ĐẠI HỌC NGÂN HÀNG THÀNH PHỐ HỒ CHÍ MINH

Chapter 2

CRYPTOGRAPHY
AND
CRYPTOCURRENCY

TP. HCM 2022

 OVERVIEW
§ Blockchain definition
§ Bitcoin Design Features
§ Cryptographic Hash Functions
§ Timestamped Append-only logs
§ Block Headers & Merkle Trees
§ Asymmetric Cryptography & Digital Signatures
§ Bitcoin Addresses 2
 Study Questions

§ What is distributed ledger technology (DLT)?

§ The relationships between blockchain and DLT?
§ What is a block, transactions?
§ Types of blockchains?
§ Advantages & Disadvantages of Blockchains?
§ Potential applications of blockchain in practice?
§ Group of 3 or 4 students:
§ self-study and take notes: 25 minutes
§ discussion: 25 minutes 3
 Blockchain - Definition
§ A blockchain is a type of distributed ledger technology (DLT) that consists
of growing list of records, called blocks, that are securely linked together
using cryptography [wikipedia].
§ Each block contains:
§ a timestamp
§ a cryptographic hash of the previous block,
§ transaction data (generally represented as a Merkle tree, where data
nodes are represented by leaves)
§ Types of blockchains:
§ Public Blockchains
§ Private Blockchains
§ Hydrid blockchains (consortiums)
§ Sidechains
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Blockchain - An Instance

Structure of Bitcoin blockchain (image: wikipedia)

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 Blockchain - Types

§ Public blockchains:
§ open, decentralized networks of computers accessible to anyone who want
to request or validate a transaction (check for accuracy)
§ Those (miners) who validate transactions receive rewards.
§ Proof-of-work or proof-of-stake consensus mechanisms are used.
§ Examples: the Bitcoin and Ethereum (ETH) blockchains.

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 Blockchain - Types
§ Private blockchains:
§ NOT open, they have access restrictions
§ Require a permission from the system administrator to join
§ They are typically governed by one entity, meaning they’re centralized
§ Example: Hyperledger is a private, permissioned blockchain

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 Blockchain - Types
§ Hybrid blockchains (consortiums):
§ a combination of public and private blockchains
§ contain centralized and decentralized features.
§ Example: Dragonchain, Energy Web Foundation, and R3.

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 Blockchain - Types
§ Sidechains:
§ a blockchain running parallel to the main chain.
§ allows users to move digital assets between two different blockchains
§ improves scalability and efficiency.
§ Example: the Liquid Network.

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Blockchain - How it works

Image by http://www.blockgeeks.com 10
 Benefits of Blockchain Over Traditional Finance
§ Trustless
§ Unstoppable
§ Immutable
§ Decentralized
§ Lower Cost
§ Peer-to-Peer
§ Transparent
§ Universal Banking

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 Disadvantages of Blockchain
§ Environmental Impact
§ Personal Responsibility
§ Growing Pains
§ False Narratives

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 Applications of Blockchain
§ Cryptocurrencies: Bitcoin, Ethereum, etc.
§ Smart Contracts
§ Decentralized Banking
§ Video Games/Art
§ Peer-to-peer Energy Trading
§ Supply chain and logistics tracking
§ Healthcare process optimization

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 Applications of Blockchain
§ Real estate processing platform
§ NFT marketplaces: These are marketplaces that allow you to buy nonfungible
tokens (NFTs) è “FTX sập rồi”
§ Music royalties tracking
§ Personal identity security
§ Automated Advertising Campaigns

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 BITCOIN DESIGN FEATURES
Cryptography & Timestamped Logs
§ Cryptographic Hash Func1ons
§ Timestamped Append-only Logs (Blocks)
§ Block Headers & Merkle Trees
§ Asymmetric Cryptography & Digital Signatures
§ Addresses
Decentralized Network Consensus
§ Consensus through Proof of Work
§ Network of Nodes
§ Na1ve Currency
Transac>on Script & UTXO
§ Transac1on Inputs & Outputs
§ Unspent Transac1on Output (UTXO)
§ Scrip1ng language 15
 CRYPTOGRAPHIC HASH FUNCTIONS
Hash = Digital Fingerprints for Data
General Properties
§ Maps Input x of any size to an Output of fixed size – called a ‘Hash’
§ Deterministic: Always the same Hash for the same x
§ Efficiently computed

Cryptographic Properties
§ Preimage resistant (One way): infeasible to determine x from Hash(x)
§ Collision resistant: infeasible to find and x and y where Hash(x) = Hash(y)
§ Avalanche effect: Change x slightly and Hash(x) changes significantly
§ Puzzle friendliness: knowing Hash(x) and part of x it is still very hard to find
rest of x 1
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 CRYPTOGRAPHIC HASH FUNCTIONS
Hash = Digital Fingerprints for Data
Use cases
§ Hash password before storing in database
§ Verify data integrity when receiving
§ Using as reference
§ Using in digital signature

Bitcoin hash functions

§ Headers & Merkle Trees – SHA 256
§ Bitcoin Addresses – SHA 256 and RIPEMD160
Hash calculator online
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TIME-STAMP DIGITAL DOCUMENT

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 TIME-STAMP DIGITAL DOCUMENT

WHY TIME-STAMP?
§ Bind a signed document to a parWcular date and Wme
§ Prove in the future that the signed document existed at this parWcular date
and Wme.
§ Ensure the accuracy of the date and the Wme it indicates and the integrity of
the data to which the date and Wme are bound

USE CASE
§ Digital signature for contract

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 TIME-STAMP DIGITAL DOCUMENT

WHY TIME-STAMP?
§ Bind a signed document to a particular date and time
§ Prove in the future that the signed document existed at this particular date
and time.
§ Ensure the accuracy of the date and the time it indicates and the integrity of
the data to which the date and time are bound

USE CASE
§ Digital signature for contract

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TIMESTAMPED APPEND-ONLY - BLOCKCHAIN

GENESIS BLOCK

0000000…0000

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BLOCK HEADER

§ Version
§ Previous Block hash
§ Merkle Root hash
§ Timestamp
§ Difficulty target
§ Nonce

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 MERKLE TREE
Binary Data Tree with Hashes

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SYMMETRIC & ASYMMETRIC CRYPTOGRAPHY

SYMMETRIC ENCRYPTION

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SYMMETRIC & ASYMMETRIC CRYPTOGRAPHY

ASYMMETRIC ENCRYPTION

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ASYMMETRIC CRYPTOGRAPHY & DIGITAL
SIGNATURES

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 BITCOIN ADDRESSES

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Bitcoin explorer
 BITCOIN ADDRESSES

Sign transaction with private key Verify transaction with public key
-----BEGIN RSA PRIVATE KEY----- -----BEGIN RSA PUBLIC KEY-----
MIIBOgIBAAJBAKj34GkxFhD90vcNLYLInFEX6Ppy1tPf9Cnzj4p4WGeKLs1Pt8Qu MEgCQQCo9+BpMRYQ/dL3DS2CyJxRF+j6ctbT3/Qp84+KeFhnii7NT7fELilKUSnx
KUpRKfFLfRYC9AIKjbJTWit+CqvjWYzvQwECAwEAAQJAIJLixBy2qpFoS4DSmoEm S30WAvQCCo2yU1orfgqr41mM70MBAgMBAAE=
o3qGy0t6z09AIJtH+5OeRV1be+N4cDYJKffGzDa88vQENZiRm0GRq6a+HPGQMd2k -----END RSA PUBLIC KEY-----
TQIhAKMSvzIBnni7ot/OSie2TmJLY4SwTQAevXysE2RbFDYdAiEBCUEaRQnMnbp7
9mxDXDf6AU0cN/RPBjb9qSHDcWZHGzUCIG2Es59z8ugGrDY+pxLQnwfotadxd+Uy
v/Ow5T0q5gIJAiEAyS4RaI9YG8EWx/2w0T67ZUVAw8eOMB6BIUg0Xcu+3okCIBOs
HASH SHA 256
/5OiPgoTdSy7bcF9IGpSE8ZgGKzgYQVZeN97YE00
61087f7e8804c5361dd0291c2dd4083a6d28014a999b43c981a42435cf0fce00
-----END RSA PRIVATE KEY-----

HASH RIPEMD 160

First 4 bytes 2x SHA 256
09bcbf6b 21799c282798d07dc5cf385d5fe2fcb7c5e91a53
(8 hex digits)

Bitcoin address
base58
3xVUrcYNkxtrpgeD6Lez2QbfZGW7g3MDWTV34mZy 21799c282798d07dc5cf385d5fe2fcb7c5e91a5309bcbf6b

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Bitcoin explorer
 QUESTIONS

§ Why bitcoin need time-stamp and hash?

§ Why we need seed phrase instead of password to initiate
blockchain transaction?

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DISCUSSION

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