Denial of Service Attacks by Intruders.

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34 Proof of Work vs. Proof of Stake

 Proof of work and Proof of stake are two discrete consensus mechanisms for
cryptocurrency, but there are important differences between them.
 Both methods confirm incoming transactions and add them to the
blockchain.
 With Proof of Stake, network participants are known to as “validators” other
than miners.
 One important difference is that instead of solving math problems,
validators lock up a set amount of cryptocurrency – their stake – in a smart
contract on the blockchain.
 In interchange for “staking” cryptocurrency, they get a chance to prove new
transactions and earn a reward.
 If they incorrectly verify wrong or fraudulent data, they may lose some or all
of their deposit as a penalty.
 Proof of stake makes it easy to involve more people in blockchain systems
as validators.
 There is no need to buy expensive computing systems and consume huge
amounts of electricity to bet cryptocurrencies except a few coins.

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35 Introduction to Merkel
Tree
 A hash tree, also known as a Merkle tree, is a tree in
which
 each leaf node is labelled with the cryptographic hash
of a data block
 each non-leaf node is labeled with the cryptographic
hash of its child nodes' labels
 The majority of hash tree implementations are
binary (each node has two child nodes), but they
can also have many more child nodes.

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36 What is a Merkel Tree?

 Merkle trees, also known as Binary hash trees, are a

prevalent sort of data structure in computer science.
 In bitcoin and other cryptocurrencies, they're used to
encrypt blockchain data more efficiently and securely.
 It's a mathematical data structure made up of hashes
of various data blocks that summarize all the
transactions in a block.
 It also enables quick and secure content verification
across big datasets and verifies the consistency and
content of the data.

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37 What is a Merkel Tree?

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38 What is a Merkel Root?
 A Merkle root is a simple mathematical method for confirming
the facts on a Merkle tree.
 They're used in cryptocurrency to ensure that data blocks
sent through a peer-to-peer network are whole, undamaged,
and unaltered.
 They play a very crucial role in the computation required to
keep cryptocurrencies like bitcoin and ether running.

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39 Working of Merkel Trees

 A Merkle tree totals all transactions in a block and

generates a digital fingerprint of the entire set of
operations, allowing the user to verify whether it
includes a transaction in the block.
 Merkle trees are made by hashing pairs of nodes
repeatedly until only one hash remains
 This hash is known as the Merkle Root or the Root
Hash.
 They're built from the bottom, using Transaction IDs,
which are hashes of individual transactions
 Each non-leaf node is a hash of its previous hash,
and every leaf node is a hash of transactional data.
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40 Working of Merkel Trees

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41 Example

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42 Benefits of Merkle Tree in Blockchain

 Validate the data's integrity: It can be used to

validate the data's integrity effectively.
 Takes little disk space: Compared to other data
structures, the Merkle tree takes up very little disk
space.
 Tiny information across networks: Merkle trees
can be broken down into small pieces of data for
verification.
 Efficient Verification: The data format is efficient,
and verifying the data's integrity takes only a few
moments.

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43 Why is it essential to Blockchain?
 Think of a blockchain without Merkle Trees to get a sense of how vital they
are for blockchain technology.
 Let’s take Bitcoin scenario because its use of Merkle Trees is essential for
the cryptocurrency.
 If Bitcoin didn't include Merkle Trees, per se, every node on the network
would have to retain a complete copy of every single Bitcoin transaction
ever made
 One can imagine how much information that would be
 Any authentication request on Bitcoin would require an enormous amount of
data to be transferred over the network: therefore, you'll need to validate
the data on your own
 To confirm that there were no modifications, a computer used for validation
would need a lot of computing power to compare ledgers
 Merkle Trees are a solution to this issue
 They hash records in accounting, thereby separating the proof of data from
the data itself
 Proving that giving tiny amounts of information across the network is all
that is required for a transaction to be valid
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 Furthermore, it enables you to demonstrate that both ledger variations
25 are
identical in terms of nominal computer power and network bandwidth
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44 Data Privacy and Blockchain

 Data Privacy is sometimes referred to as information

privacy, which deals with the proper handling of
sensitive data including personal data
 Data privacy has regulated the manner in which
personal data is collected, processed, stored to
ensure proper handling of data.
 Data is the most important asset in a business
 We live in an era where companies find value in
collecting and sharing data
 The business had to meet legal responsibilities
about the collection, storage, and process of
personal data.
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45 Data Privacy and Blockchain

 It creates a challenge to identify data controllers and

data processors in various blockchain implementations
 In distributed blockchain networks there is the territorial
implication
 A great variety of regulations can incur significant
overhead costs
 There should be potential restrictions when cross-border
data transfer takes place
 They require some centralized program to implement
them
 Difficult to implement in public blockchain with undefined
groups
 Applying criteria for processing personal data in the
blockchain should be structured
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46 Data Threat Mitigation
steps
 Use permissioned blockchain to support governance
models:
 Authorize selected number of approved participants.
 Technical measures to reduce the amount of personal
data that participants process.
 Allocating data processing responsibly.
 Responding to individual requests.
 Deploying data processing agreement.
 View differences between public and private blockchain
implementation.

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47 Data Threat Mitigation
steps
 Limit personal data stored in the blockchain:
 Avoid putting personal data on a blockchain.
 The financial system does not involve a naïve user.
 Avoid payload for storing personal data on the
blockchain.
 Use one-time addresses to secure data in the
blockchain.
 Supply management chain to limit data on the
blockchain.

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48 Blockchain Privacy Management

 From the perspective of privacy compliance blockchain

technology appear to be least ambiguous.
 Processing data on a public blockchain may involve
significant business risks.
Suggestion from technologists:
 Managing and verifying consent.
 Minimizing sharing of data between the data controller
and data processor.
 Providing individuals with clear notification.
 Self-governing blockchain-enabled identity and data
management solutions to maintain data and privacy
policy can be the potential solutions

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BMS INSTITUTE OF TECHNOLOGY AND MANAGEMENT
49 Payment Verification
 Simple Payment Verification, usually abbreviated to
SPV, is a system that enables light clients (wallets
running on low-end systems) to verify that a
transaction has been included in Bitcoin and therefore
a payment has been made.
 This is possible by using the Merkle tree to store the
transactions in each block
 A Merkle tree is a structure created by grouping all the
transactions in pairs and hashing them together, then
proceeding to hash the resulting hashes together and
continuing this process till there is only one hash left,
called the merkle root.
 This creates a tree where every node has two children,
which can be used to create their parent node.

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50 Payment Verification

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51 Payment Verification
 Someone that only knows the Merkle root/top hash can verify
if a transaction is part of the tree, that is, if it’s been included
into a Bitcoin block.
 This is done by taking the nodes that are in the path that
connects the Merkle root with one of the bottom transactions
and bundling them together to create a proof:

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52 Payment Verification

 Running a full node requires downloading the entire

Blockchain
 But if we use SPV proofs we only need to know the merkle
root of each block in order to verify the transactions
 So, we only have to store 80 bytes per block, instead of the
much larger size per block required for full nodes
 This decrement of over 99.99% makes running the verification
inside a low-resource device or a smart contract feasible

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BMS INSTITUTE OF TECHNOLOGY AND MANAGEMENT
53 Resolving Conflicts and Creation
of Blocks

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BMS INSTITUTE OF TECHNOLOGY AND MANAGEMENT
54 Resolving Conflicts and Creation
of Blocks
 From the above-given steps, in step 5, a conflict can arise
where multiple miners create blocks at the same time and try
to add them to the last valid block of the Blockchain
 In this case which block will be appended to the blockchain?
 Consider Steve, Jake and Iris are miners in the blockchain and
they simultaneously create their respective blocks which are
known as candidate blocks (represented in green, yellow, and
blue respectively).

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55 Resolving Conflicts and Creation
of Blocks

 Out of these candidate blocks, a decision has to be

made to choose which of these blocks should be put in
the chain.
 This conflict is resolved using the longest chain rule
which is adopted by every node in the network to
achieve consensus on the valid structure of the
blockchain.
 To add a node in the blockchain, a miner in the network
needs to have a computer with high processing power.
 In this case, let us say Jake’s computer has more
processing power as compared to the computers of
Steve and Iris
 So, Jake can create a block faster than Steve and Iris.
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56 Resolving Conflicts and Creation
of Blocks

 Meanwhile, other miners are trying to create other valid

blocks, so these blocks are created on the block which
has occurred first, and since Jake’s block was created
faster than Steve’s and Iris’s, it occurs first in the chain
and the miners add their blocks (given below in red ) on
top of Jake’s blog (given below in yellow).

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57 Resolving Conflicts and Creation
of Blocks

 According to the longest chain rule, the unit with the

longest length must be accepted as the valid version of
the blockchain.
 Therefore, the updated valid version of the blockchain
looks like the one below:

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58 Resolving Conflicts and Creation
of Blocks

 The blocks created by Steve and Iris are discarded and

they become orphan blocks since they are not part of
the main chain of blocks anymore.

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59 Resolving Conflicts and Creation
of Blocks

 It is important to note that the transactions inside these

orphan blocks are valid because someone in the
network has initiated it, but cannot be included in the
blockchain as they do not follow the longest chain rule
 So, these transactions are sent back to the transaction
pool (which contains those transactions that are not yet
mined), where the miners can pick them from the pool
and then start mining them again

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