UNIT 4

Blockchain
➢ Blockchain is a peer-to-peer decentralized distributed ledger technology that makes
the records of any digital asset transparent and unchangeable and works without
involving any third-party intermediary. It is an emerging and revolutionary
technology that is attracting a lot of public attention due to its capability to reduce
risks and frauds in a scalable manner.
➢ Blockchain is a record-keeping technology designed to make it impossible to
hack the system or forge the data stored on it, thereby making it secure and
immutable.
➢ Blockchain was invented by Satoshi Nakamoto. As the name suggests, blockchain
is a chain of blocks that contains information.
➢ Each block consists of a number of transactions and each transaction is recorded in
the form of Hash. Hash is a unique address assigned to each block during its
creation and any further modification in the block will lead to a change in its hash.

A block has mainly 3 parts:

➢ Data/Information part- contain the information of the transaction incurred
➢ Hash- Unique ID of block
➢ Previous Hash- Hash of previous block

Figure – Blockchain architecture

Since in a Blockchain, every block has the hash of its previous block,
therefore if anyone tries to temper with the data in some block then the hash
of the block will be changed. So he will have to change the ‘Previous hash’ of
next block. In doing so, the present hash of the next block will also change.
Eventually the intruder will have to change the hashes of every block in the
Blockchain which is not easy at all. Hence, the data in the Blockchain is
temper proof and maintains its authenticity.
Features of Blockchain

➢ Data stored in blockchain is immutable and cannot be changed easily. Also the
data is added to the block after it is approved by everyone in the network and thus
allowing secure transactions. Those who validate the transactions and add them in
block are called miners.
➢ Blockchain is Decentralized as well as an open ledger. Ledger is the record of the
transactions done and because it is visible to everyone, therefore is called an open
ledger. No individual or any organisation is incharge of the transactions. Each and
every connection in the blockchain network has a same copy of the ledger.

➢ Blockchain is Decentralized network i.e., it has no central authority to control the

network as there is in the client server model.
➢ Blockchain provide a peer to peer network. This characteristic of blockchain
allows the transactions to involve only two parties, the sender and the receiver. Thus it
removes the requirement of ‘third party authorisation’ because everyone in the
network is themselves able to authorise the transactions.
➢ For instance, if I am sending some money from US to my friend in India through
bank, then the bank will be the trusted third party. First it will verify the transaction
and then may cut some charges for the transaction. Hence the blockchain comes into
sight. It aims at removing trusted third party so as to makes the transaction fast and
cheap.
 Limitation of Blockchain Technology

➢ Lack of Awareness

There is a lot of discussion about blockchain, but people do not know the true value of
blockchain and how they could implement it in different situations.

➢ Limited availability of technical talent

Today, there are a lot of developers available who can do a lot of different things in
every field. But in the blockchain technology, there are not so many developers
available who have specialized expertise in blockchain technology. Hence, the lack of
developers is a hindrance to developing anything on the blockchain.

➢ Immutable

In immutable, we cannot make any modifications to any of the records. It is very

helpful if you want to keep the integrity of a record and make sure that nobody ever
tampers with it. But immutability also has a drawback.

➢ Key Management

As we know, blockchain is built on cryptography, which implies that there are

different keys, such as public keys and private keys. When you are dealing with a
private key, then you are also running the risk that somebody may lose access to your
private key. It happens a lot in the early days when bitcoin wasn't worth that much.
 People would just collect a lot of bitcoin, and then suddenly forgot what the key was,
and those may be worth millions of dollars today.

➢ Scalability

Blockchain like bitcoin has consensus mechanisms which require every participating
node to verify the transaction. It limits the number of transactions a blockchain
network can process. So bitcoin was not developed to do the large scale volumes of
transactions that many of the other institutions are doing. Currently, bitcoin can
process a maximum of seven transactions per second.

➢ Consensus Mechanism

In the blockchain, we know that a block can be created in every 10 minutes. It is

because every transaction made must ensure that every block in the blockchain
network must reach a common consensus. Depending on the network size and the
number of blocks or nodes involved in a blockchain, the back-and-forth
communications involved to attain a consensus can consume a considerable amount
of time and resources.

Bitcoin and Blockchain: How They are Related?

➢ Although the advent of Blockchain has taken the world by storm, many people still
get confused about these two terms. Thus, it is important to understand how these
terms differ and how they are interrelated.
➢ Bitcoin is a cryptocurrency, which is an application of Blockchain, whereas
Blockchain is simply an underlying technology behind Bitcoin that is implemented
through various channels.
➢ So if you are working on Blockchain and learning Blockchain, then you are not
actually learning cryptocurrency but learning how cryptocurrency works.

Cryptocurrency definition
➢ Cryptocurrency, also known as crypto, is a type of online payment method that can be
exchanged online to purchase goods and services. It is much similar to real-world
currency, but it does not have any physical appearance.
➢ It is encrypted, transparent, and decentralized digital money, which is based
on blockchain technology.
➢ There are approximately 5000 different types of cryptocurrencies, among
which Bitcoin and Ethereum are the popular ones.
➢ Cryptocurrency is digital or virtual currency, which is transparent, decentralized, and
secured by cryptography.
➢ The most important feature of cryptocurrency is that it is a decentralized currency.
Decentralized means it is not issued by the central authorities, the user owns it, and
 neither government nor the bank controls it. It is also known as the money of the
future.
➢ Bitcoin is the first decentralized cryptocurrency, which was released as open-source
software in the year 2009. After the creation of bitcoin, several other cryptocurrencies
have been created.

Cryptocurrency has various features, such as:

o It has a limit to how many units can exist, such that bitcoin has 21 million limits.
o It performs easy verification of transfer of funds with the help of hashing algorithms
that verify each transaction.
o It is independent of any central authority or a bank.
o The new units can only be added after certain conditions are met.

HOW DOES CRYPTOCURRENCY WORK?

o Cryptocurrencies are digital currencies that use blockchain technology to record and
secure every transaction. A cryptocurrency (for example, Bitcoin) can be used as a
digital form of cash to pay for everything from everyday items to larger purchases like
cars and homes.
o It can be bought using one of several digital wallets or trading platforms, then
digitally transferred upon purchase of an item, with the blockchain recording the
transaction and the new owner.
o The appeal of cryptocurrencies is that everything is recorded in a public ledger and
secured using cryptography, making an irrefutable, timestamped and secure record of
every payment.

Bitcoin

o Bitcoin is one of the most popular and successful implementations of blockchain

technology. It is an open source cryptocurrency that uses distributed peer-to-peer
computing. There is no need of a central authority to manage bitcoin network. It
was created by a person or group under the pseudonym of Satoshi Nakamoto.
o The transactions on this network are verified by proof-of-work algorithms on
computers running a mining software.
o In case of bitcoins, the blockchain is a public ledger that records bitcoin
transactions. It is implemented as a chain of blocks. Each block contains a hash of
the previous block up to the genesis block which is the first block of the bitcoin
blockchain.
Introduction to Cloud Computing
Cloud computing is the on-demand delivery of IT resources over the Internet with pay-as-
you-go pricing. Instead of buying, owning and maintaining physical data centres and servers,
you can assess technology services, such as computing power, storage, and databases, on an
as-needed basis from a cloud provider like Amazon web services (AWS).

Types of Cloud Services

Cloud computing is a general term for anything that involves delivering hosted services over
the internet. These services are divided into three main categories or types of cloud
computing: infrastructure as a service (IaaS), platform as a service (PaaS) and software as a
service (SaaS).

1. Infrastructure as a Service (IaaS): In IaaS, we can rent IT infrastructures like

servers and virtual machines (VMs), storage, networks, operating systems from a
cloud service vendor. We can create VM running Windows or Linux and install
anything we want on it. Using IaaS, we don’t need to care about the hardware or
virtualization software, but other than that, we do have to manage everything else.
Using IaaS, we get maximum flexibility, but still, we need to put more effort into
maintenance.
2. Platform as a Service (PaaS): This service provides an on-demand environment for
developing, testing, delivering, and managing software applications. The developer is
responsible for the application, and the PaaS vendor provides the ability to deploy and
 run it. Using PaaS, the flexibility gets reduce, but the management of the environment
is taken care of by the cloud vendors.
3. Software as a Service (SaaS): It provides a centrally hosted and managed software
services to the end-users. It delivers software over the internet, on-demand, and
typically on a subscription basis. E.g., Microsoft One Drive, Dropbox, WordPress,
Office 365, and Amazon Kindle. SaaS is used to minimize the operational cost to the
maximum extent.

Types of Cloud Computing

o Public Cloud: The cloud resources that are owned and operated by a third-party
cloud service provider are termed as public clouds. It delivers computing resources
such as servers, software, and storage over the internet
o Private Cloud: The cloud computing resources that are exclusively used inside a
single business or organization are termed as a private cloud. A private cloud may
physically be located on the company’s on-site datacentre or hosted by a third-party
service provider.
o Hybrid Cloud: It is the combination of public and private clouds, which is bounded
together by technology that allows data applications to be shared between them.
Hybrid cloud provides flexibility and more deployment options to the business.
Advantages of cloud computing

o Cost: It reduces the huge capital costs of buying hardware and software.
o Speed: Resources can be accessed in minutes, typically within a few clicks.
o Scalability: We can increase or decrease the requirement of resources according to
the business requirements.
o Productivity: While using cloud computing, we put less operational effort. We do not
need to apply patching, as well as no need to maintain hardware and software. So, in
this way, the IT team can be more productive and focus on achieving business goals.
o Reliability: Backup and recovery of data are less expensive and very fast for business
continuity.
o Security: Many cloud vendors offer a broad set of policies, technologies, and controls
that strengthen our data security.

Cloud Computing Architecture

As we know, cloud computing technology is used by both small and large organizations
to store the information in cloud and access it from anywhere at anytime using the internet
connection.
Cloud computing architecture is a combination of service-oriented architecture and event-
driven architecture.

Cloud computing architecture is divided into the following two parts -

o Front End
o Back End

The below diagram shows the architecture of cloud computing -

Front End

The front end is used by the client. It contains client-side interfaces and applications that are
required to access the cloud computing platforms. The front end includes web servers
(including Chrome, Firefox, internet explorer, etc.), thin & fat clients, tablets, and mobile
devices.

Back End

The back end is used by the service provider. It manages all the resources that are required to
provide cloud computing services. It includes a huge amount of data storage, security
mechanism, virtual machines, deploying models, servers, traffic control mechanisms, etc.

Components of Cloud Computing Architecture

There are the following components of cloud computing architecture -

1. Client Infrastructure

Client Infrastructure is a Front end component. It provides GUI (Graphical User Interface) to
interact with the cloud.

2. Application

The application may be any software or platform that a client wants to access.

3. Service

A Cloud Services manages that which type of service you access according to the client’s
requirement.

Cloud computing offers the following three type of services:

i. Software as a Service (SaaS) – It is also known as cloud application services. Mostly,

SaaS applications run directly through the web browser means we do not require to download
and install these applications. Some important example of SaaS is given below –

Example: Google Apps, Salesforce Dropbox, Slack, Hubspot, Cisco WebEx.

ii. Platform as a Service (PaaS) – It is also known as cloud platform services. It is quite
similar to SaaS, but the difference is that PaaS provides a platform for software creation, but
using SaaS, we can access software over the internet without the need of any platform.

Example: Windows Azure, Force.com, Magento Commerce Cloud, OpenShift.

iii. Infrastructure as a Service (IaaS) – It is also known as cloud infrastructure services.

It is responsible for managing applications data, middleware, and runtime environments.

Example: Amazon Web Services (AWS) EC2, Google Compute Engine (GCE), Cisco
Metapod.

4. Runtime Cloud

Runtime Cloud provides the execution and runtime environment to the virtual machines.

5. Storage

Storage is one of the most important components of cloud computing. It provides a huge
amount of storage capacity in the cloud to store and manage data.

6. Infrastructure

It provides services on the host level, application level, and network level. Cloud
infrastructure includes hardware and software components such as servers, storage, network
devices, virtualization software, and other storage resources that are needed to support the
cloud computing model.
7. Management

Management is used to manage components such as application, service, runtime cloud,

storage, infrastructure, and other security issues in the backend and establish coordination
between them.

8. Security

Security is an in-built back end component of cloud computing. It implements a security

mechanism in the back end.

9. Internet

The Internet is medium through which front end and back end can interact and communicate
with each other.

Benefits of Cloud Computing

Cloud Computing has numerous advantages. Some of them are listed below -
• One can access applications as utilities, over the Internet.
• One can manipulate and configure the applications online at any time.
• It does not require to install a software to access or manipulate cloud application.
• Cloud Computing offers online development and deployment tools, programming
runtime environment through PaaS model.
• Cloud resources are available over the network in a manner that provide platform
independent access to any type of clients.
• Cloud Computing offers on-demand self-service. The resources can be used without
interaction with cloud service provider.
• Cloud Computing is highly cost effective because it operates at high efficiency with
optimum utilization. It just requires an Internet connection
• Cloud Computing offers load balancing that makes it more reliable.