BLOCKCHAIN Assignment 2

1. What is bitcoin Script? What are the different commands used in bitcoin script
Ans:
**Bitcoin Script** is a stack-based, programming language used in Bitcoin transactions to
define how the transfer of bitcoins can occur. It is not Turing-complete, which means it
doesn’t support loops or other constructs that could lead to infinite execution. Bitcoin Script
is used to create smart contracts in Bitcoin, specifying conditions that must be met for a
transaction to be validated.

### Key Features of Bitcoin Script:

- **Stack-based**: Operates by pushing and popping data onto/from a stack.
- **Stateless**: Transactions are evaluated independently.
- **Non-Turing complete**: No loops, ensuring termination.
- **Condition-based**: Defines the rules for spending bitcoins.

### Types of Scripts in Bitcoin:

1. **P2PK (Pay-to-Public-Key)**: Oldest form of transaction. The owner of the private key
corresponding to the public key can redeem the funds.
2. **P2PKH (Pay-to-Public-Key-Hash)**: The most common form, where funds can be
redeemed by presenting the public key and a valid signature.
3. **P2SH (Pay-to-Script-Hash)**: The recipient must present a script matching the hash
provided by the sender, along with the required data to satisfy the script.
4. **P2WPKH (Pay-to-Witness-Public-Key-Hash)**: Used in SegWit transactions, a more
efficient version of P2PKH.

### Common Bitcoin Script Commands (also called **opcodes**):

1. **Stack Operations**:
- `OP_DUP`: Duplicates the top stack item.
- `OP_SWAP`: Swaps the top two stack items.
- `OP_DROP`: Removes the top stack item.
- `OP_TOALTSTACK`: Moves the top item to the alternate stack.

2. **Arithmetic Operations**:
- `OP_ADD`: Adds two numbers.
- `OP_SUB`: Subtracts one number from another.
- `OP_EQUAL`: Checks if two values are equal.
- `OP_EQUALVERIFY`: Verifies equality and fails the script if the check fails.

3. **Control Flow**:
- `OP_IF` / `OP_NOTIF`: Conditional execution.
- `OP_ELSE`: Defines the else branch of a conditional.
- `OP_ENDIF`: Marks the end of a conditional block.
- `OP_VERIFY`: Fails the script unless the top item is true.
4. **Crypto Operations**:
- `OP_HASH160`: Hashes the top item using SHA-256 followed by RIPEMD-160.
- `OP_CHECKSIG`: Verifies the signature of the transaction.
- `OP_CHECKMULTISIG`: Verifies multiple signatures.

5. **Other Utility Operations**:

- `OP_RETURN`: Marks the transaction as invalid, often used to embed data.

Bitcoin Script serves as the backbone for many of Bitcoin's transaction types and is essential
for security, verifying ownership, and ensuring conditions for spending bitcoins.

2. Explain Block Propagation in block-chain. How to achieve efficient Block

Propagation in block-chain.
Ans:
### Block Propagation in Blockchain

Block propagation refers to the process by which a newly created block is disseminated
across the entire blockchain network. When a miner successfully mines a block, it is
broadcast to all other nodes in the network to ensure consistency and synchronization of the
blockchain ledger. This process is crucial for maintaining the integrity and security of the
blockchain.

#### Steps in Block Propagation:

1. **Block Creation:** A miner solves the cryptographic puzzle and creates a new block
containing a list of transactions.
2. **Block Broadcasting:** The miner broadcasts the new block to its immediate neighboring
nodes.
3. **Block Validation:** Each node that receives the block verifies its validity by checking the
proof of work and the integrity of the block's transactions.
4. **Block Propagation to Neighboring Nodes:** Once a node verifies the block, it broadcasts
the block to its neighboring nodes, and the process continues until the block reaches all
nodes in the network.

### Challenges in Block Propagation:

- **Latency:** It can take time for the block to propagate to all nodes, leading to potential
forks in the blockchain.
- **Bandwidth Consumption:** Broadcasting large blocks to all nodes in the network can
consume significant bandwidth.
- **Propagation Delays:** The longer it takes for a block to propagate, the higher the
chances of two miners producing blocks simultaneously, resulting in orphaned blocks.

### Achieving Efficient Block Propagation in Blockchain:

To improve block propagation efficiency, several techniques can be employed:

1. **Compact Blocks:**
 - Bitcoin uses **Compact Block Relay**, which reduces the amount of data sent by only
transmitting the header and short transaction IDs. Since most nodes already have most of
the transactions, they can reconstruct the block instead of receiving all transaction data.

2. **Gossip Protocol:**
- Instead of broadcasting to all nodes simultaneously, each node forwards the block to a
small, random subset of its neighbors, which in turn propagate to their neighbors. This
reduces bandwidth and ensures more efficient propagation across the network.

3. **Block Pre-Validation:**
- Nodes start validating transactions as they receive them, even before the block is fully
received. This speeds up the validation process once the full block is received, reducing
propagation time.

4. **Relay Networks:**
- **Fast relay networks** like the **Bitcoin Relay Network** are designed to propagate
blocks more quickly by bypassing the traditional peer-to-peer architecture and using
specialized high-speed networks to transmit blocks faster.

5. **Incentivized Relaying:**
- Incentivizing nodes to propagate blocks quickly and efficiently by rewarding them could
motivate nodes to optimize their bandwidth usage and network connectivity, reducing delays
in block propagation.

6. **Cut-Through Relay:**
- This method involves forwarding block data to other nodes even before it has been fully
validated by the receiving node. This improves the speed of block dissemination throughout
the network.

By using a combination of these techniques, blockchains can achieve faster and more
efficient block propagation, reducing network latency and improving overall system
performance. Efficient block propagation is crucial for maintaining the decentralization,
security, and consistency of the blockchain.

3. What is P2P network in bitcoin. Explain in detail

Ans:
### P2P (Peer-to-Peer) Network in Bitcoin

A **Peer-to-Peer (P2P) network** in Bitcoin is a decentralized model where each participant,

or node, can function as both a client and server. It enables direct sharing of information
between nodes without a central authority, facilitating the broadcasting and validation of
transactions and blocks, maintaining the integrity of the blockchain.

### Key Features:

1. **Decentralization:**
 - No central authority controls the network. Each node operates independently, making the
system resilient to failures or attacks.

2. **Distributed Ledger:**
- Every node maintains a full copy of the blockchain, ensuring consistency as all nodes
receive updates.

3. **Transparency and Trustlessness:**

- Participants trust cryptographic proofs and consensus mechanisms, not a central entity.

4. **Fault Tolerance:**
- If some nodes go offline, the network remains operational as data is available across
other nodes.

5. **Permissionless:**
- Anyone can join or leave the network without needing approval.

### How it Works:

1. **Node Participation:**
- Nodes communicate and validate transactions or blocks. Full nodes store the entire
blockchain, while light nodes download only block headers.

2. **Transaction Propagation:**
- Transactions are broadcast to neighboring nodes for validation, ensuring they meet
criteria like signature verification and non-duplication.

3. **Mining and Block Propagation:**

- Miners validate blocks and propagate them across the network, allowing nodes to update
their blockchain copies.

4. **Consensus Mechanism:**
- The **Proof of Work (PoW)** ensures agreement on the valid chain, rejecting conflicting
or invalid blocks.

### Benefits:

- **Censorship Resistance:** No central entity can block transactions.

- **Security:** Decentralization and PoW make attacks difficult.
- **No Single Point of Failure:** The system remains functional even if several nodes fail.

### Challenges:

- **Latency:** Propagation time for transactions and blocks can cause delays.
- **Resource Intensive:** Running a full node requires significant resources.
- **Sybil Attacks:** Permissionless entry could allow malicious nodes, mitigated by PoW.
In summary, Bitcoin’s P2P network ensures decentralized control, security, and
transparency, making it resilient and trustless.

4. Explain the distributed consensus network in

bitcoin?
Ans:
### Distributed Consensus in Bitcoin

**Distributed consensus** in Bitcoin refers to the process by which the decentralized network
of participants (nodes) agrees on the state of the blockchain, particularly the validity of new
transactions and the order of blocks. Since Bitcoin operates without a central authority, it
relies on distributed consensus to maintain a consistent, immutable ledger across all nodes
in the network.

### Key Concepts of Bitcoin’s Distributed Consensus:

1. **Decentralization:**
- No single entity or central authority controls the blockchain. Each node independently
verifies transactions and blocks, contributing to the network's decision-making.

2. **Consensus Mechanism: Proof of Work (PoW):**

- Bitcoin’s consensus is achieved through **Proof of Work (PoW)**, a cryptographic
puzzle-solving process. Miners (nodes that validate transactions and secure the network)
compete to solve a complex mathematical problem to add a new block to the blockchain.
- The solution (hash) to the problem proves that the miner has expended computational
effort. This process prevents spam and malicious activities because solving PoW requires
significant resources (electricity and computing power).

3. **Longest Chain Rule:**

- In Bitcoin, the longest chain (the chain with the most cumulative Proof of Work) is
considered the valid chain.
- If two miners simultaneously solve a block, causing a temporary fork, the network will
follow the chain that receives the next valid block first. The chain that continues growing
longer will be accepted, and the shorter chain will be discarded.

4. **Block Validation:**
- When a miner solves a block, it is broadcast to all nodes in the network. Each node
independently verifies:
- The validity of each transaction (e.g., digital signatures, preventing double spending).
- The correctness of the Proof of Work.
- If valid, the node adds the block to its local copy of the blockchain and propagates it to
neighboring nodes.

5. **51% Attack:**
- Consensus is protected by PoW, but if a single entity controls more than 50% of the
network's computational power, it could theoretically overpower the rest of the network. This
could allow them to:
 - Create a fork and rewrite parts of the blockchain.
- Reverse their own transactions (double-spending).
- However, the immense computational power required to achieve this makes such attacks
extremely costly and impractical.

### Steps in the Bitcoin Consensus Process:

1. **Transaction Broadcast:**
- A user initiates a transaction, which is broadcast to neighboring nodes.

2. **Transaction Validation:**
- Nodes validate transactions to ensure they are legitimate (e.g., correct signatures,
sufficient funds, etc.).

3. **Block Mining:**
- Miners collect validated transactions, group them into a block, and begin solving the
Proof of Work puzzle.

4. **Block Propagation:**
- Once a miner successfully solves the puzzle, they broadcast the new block to the
network. Other nodes verify the block and add it to their blockchain.

5. **Chain Selection:**
- Nodes choose the longest valid chain (the one with the most Proof of Work) as the
correct version of the blockchain.

### Importance of Distributed Consensus:

- **Security:** Consensus ensures that only valid transactions are recorded, preventing fraud
and double-spending.
- **Immutability:** Once a block is added to the blockchain and confirmed by subsequent
blocks, it becomes increasingly difficult to alter due to the computational work required.
- **Decentralization:** Consensus allows Bitcoin to operate without a central authority,
making the network resilient to censorship, corruption, or single points of failure.

### Conclusion:

The distributed consensus network in Bitcoin allows a decentralized, global network of

participants to agree on the validity of transactions and blocks without the need for a central
authority. The **Proof of Work** mechanism, combined with the longest chain rule, ensures
the security and integrity of the blockchain while preventing fraudulent activities like
double-spending.
5. Explain how Double Spending Problem can be resolved, explain using
unconfirmed transaction pool diagram.
Ans:

Double Spending Problem and Its Resolution in Bitcoin

Double spending is the risk that a digital currency can be spent more than once. In
traditional financial systems, intermediaries like banks prevent double spending by validating
transactions. However, in decentralized systems like Bitcoin, there is no central authority to
oversee transactions. Thus, Bitcoin relies on a unique mechanism to prevent this problem.

Double Spending in Bitcoin

Double spending happens when a user tries to send the same Bitcoin to two different
recipients simultaneously. Without a reliable way to resolve this, one recipient could be left
with invalid funds. To address this, Bitcoin uses a Proof of Work (PoW) consensus
mechanism, along with block confirmation, to prevent double spending.

How Bitcoin Resolves Double Spending:

1. Transaction Validation:
○ Every Bitcoin transaction is broadcast to the P2P network, where nodes
independently verify its validity. This includes checking the sender’s balance,
ensuring proper digital signatures, and making sure the coins haven't been
spent before.
2. Unconfirmed Transaction Pool (Mempool):
○ When a valid transaction is broadcast, it goes into a node's Unconfirmed
Transaction Pool or Mempool (memory pool). These are transactions that
have not yet been included in a block.
 ○ Miners select transactions from the mempool to create new blocks. The
transactions are unconfirmed until they are added to a block.
3. Mining and Block Confirmation:
○ Miners compete to solve a complex cryptographic puzzle (Proof of Work) to
create a new block that contains valid transactions. Once the block is mined,
it is broadcast to the network, and nodes verify it.
○ The first miner to successfully solve the puzzle gets to add their block to the
blockchain. Once a block is confirmed and added, the transactions in it are
considered confirmed.
4. Fork Resolution:
○ If a malicious user attempts to double spend by broadcasting two transactions
using the same inputs to different nodes, both transactions may initially be
accepted into different mempools.
○ However, only one transaction can be included in the blockchain. The block
that contains one of the transactions will eventually propagate across the
network.
○ The double-spent transaction that is included in a block first will be confirmed,
while the second conflicting transaction will be rejected and removed from the
mempools of other nodes.
5. Multiple Confirmations:
○ For further security, Bitcoin nodes typically wait for multiple block
confirmations (typically 6) before considering a transaction fully secure. With
each new block added to the blockchain, the difficulty of reversing the
transaction increases exponentially, ensuring that the confirmed transaction is
final.

Diagram Explanation: Unconfirmed Transaction Pool (Mempool) and

Double Spending Resolution

Consider a scenario where a user tries to double spend:

1. Transaction A and Transaction B:

○ The user creates Transaction A and broadcasts it to some nodes in the
network, spending the same bitcoins.
○ Then, they broadcast Transaction B, attempting to spend the same coins
elsewhere.
2. Mempool Storage:
○ Nodes in the network receive these transactions and store them in the
unconfirmed transaction pool (mempool). Since the two transactions
conflict, they cannot both be valid.
○ Mempool Node 1: Stores Transaction A.
○ Mempool Node 2: Stores Transaction B.
3. Mining Process:
○ Miners take transactions from the mempool and try to include them in a block.
Let's say Miner X takes Transaction A and mines a new block that includes
this transaction.
4. Block Propagation:
 ○The block containing Transaction A is broadcast across the network. Other
nodes verify the block and add it to their blockchain.
5. Transaction Confirmation:
○ Once the block is added to the blockchain, Transaction A is considered
confirmed. Transaction B is now invalid because its inputs have already
been spent in Transaction A.
○ Transaction B is removed from the mempools of all nodes as it conflicts with
the blockchain’s confirmed history.
6. Finality with Confirmations:
○ With each new block mined on top of the block containing Transaction A, it
becomes more secure and final, as reversing the transaction would require an
overwhelming amount of computational power.

6. Differentiate between proof of work and proof of stake

Ans:
Comparison of Proof of Work (PoW) and Proof of Stake (PoS)

Feature Proof of Work (PoW) Proof of Stake (PoS)

Consensus Miners solve complex Validators are chosen based on

Mechanism cryptographic puzzles staked coins

Energy Consumption High Low

Incentive/Reward Miners earn new coins Validators earn transaction fees

and transaction fees and sometimes new coins

Security Secured by Secured by staked assets

computational power

Block Creation Miners compete to solve Validators are selected

a puzzle semi-randomly

Cost of Attack (51% Very high High

Attack)

Hardware Specialized hardware Standard devices

Requirements (ASICs, GPUs)
 Decentralization Can become centralized More likely to stay
decentralized

Transaction Speed Slower Faster

Environmental Negative Environmentally friendly

Impact

Validator Selection Based on computational Based on staked coins

work

Risk of Higher Lower

Centralization

Initial Investment Expensive Investment in coins

Finality of Eventual finality Faster finality

Transactions

Example Networks Bitcoin, Litecoin, Bitcoin Ethereum 2.0, Cardano,

Cash Polkadot, Solana

Summary:

● PoW relies on computational power and energy consumption, favoring miners

with powerful hardware.

● PoS secures the network through economic incentives, favoring wealthier

participants.

Each has its strengths and weaknesses, with PoW being more tested and PoS

aiming to improve scalability and sustainability.