UNIT – 2

Hashing:
• Hashing is a cryptographic process used in blockchain technology to secure and verify
transactions and to control the creation of new units.
• Hashing is a mathematical function that takes an input, such as text or data, and turns
it into an output of fixed length and structure known as the 'hash value'.
• The hash value is always the same length and one-way, meaning it cannot be
reversed. Hashing plays a crucial role in blockchain technology by providing a way to
secure the data stored, verify the integrity of the data, link blocks together, and serve
as a part of the consensus mechanism.
• Each block header in a block in the blockchain contains the hash of the previous block
header, ensuring that it is not possible to change even a single block in a blockchain
without being detected.
• Hashing is also used in password authentication systems and digital signatures.
Hashing is an essential aspect of blockchain technology, and without it, the
blockchain would not be able to function as a secure, tamper-proof, and
decentralized ledger.

Public key cryptosystems:

• Public key cryptography is a fundamental component of blockchain technology,
providing a secure and efficient method for conducting transactions and ensuring
data integrity. In public key cryptography, a pair of keys is used - a public key and a
private key. The public key is distributed widely and is used to encrypt messages or
verify digital signatures, while the private key is kept secret and is used to decrypt
 messages or create digital signatures. This asymmetric encryption scheme enables
secure communication and transaction verification without the need for a shared
secret key.
• In the context of blockchain, public key cryptography is used to create digital
signatures, which are used to verify the authenticity of transactions and ensure
that only the intended recipient can access the transaction data. When a user
initiates a transaction, they use their private key to create a digital signature,
which is then verified by the network using the user's public key. This process
ensures that the transaction is authentic and has not been tampered with.
• Public key cryptography plays a critical role in the security and integrity of
blockchain networks, enabling secure and transparent transactions without the
need for a central authority. It is a key component of the trustless and
decentralized nature of blockchain technology, and is essential for ensuring the
privacy and security of user data and transactions.

private vs public block chain and use cases:

Public blockchains and private blockchains are two types of blockchain networks that differ
in terms of accessibility, governance, and level of transparency and security they offer.
Public Blockchains:
• Accessible to anyone, allowing anyone to read, write, and participate in the
blockchain.
• Decentralized and not controlled by a single entity.
• Highly secure due to mining and the consensus mechanism.
• Transparent, with no anonymous participants.
 • Suitable for cryptocurrencies and applications requiring high levels of security and
transparency.
Examples of public blockchains include Bitcoin, Ethereum, and Litecoin
Private Blockchains:
• Access restricted to authorized parties only, not open to the public.
• Centralized, with a single entity or a group of entities controlling the network.
• Less transparent, with only authorized parties having access to the data on the
network.
• More efficient, with faster transactions and better scalability.
• Suitable for enterprise use cases, such as supply chain management, where parties
involved want to maintain control over the network.
Use cases of private blockchains include:
1. Supply chain management: Private blockchains can be used to track and trace the
movement of goods, providing transparency and security in the supply chain.
2. Data integrity: Private blockchains can be used to store and verify the integrity of
data, ensuring that only authorized parties have access to the data.
3. Compliance and regulatory: Private blockchains can be used to manage compliance
requirements and ensure that only authorized parties can participate in the network.
4. Voting systems: Private blockchains can be used to create secure and transparent
voting systems, ensuring that only eligible voters can participate in elections or
decisions.
5. Identity management: Private blockchains can be used to manage digital identities
and ensure that only authorized parties have access to the data
Use cases of public blockchains include:
1. Cryptocurrencies: Public blockchains such as Bitcoin and Ethereum are used for the
creation, transfer, and storage of digital currencies, providing a secure and
transparent alternative to traditional financial systems.
2. Smart Contracts: Public blockchains enable the execution of self-executing smart
contracts, which are programmable contracts that automatically execute and enforce
the terms of an agreement when predefined conditions are met. This has applications
in various industries, including real estate, supply chain management, and legal
services.
3. Supply Chain Management: Public blockchains can be used to create transparent and
traceable supply chains, allowing for the secure and efficient tracking of goods from
 the point of origin to the end consumer. This can help prevent fraud, counterfeiting,
and ensure the quality and authenticity of products.
4. Identity Management: Public blockchains can be used to create secure and tamper-
proof digital identities, allowing individuals to control and manage their personal data
and providing a secure and transparent alternative to traditional identity
management systems.
5. Voting and Governance: Public blockchains can be used to create secure and
transparent voting and governance systems, allowing for the secure and efficient
recording and counting of votes, and ensuring the integrity and transparency of the
electoral process.
6. Healthcare: Public blockchains can be used to create secure and transparent
healthcare records, allowing for the secure and efficient sharing of medical records
and ensuring the privacy and security of patient data.

Hash Puzzles:
• Hash puzzles are an essential component of the mining process in blockchain
technology. A hash puzzle is a mathematical problem that miners must solve to add a
new block to the blockchain.
• The puzzle involves finding a specific input that, when hashed using a cryptographic
algorithm, produces a hash value that meets a specific set of criteria.
• The criteria are usually a certain number of leading zeros in the hash value, which is
known as the difficulty level.
• The difficulty level is adjusted periodically to ensure that the rate of block creation
remains constant.
• Miners compete to solve the hash puzzle, and the first miner to solve it is rewarded
with newly minted cryptocurrency and transaction fees.
• Hash puzzles are designed to be difficult to solve, requiring significant computational
power and energy consumption.
• The use of hash puzzles ensures the security and integrity of the blockchain by
making it difficult for malicious actors to manipulate the blockchain.
• Hash puzzles are an essential component of proof-of-work consensus algorithms used
in public blockchains such as Bitcoin and Ethereum.
Extensibility of Block chain concepts:
Blockchain technology has shown great potential in various use cases across different
industries. However, it also has some limitations, such as scalability issues, high energy
consumption, and privacy concerns. To address these limitations and extend the
functionality of blockchain technology, several approaches and extensions have been
proposed. Some of these extensions include:
1. Alternative Consensus Algorithms: Blockchain technology primarily uses the Proof-
of-Work (PoW) consensus algorithm, which has limitations in terms of energy
consumption and scalability. Alternative consensus algorithms, such as Proof-of-Stake
(PoS), Byzantine Fault Tolerance (BFT), and Practical Byzantine Fault Tolerance (pBFT),
have been proposed to address these issues and improve the efficiency and
scalability of blockchain systems.
2. Layer-1 and Layer-2 Solutions: Layer-1 solutions involve changing the codebase of the
blockchain, such as implementing Segregated Witness (SegWit) or sharding, to
improve scalability and reduce transaction costs. Layer-2 solutions involve building
additional layers on top of the existing blockchain to enhance scalability and reduce
transaction costs, examples include state channels, optimistic rollups, and zkRollups.
3. Blockchain Interoperability: Blockchain interoperability refers to the ability of
different blockchains to communicate and exchange data or assets with each other.
This can be achieved through cross-chain communication, atomic swaps, or bridges,
which enable the interaction between blockchains with different consensus
algorithms and smart contracting capabilities.
4. Privacy and Scalability Solutions: To address privacy and scalability concerns in
blockchain technology, various solutions have been proposed, such as the use of zero-
knowledge proofs, confidential transactions, and privacy-preserving smart contracts.
5. Sidechains and Distributed Data Clouds (DDC): Sidechains are separate blockchains
that run parallel to the main chain and can implement new rules and functionality.
Distributed Data Clouds (DDC) are systems that store and manage data across
multiple nodes, providing a decentralized alternative to centralized storage solutions.
6. Forks: Forks are major changes to the blockchain's codebase that create two or more
separate chains. Soft forks allow miners and nodes to continue using the old software
without fear of losing their funds, while hard forks require an upgrade to continue
participating in the network.
Digital Identity verification:
• Digital identity verification is the process of confirming an online identity, ensuring
that individuals with digital identities exist, authenticating their identity, and
investigating their reputation to prevent fraud, mitigate risk, and ensure compliance.
• It is a reliable and quick way to build a layer of trust in a remote business relationship,
enabling organizations to safely deliver services and handle transactions for global
customers.
• There are two main digital identity verification methods: analyzing data and analyzing
identity documents.
o The first approach involves checking a person’s identity data against data
sources such as electoral records, credit bureaus, and census information.
o The other method involves analyzing digital images of identity documents.
• Digital identity verification benefits include robust security, reduced manual
verification, and a smooth, convenient user experience.
• It is essential for secure and genuine access to resources of web and mobile
applications, providing access control based on the user’s credentials.
• Digital identity verification is crucial for preventing fraud and building trust, and it is
commonly used in financial processes, such as opening a bank account, and for Know
Your Customer (KYC) and Customer Due Diligence (CDD) requirements. It involves the
matching of personal data against trusted sources and testing to ensure it is real,
verifiable data.
• Digital identity verification speeds up the verification process, which is necessary for
the fast pace of the digital world. There are different approaches to digital identity
verification, and it is essential for bringing benefits to the transactions individuals
need.
Block chain Neutrality:
• Blockchain neutrality refers to the principle that blockchain networks should be open,
transparent, and accessible to all participants, without any bias or discrimination.
• It is a concept that is similar to net neutrality, which advocates for equal access to the
internet without any discrimination or preferential treatment.
• Blockchain neutrality is important because it ensures that the blockchain network is
not controlled by a single entity or group of entities, and that all participants have
equal access to the network and its resources.
• Blockchain neutrality is essential for promoting competition, innovation, and
decentralization in the blockchain ecosystem.
• It ensures that no single entity or group of entities can control the network, and that
all participants have equal access to the network's resources.
• Blockchain neutrality also promotes transparency and accountability, ensuring that all
transactions and activities on the network are visible and auditable.
• Regulators and policymakers play a critical role in ensuring blockchain neutrality by
promoting open access and non-discrimination on dominant blockchain networks.
• This approach not only serves traditional antitrust goals of lowering prices and
promoting innovation but also achieves broader economic and social reform by
reducing the power and influence of the biggest financial institutions.
Digital art:
• Digital art refers to any artistic work or practice that uses digital technology as part of
the creative or presentation process. It can be purely computer-generated, such as
fractals and algorithmic art, or taken from other sources, such as a scanned
photograph or an image drawn using vector graphics software using a mouse or
graphics tablet.
• Digital art can be created using various tools and techniques, including computer-
generated imagery, digital painting, digital photography, and electronic sculpture
Some key aspects of digital art include:
1. Computer-generated art: Artworks created using algorithms, fractals, and other
mathematical concepts, often without human intervention
2. Digital painting: Artworks created using digital tools, such as software and computer
platforms, and digitally outputting the resulting image as painted on canvas
3. Digital photography: Photographs taken or manipulated using digital cameras and
software
4. Digital sculpture: Three-dimensional objects created using digital tools and
technologies, such as 3D printing or computer-aided design (CAD)
5. Interactive art: Artworks that allow the audience to have some control over the final
image or presentation, often through the use of programming or sensors

Block chain Environment:

• A blockchain environment refers to the overall ecosystem, infrastructure, and
conditions in which blockchain technology operates.
• This includes the network of interconnected nodes, the consensus mechanisms, the
protocols and standards, the regulatory and legal framework, and the various
applications and use cases of blockchain technology.
• The blockchain environment plays a crucial role in shaping the development,
adoption, and impact of blockchain technology across different industries and
sectors.
• It encompasses both the technical and non-technical aspects of blockchain, and it is
essential for ensuring the security, integrity, and efficiency of blockchain systems.