Unit-2

HASHING:
Hashing is a fundamental concept in blockchain technology. It plays a crucial role in ensuring the
security and immutability of blockchain data. 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. Here an explanation of how hashing is used in blockchain:
1. What is Hashing? Hashing is a one-way cryptographic function that takes an input (or message) and
returns a fixed-size string of characters, which is typically a hexadecimal number. The output, known as
the hash value or hash code, is unique to the input data. Even a small change in the input data will result
in a significantly different hash value.
2. Data Integrity: In a blockchain, data is stored in blocks. Each block contains a list of transactions or other
relevant information. To ensure the integrity of the data within each block, a hash is generated for the
entire block contents. This hash value is sometimes referred to as the block header
3. Linking Blocks: To create a chain of blocks, each block includes the hash value of the previous blocks
header. This forms a link between blocks in the chain. This linking of blocks is what gives a blockchain
its name and ensures that the data in previous blocks cannot be altered without changing the hash values
of all subsequent blocks.
4. Consensus Mechanism: Hashing is also a key component of many blockchain consensus mechanisms,
such as Proof of Work (PoW) used in Bitcoin. Miners in a PoW system compete to solve a cryptographic
puzzle by finding a nonce (a random number) that, when hashed along with the blocks data, results in a
hash value that meets certain criteria (e., starts with a certain number of leading zeros). This process is
computationally intensive and requires a lot of computational power, making it difficult for malicious
actors to manipulate the blockchain.
5. Security: Cryptographic hashing ensures that once data is added to a block and the block is added to the
blockchain, it becomes extremely difficult to alter any past data because doing so would require changing
the data in that block, which would in turn change its hash value. This change would cascade through all
subsequent blocks, making it computationally impractical and economically unfeasible.
6. Data Verification: Users of the blockchain can independently verify the integrity of data by recalculating
the hash values of blocks and comparing them to the stored values. If the hashes match, it means the data
has not been tampered with.
7. Authentication: It proves that the transaction was initiated by the owner of the private key associated
with the public key used in the transaction.
8. Integrity: It ensures that the transaction data has not been tampered with during transmission.
9. Transaction Verification: Other participants in the network can use the sender& public key to verify the
digital signature on a transaction. By doing so, they can confirm the transaction authenticity and integrity
without needing to know the sender private key.
10. Secure Ownership and Access Control: Public key cryptography allows for secure ownership of assets
(e., cryptocurrencies) on the blockchain. Only the holder of the private key can access and control those
assets. Access control to blockchain accounts and assets is established by controlling the corresponding
private keys. This means that the owner has full control over their funds and can transfer ownership only
by signing transactions with their private key.
11. Confidential Transactions: Some blockchains incorporate additional cryptographic techniques, such as
zero-knowledge proofs, to provide privacy for transaction amounts and other sensitive data. These
techniques allow participants to prove the validity of transactions without revealing specific details,
preserving confidentiality.
12. Encryption and Secure Communication: Public key cryptography can also be used for secure
communication within a blockchain network. Users can encrypt messages with the recipient public key,
ensuring that only the corresponding private key holder can decrypt and read the message.
13. Consensus Mechanisms: Public key cryptography is often integral to the consensus mechanisms used in
blockchains. For example, in Proof of Stake (PoS) blockchains, participants lock up a certain amount of
A public key cryptosystem: cryptocurrency as collateral, and their public keys are used to verify their
eligibility to create new blocks and validate transactions. In summary, public key cryptosystems are
foundational to blockchain technology, providing the means for secure transactions, user authentication,
and privacy features. They ensure that users can interact with the blockchain securely and have control
over their assets while maintaining the integrity and confidentiality of transactions and data.

A public key cryptosystem, also known as asymmetric cryptography, is a cryptographic system that uses
two different keys to encrypt and decrypt messages:

Public key

Anyone can use the public key to encrypt a message, but only the sender can read it. The sender shares
the public key with anyone who wants to communicate with them securely.

Cryptographic algorithms based on mathematical problems called one-way functions generate key pairs.
The security of public key cryptography relies on these mathematical challenges, which classical
computers have difficulty solving. However, quantum computers could potentially break the security of
public-key algorithms if they become powerful enough.
Public key cryptography is widely used, especially for TLS/SSL, which makes HTTPS possible. For
example, during an SSL/TLS handshake, the client and server decide on an encryption algorithm and a
shared secret key that's only used for that session. All messages exchanged between the client and server
are then encrypted using the key and algorithm, ensuring privacy even if malicious forces intercept the
messages.
PRIVATE, PUBLIC BLOCK CHAIN; USE CASES:

Difference between Public and Private blockchain :

S.n Basis of Public BlockChain

o Comparison Private BlockChain

In this type of blockchain anyone can read, write and In this type of blockchain read and write is
participate in a blockchain. Hence, it is permissionless done upon invitation, hence it is a
1. Access – blockchain. It is public to everyone. permissioned blockchain.

Network Actors
2. – Don’t know each other Know each other

Decentralized
3. Vs Centralized – A public blockchain is decentralized. A private blockchain is more centralized.

The order of magnitude of a public blockchain is lesser than

Order Of that of a private blockchain as it is lighter and provides The order of magnitude is more as
4. Magnitude – transactional throughput. compared to the public blockchain.

5. Native Token – Yes Not necessary

6. Speed – Slow Fast

Transactions pre Transaction per second is more as

7. second – Transactions per second are lesser in a public blockchain. compared to public blockchain.

A private blockchain is more prone to

A public network is more secure due to decentralization and hacks, risks, and data breaches/
active participation. Due to the higher number of nodes in the manipulation. It is easy for bad actors to
network, it is nearly impossible for ‘bad actors’ to attack the endanger the entire network. Hence, it is
8. Security – system and gain control over the consensus network. less secure.

9. Energy A public blockchain consumes more energy than a private Private blockchains consume a lot less
 blockchain as it requires a significant amount of electrical
Consumption – resources to function and achieve network consensus. energy and power.

Proof of Elapsed Time (PoET), Raft, and

Consensus Some are proof of work, proof of stake, proof of burn, proof Istanbul BFT can be used only in case of
10. algorithms – of space etc. private blockchains.

In a public blockchain, no one knows who each validator is In a private blockchain, there is no chance
and this increases the risk of potential collision or a 51% of minor collision. Each validator is
attack (a group of miners which control more than 50% of the known and they have the suitable
11. Attacks – network’s computing power.). credentials to be a part of the network.

Potential to disrupt current business models through Reduces transaction cost and data
disintermediation. There is lower infrastructure cost. No need redundancies and replace legacy systems,
to maintain servers or system admins radically. Hence simplifying documents handling and
reducing the cost of creating and running decentralized getting rid of semi manual compliance
12. Effects – application (dApps). mechanisms.

Bitcoin, Ethereum, Monero, Zcash, Dash, Litecoin, Stellar, R3 (Banks), EWF (Energy), B3i
13. Examples – Steemit etc. (Insurance), Corda.

Use Cases:

Cryptocurrencies: Public blockchains like Bitcoin and Ethereum serve as platforms for digital
currencies and tokens.
Consortium Blockchains: Multiple organizations in a consortium can use a private blockchain to
collaborate and share information securely while maintaining control
l. Financial Services: Private blockchains are used in financial institutions for settlements, clearing, and
asset tokenization. Healthcare: Medical records and patient data can be stored and shared securely within
a private blockchain network.
2. Government and Regulation: Some government agencies use private blockchains for secure record-
keeping and regulatory compliance. In summary, the choice between a private and public blockchain
depends on the specific use case and requirements.
Public blockchains provide openness and decentralization, while private blockchains offer controlled
access, privacy, and efficiency. Hybrid solutions also exist, combining aspects of both types to meet
specific needs.

HASHPUZZELS:
This also helps to maintain the rate at which transactions are appended in the blockchain at 10 minutes.
To solve the hash puzzle, miners will try to calculate the hash of a block by adding a nonce to the block
header repeatedly until the hash value yielded is less than the target.
1. Proof of Work (PoW): In blockchain, PoW is often referred to as apuzzle that miners need to solve.
Miners compete to find a specific nonce (a random number) that, when hashed along with the transaction
data and the previous block header, results in a hash value meeting certain criterion, such as having a
specified number of leading zeros. This process involves a lot of computational work and is sometimes
colloquially referred to as a hash puzzle
2. Cryptographic Puzzles: Blockchain networks use cryptographic hashing extensively for various purposes,
including data integrity, security, and consensus mechanisms. Cryptographic puzzles can be a general
term for the mathematical challenges and cryptographic operations involved in blockchain technology.
3. Security and Authentication: In some blockchain applications, hash puzzles could refer to cryptographic
challenges used for authentication and access control. Users may need to solve cryptographic puzzles to
gain access to certain resources or services on a blockchain platform.
4. Blockchain-Based Games and Applications: Some blockchain-based games and applications incorporate
puzzles and challenges as part of their gameplay or user interactions. These puzzles may involve
cryptographic operations or hash functions. If you have a specific context or use case in mind for
 HashPuzzles providing more details could help in offering a more precise explanation. Blockchain
technology is versatile, and different projects and applications may use terminology in unique ways to
describe their specific features or mechanisms.

EXTENSIBILITY OF BLOCK CHAIN CONCEPTS:

Blockchain technology, while initially designed to support cryptocurrencies like Bitcoin, has proven to
be highly adaptable and extensible. This extensibility means that blockchain concepts and frameworks
can be applied to various domains and use cases beyond digital currencies. Extensibility refers to the
ability of a system to adapt and evolve over time. The extensibility of blockchain technology allows for
the development of new use cases beyond its original intent. Extensibility is a critical factor in the
ongoing success of blockchain technology.
1. Energy Trading: Blockchain is used in peer-to-peer energy trading platforms that allow users to buy and
sell excess renewable energy directly to neighbors. This promotes sustainable energy consumption and
decentralization of power grids.
2. Intellectual Property and Content Ownership: Blockchain can be used to timestamp and prove
ownership of intellectual property, such as patents, copyrights, and digital content.
3. Token Sales and Fundraising: Initial Coin Offerings (ICOs) and Security Token Offerings (STOs) are
methods of raising capital using blockchain tokens. They have disrupted traditional fundraising and
investment models.
4. Government Services: Governments explore blockchain for land registries, identity documents, and
public record management to increase transparency and reduce corruption. Blockchain s extensibility
arises from its core features, including decentralization, transparency, security, and trustlessness.
Developers can build custom applications and protocols on existing blockchain platforms or create
entirely new blockchain networks tailored to specific use cases. As a result, the blockchain ecosystem
continues to evolve and expand into various industries and applications beyond its initial use in
cryptocurrencies.

DIGITAL IDENTITY VERIFICATION:

Blockchain technology offers a promising solution for digital identity verification and management.
Traditional identity verification methods often rely on centralized databases, which can be vulnerable to
data breaches and privacy concerns. Blockchain-based identity systems aim to provide a more secure,
user-centric, and privacy-preserving approach. Here s how digital identity verification works in
blockchain:
Components of Blockchain-Based Digital Identity:
1. User Identity: Individuals or entities create and manage their digital identities on the blockchain. These
identities are associated with a unique cryptographic key pair—a public key (used as the identifier) and a
private key (used for authentication).
2. Decentralization: Blockchain networks are decentralized, meaning that no single entity or organization
controls the entire system. This decentralization enhances security and reduces the risk of data breaches.
3. User Consent: Users have control over their identity data and must provide explicit consent for its use
and disclosure. This consent is typically managed through smart contracts on the blockchain.
4. Data Integrity: Identity-related data, such as personal information, documents, and credentials, can be
stored on the blockchain in an encrypted and tamper-evident format. This ensures data integrity and
prevents unauthorized alterations.

Key Features of Blockchain-Based Digital Identity:

1. Privacy Preservation: Blockchain-based identity systems aim to give users more control over their
personal information. Users can share only the necessary information for a specific transaction or
verification, without revealing their entire identity.
2. Security: Cryptographic keys are used for identity authentication, making it challenging for malicious
actors to impersonate users. The immutability of blockchain records also adds to security.
3. Reduced Fraud: With cryptographic verification, the risk of identity fraud is reduced. Users can prove
their identity without relying on centralized authorities or third-party intermediaries.
4. Interoperability: Blockchain-based identity systems can be designed to work across different platforms
and services, allowing users to use a single identity across various applications and services.

BLOCK CHAIN NEUTRALITY:

Blockchain neutrality is not a widely recognized or established term in the blockchain and
cryptocurrency space, as of my last knowledge update in September 2021. However, it s possible that the
concept you re referring to is related to the principles of neutrality, openness, and decentralization that
are often associated with blockchain technology and the blockchain ecosystem. The technology of
blockchain is neutral in the system of artificial intelligence. This technology provides transparency in
every sector where it has been used. Blockchain is used in many different sectors either in finance,
Border control systems or in hospitals.
1. Decentralization: Blockchain technology is designed to be decentralized, meaning that it operates on a
network of nodes (computers) distributed across the globe. Decentralization is a core principle that
ensures no single entity has complete control over the network, promoting censorship resistance and
security.
2. Openness: Blockchains are typically open and transparent, allowing anyone to join the network, view
transaction data, and participate in the validation process (for public blockchains). This openness fosters
trust and accessibility.
3. Net Neutrality: Net neutrality is a concept related to the open internet. It advocates for internet service
providers treating all data on the internet equally, without discriminating or charging differently based on
user, content, website, platform, or application. While blockchain and net neutrality are not directly
related, some proponents of decentralization and blockchain technology view them as aligned principles
in promoting an open and fair digital environment.
4. Token Neutrality: In the context of blockchain and cryptocurrencies, token neutrality refers to the idea
that blockchain networks should not favor specific tokens or assets over others. This means that the
underlying blockchain protocol should provide a level playing field for all tokens to be created,
transferred, and used without discrimination.
5. Interoperability: Interoperability is another concept related to blockchain neutrality. It emphasizes the
importance of different blockchain networks and platforms being able to communicate and interact
seamlessly, allowing users to move assets and data across different blockchains without constraints.
6. Blockchain Neutrality (Hypothetical): If blockchain neutrality were to be coined as a term, it might
refer to the idea that blockchain networks should be open, accessible, and neutral platforms that do not
discriminate against any participants or use cases. In this context, blockchain neutrality would imply that
blockchain networks should not favor specific industries, applications, or users but rather provide a
neutral and inclusive environment for innovation and development. Please note that the concept of
blockchain neutrality may not be a widely recognized term, and its meaning may vary depending on the
context in which it is used. Its essential to consider the specific context and intent when discussing this
concept.
DIGITAL ART:
Digital art on the blockchain refers to a relatively new and innovative way of creating, selling, and
owning digital artwork using blockchain technology. Blockchain is a decentralized and transparent ledger
system that records transactions across a network of computers. Crypto-art, also called cryptoart or
digital art, uses the technology of NFTs in such a way that each work of art or artistic creation is linked
to an NFT or Non Fungible Token, as is the case with the use of cryptocurrencies. When applied to
digital art, it has several potential benefits and use cases:
1.environmental concerns due to the significant carbon footprint associated with mining
cryptocurrencies.
2. Copyright and Intellectual Property: While blockchain can help with provenance and ownership, it
does not automatically address copyright infringement or plagiarism issues. Artists still need to enforce
their intellectual property rights.
 3. Market Volatility: The market for digital art and NFTs can be highly speculative and volatile, with
prices subject to rapid fluctuations.
4. Legal and Regulatory Issues: The legal and regulatory landscape for digital art and NFTs is evolving
and can vary by jurisdiction. Artists and collectors should be aware of potential legal challenges and tax
implications.
In conclusion, digital art on the blockchain has brought significant innovation to the art world, offering
new opportunities for artists, collectors, and creators. However, it also comes with its own set of
challenges and considerations that should be carefully evaluated by all parties involved.
BLOCK CHAIN ENVIRONMENT:
Blockchain technology has both positive and negative environmental impacts, and these effects can vary
depending on the specific blockchain network and consensus mechanism used. Blockchain can be used to
provide transparency in supply chains, which can help identify and reduce environmental impacts. For
example, blockchain can be used to track the origin of products and ensure that they are produced in an
environmentally sustainable way.
Here a closer look at the environmental aspects of blockchain: Positive Environmental Aspects:
1. Efficiency and Reduced Intermediaries: Blockchain technology has the potential to streamline various
processes by eliminating intermediaries in transactions. This can lead to more efficient resource
utilization, reduced paperwork, and lower energy consumption associated with intermediaries
operations.
2. Transparency and Accountability: By providing a transparent and immutable ledger, blockchain can help
reduce fraud, corruption, and resource waste in various industries. This increased accountability can lead
to more sustainable practices.
3. Supply Chain Management: Blockchain can be used to improve transparency and traceability in supply
chains, which can help prevent illegal or unsustainable practices in industries like agriculture and
forestry. This can have a positive impact on environmental conservation efforts. Negative Environmental
Aspects:
4. Energy Consumption: Many blockchain networks, particularly those that use Proof of Work (PoW)
consensus mechanisms like Bitcoin and some versions of Ethereum, are energy-intensive. Mining and
validating transactions on these networks require substantial
In summary, blockchain technology has both positive and negative environmental aspects. While it offers
the potential for increased efficiency, transparency, and sustainability in various industries, the energy-
intensive nature of certain blockchain networks remains a significant environmental concern. Efforts are
underway to develop more energy-efficient consensus mechanisms and promote sustainable practices
within the blockchain industry.