ETHEREUM CONTINUED

Ethereum is a blockchain- based computing platform that enables developers to build and deploy decentralized
applications—meaning not run by a centralized authority. You can create a decentralized application for which the
participants of that particular application are the decision-making authority.

Ethereum Features

 Ether: This is Ethereum’s crypto currency.

 Smart contracts: Ethereum allows the development and deployment of these types of contracts.

 Ethereum Virtual Machine: Ethereum provides the underlying technology—the architecture and the
software—that understands smart contracts and allows you to interact with it.

 Decentralized applications (Dapps): A decentralized application is called a Dapp (also spelled DAPP,
App, or DApp) for short. Ethereum allows you to create consolidated applications, called
decentralized applications.

 Decentralized autonomous organizations (DAOs): Ethereum allows you to create these for
democratic decision-making.

1. Ether: Ether (ETH) is Ethereum’s crypto currency. It is the fuel that runs the network. It is used to pay for the
computational resources and the transaction fees for any transaction executed on the Ethereum network. Like
Bitcoins, ether is a peer-to-peer currency. Apart from being used to pay for transactions, ether is also used to buy
gas, which is used to pay for the computation of any transaction made on the Ethereum network.

2. Smart Contracts : are revolutionizing how traditional contracts work, which is why you need to use the
tutorial to become more familiar with them. A smart contract is a simple computer program that facilitates the
exchange of any asset between two parties. It could be money, shares, property, or any other digital asset that you
want to exchange. Anyone on the Ethereum network can create these contracts. The contract consists primarily of
the terms and conditions mutually agreed on between the parties (peers).

3. Ethereum Virtual Machine: EVM, as mentioned above in this Ethereum tutorial, is designed to operate
as a runtime environment for compiling and deploying Ethereum-based smart contracts. EVM is the engine that
understands the language of smart contracts, which are written in the Solidity language for Ethereum. EVM is
operated in a sandbox environment—basically, you can deploy your stand-alone environment, which can act as a
testing and development environment. You can then test your smart contract (use it) “n” number of times, verify it,
and once you are satisfied with the performance and the functionality of the smart contract, you can deploy it on the
Ethereum main network.

4. Decentralized Applications (Dapps): Let’s compare decentralized applications with traditional

applications. When you log in to Twitter, for example, a web application gets displayed that is rendered using
HTML. The page will call an API to access your data (your information), which is centrally hosted. It’s a simple
process: your front end executes the backend API, and the API goes and fetches your data from a centralized
database.
5. Decentralized Autonomous Organizations (DAOs): A DAO is a digital organization that operates
without hierarchical management; it works in a decentralized and democratic fashion. So basically, a DAO is an
organization in which the decision-making is not in the hands of a centralized authority but preferably in the hands
of certain designated authorities or a group or designated people as a part of an authority. It exists on a blockchain
network, where it is governed by the protocols embedded in a smart contract, and thereby, DAOs rely on smart
contracts for decision-making—or, we can say, decentralized voting systems—within the organization. So, before
any organizational decision can be made, it must go through the voting system, which runs on a decentralized
application.

IOTA
What is IOTA in blockchain?
IOTA is an open-source distributed ledger and crypto currency designed for the Internet of things (IoT). It uses a
directed acyclic graph to store transactions on its ledger, motivated by a potentially higher scalability over block
chain based distributed ledgers
 The IOTA Tangle is a decentralized, peer-to-peer network that enables secure data and value transfers
between connected devices.
 Unlike traditional blockchain technologies, the Tangle does not rely on miners to validate transactions.
Instead, each new transaction in the Tangle must confirm two previous transactions, adding to the security
and scalability of the network.
 The IOTA Tangle also has the unique feature of feeless transactions, meaning that users do not have to pay
fees to send transactions on the network.
 This makes IOTA particularly well-suited for micro-transactions in IoT applications where small amounts of
data or value are exchanged between devices.
What is the Tangle: The Tangle is an alternative type of distributed ledger technology; it is a Directional Acyclic
Graph (DAG), developed by the IOTA Foundation which is a global non-profit foundation. Their goal is to establish
a true global, open source DLT space, where the Internet of Things and the Connected Economy are a reality.

Egalitarian Approach: The IOTA DLT platform is freely available to humanity to ensure that everyone can
connect data, money and devices, and that they can do so freely. This means that the platform will be ideal for zero-
cost micro payments with no transaction fees. It also means that it has the potential to accelerate past other
blockchain technologies, rendering them obsolete in a very short space of time. Their vision is well funded and
supported by major manufacturing supply chain giants like Volkswagen, Jaguar and Land Rover.

IOTA Advantages
 No transaction fees. With IOTA, there’s no need to pay for gas (like with Ethereum) or reward miners
(like with Bitcoin) to complete transactions. Lacking miners or validators, IOTA is a fee-free data and
value transfer protocol.
 Faster transactions. Conventional blockchains often experience bottlenecks due to the time it takes to
create new blocks. The Bitcoin blockchain can handle roughly five transactions per second (TPS), although
this may vary at times. For Ethereum, it’s typically around 15 TPS. For IOTA, it’s possible for its network
to handle up to around 1,000 TPS.
 Energy efficient. IOTA is designed to accommodate devices such as sensors that operate in a low-energy
environment. Even IoT devices with minimal computing power, like toasters, can write data to IOTA’s
Tangle.
 Adaptable to different use cases. Large corporations may adapt IOTA for individual use cases. With
IOTA Access, an open-source framework that allows access to control systems, a car owner can allow
someone access to their vehicle remotely, for instance.
 Decentralization roadmap. IOTA’s 2.0 version is fully decentralized.

IOTA Disadvantages

Security vulnerabilities. In February 2020, hackers stole more than $1.5 million worth of MIOTA. It’s reported
that the hackers appeared to have targeted a few high-net worth accounts, and IOTA’s founder David Sønstebø
agreed to repay the victims of the hack with the network’s tokens.

Capacity for growth. The IOTA system is still in its infancy. Like many cryptos, success hinges on wider
adoption of the network with increased numbers of participants.
 THE REAL NEED FOR MINING
Mining is the process by which new currency is added to the block chain. This is an incentive for the miners to
validate and verify blocks made up of transactions. The mining process helps secure the network by verifying
computations.

At a theoretical level, a miner performs the following functions:

 Listens for the transactions broadcasted on the Ethereum network and determines the transactions to be
processed
 Determines stale blocks called Uncles or Ommers and includes the min the block.
 Updates the account balance with the reward earned from successfully mining the block.
 Finally, a valid state is computed and block is finalized, which defines the result of all state transition

The current method of mining is based on Proof of Work, which is similar to that of bit coin, but it must also contain
the Proof of Work for a given difficulty. Considerable research work has been carried out in order to build the Proof
of Stake algorithm suitable for the Ethereum Network

CPU mining

Even though not profitable on the main net, CPU mining is still valuable on the test network or even a
private network to experiment with mining and contract deployment. Private and test networks will be
discussed with practical examples in the next chapter. A geth example is shown on how to start CPU
mining here. Geth can be started with mine switch in order to startmining:

geth --mine –minerthreads<n>

CPU mining can also be started using the web 3 geth console. Geth console can be started by issuing the
following command:

gethattach

After this, the miner can be started by issuing the following command, which will return true if successful, or false
otherwise. Take a look at the following command
 Miner.Stop
True

The preceding command will start the miner with fourthreads. Take a look at the following command:

The preceding command will stop the miner. The command

geth --rpc
will return true ifsuccessful

GPU mining

At a basic level, GPU mining can be performed easily byrunning two commands:

ethminer -G

Once geth is up and running and the blockchain is fully downloaded, Ethminer can be run in order to start
mining. Ethminer is a standalone miner that can also beused in the farm mode to contribute to mining pools

Miner.Start(4)
True
Types of Mining

The process of mining can get really complex and a regular desktop or PC cannot cut it. Hence, it requires a unique
set of hardware and software that works well for the user. It helps to have a custom set specific to mining certain
blocks.

The mining process undertaking can be divided into three categories:

1. Individual Mining: When mining is done by an individual, user registration as a miner is necessary. As soon as
a transaction takes place, a mathematical problem is given to all the single users in the blockchain network to solve.
The first one to solve it gets rewarded.

2. Pool Mining: In pool mining, a group of users works together to approve the transaction. Sometimes, the
complexity of the data encrypted in the blocks makes it difficult for a user to decrypt the encoded data alone. So, a
group of miners works as a team to solve it. After the validation of the result, the reward is then split between all
users.

3. Cloud Mining: Cloud mining eliminates the need for computer hardware and software. It’s a hassle-free method
to extract blocks. With cloud mining, handling all the machinery, order timings, or selling profits is no longer a
constant worry.

Consensus
Consensus Mechanism

In the blockchain, a consensus mechanism is a system that validates a transaction and marks it as authentic. This
mechanism lists all valid transactions of a coin in a blockchain to build trust in the coin among traders. Several
currencies, such as Bitcoin, Ethereum etc., use this system for security purposes.

Types Of Consensus Mechanisms?

Several mechanisms are used as a consensus mechanism during coin trading. These mechanisms are as follows:

Proof of Work: ‘Proof’ refers to the solution of a highly-complex problem, and ‘work’ refers to the process of
solving the same. Crypto coin miners compete to solve the problem and gain the right to process the transaction. The
fastest solver receives a mining fee from the traders of these coins.

This mechanism tracks and verifies the creation and transactions across blockchain networks. It enables miners by
allowing them to validate new transactions and is extremely secure. However, it has several cons, such as high
electricity requirements and difficulty for individual miners.

Proof of Stake: This mechanism randomly chooses a maximum coin owner to validate a transaction. It also allows
the owner to create a block for the same coin. This mechanism requires comparatively less energy, transaction time
and a lower fee. Coins like Etherium 2.0, Polkadot, Cosmos, Cardano, ThorChain, Nxt and Algorand use this
mechanism extensively. There is a security risk as if an owner owns 51% or more coins of a particular coin, then
that person will get sole ownership of its network.
Proof of Capacity: The PoC mechanism heavily relies on free space available in the hard drive. This is because
there are many solutions to a coin's hash problem that a trader needs to store. It is highly efficient as compared to
PoW and PoC mechanisms. Coins such as Burst, Storj, SpaceMint and Chia use these mechanisms.

Proof of Activity: This mechanism is a combination of both Proof of Work and Proof of Stake. It has been designed
to combine the best features of PoW and PoS. In the beginning, the Proof-of-Activity mechanism functions like
PoW. Once a new block is completed, it starts to function like a Proof-Of-Stake mechanism. Coins such as DCR
(Decred) use this mechanism.

Proof of Authority: Different organisations and private companies created this unique mechanism. There are
validators with approved accounts which authorise transactions and the creation of new blocks. These validators
must disclose their true identity to get the right to validate a transaction.

Proof of Burn: PoB aims to improve the quality of blockchain so that it can be used easily and extensively as a tool
for faster and more secured transactions. After PoW and PoS, PoB is designed to prevent fraud activities on a
blockchain network. Cryptocurrencies such as Bitcoin use this mechanism to offer secure transactions to traders.

Proof of Elapsed Time: Intel Corporation created this mechanism to permit blockchain to decide the person who
will create the next block. It uses a lottery system to decide the next block creator. Thus, it gives a fair chance to all
traders to create the next block. It is an efficient process involving utilising lesser resources and low energy
consumption.

Advantages of the consensus mechanism

Consensus mechanisms offer several advantages, such as:

No barriers to participation: Any crypto trader or miner across the globe can participate in a consensus
mechanism. There are few barriers to participation in a consensus for any crypto coin.

Builds trust among users: Traders and miners of a particular coin across the globe must agree to approve a
decision. This, in turn, builds trust among the users.

Establishes security: Consensus mechanisms maintain the transparency of trading for all coins. Thus, traders can
ensure that no fraud occurs during a transaction.

Disadvantages of the consensus mechanism

The minor disadvantages of a consensus mechanism include:

Severe chances of hacking: There lies a chance of hacking known as 51% hack, which stands out as a potential
attack on a consensus mechanism.

Excessive use of electricity: There is a heavy requirement for electricity for the PoW mechanism to function.

With very few associated disadvantages, the consensus mechanism is a great security tool for a decentralised form
of trade. This allows traders and miners across the globe to establish a connection and trust among themselves and
benefit from the mechanism.

The benefits in the case of traders are trade security and faster transactions. On the other hand, miners get several
rewards for solving complex problems faster and gaining authority to validate a trade.
 Byzantine Generals Problem
Byzantine General’s Problem

In 1982, The Byzantine General’s Problem was invented by Leslie Lamport, Robert Shostak, and Marshall Pease.
Byzantine Generals Problem is an impossibility result which means that the solution to this problem has not been
found yet as well as helps us to understand the importance of blockchain. It is basically a game theory problem
that provides a description of the extent to which decentralized parties experience difficulties in reaching
consensus without any trusted central parties.

 The Byzantine army is divided into many battalions in this classic problem called the Byzantine General’s
problem, with each division led by a general.
 The generals connect via messenger in order to agree to a joint plan of action in which all battalions
coordinate and attack from all sides in order to achieve success.
 It is probable that traitors will try to sabotage their plan by intercepting or changing the messages.
 As a result, the purpose of this challenge is for all of the faithful commanders to reach an agreement without
the imposters tampering with their plans.

Money and Byzantine General’s Problem

Money is one such commodity whose value should be same throughout the society, that is everyone should agree
upon the value of a certain amount of money, despite all the differences therefore in the initial times, precious
metals and rare goods were chosen as money because their value was seen equally throughout the society, but in
some cases such as precious metals the purity of the metals could not be known for sure or checking the purity
was an extremely tedious task which turned out to be very inefficient for the daily transactions, therefore it was
decided upon to replace gold with a central party which would be highly trustable chosen by the people in the
society to establish and maintain the system of money. But with time it was later realized that those central
parties, how much-ever qualified were still not completely trustworthy as it was so simple for them to manipulate
the data.
 Centralized systems do not address the Byzantine Generals problem, which requires that truth be verified in
an explicitly transparent way, yet centralized systems give no transparency, increasing the likelihood of data
corruption.
 They forgo transparency in order to attain efficiency easily and prefer to avoid dealing with the issue
entirely.
 The fundamental issue of centralized systems, however, is that they are open to corruption by the central
authority, which implies that the data can be manipulated by anyone who has control of the database itself
because the centralized system concentrates all power on one central decision maker.
Therefore, Bitcoin was invented to make the system of money decentralized using block chain to make money
verifiable, counterfeit-resistant, trustless, and separate from a central agency .

How Bitcoin Solves the Byzantine General’s Problem?

In the Byzantine Generals Problem, the untampered agreement that all the loyal generals need to agree to is the
block chain. Block chain is a public, distributed ledger that contains the records of all transactions. If all users of
the Bit coin network, known as nodes, could agree on which transactions occurred and in what order, they could
verify the ownership and create a functioning, trustless money system without the need for a centralized
authority. Due to its decentralized nature, block chain relies heavily on a consensus technique to validate
transactions. It is a peer-to-peer network that offers its users transparency as well as trust. Its distributed ledger is
what sets it apart from other systems. Block chain technology can be applied to any system that requires proper
verification.
Proof Of Work: The network would have to be provable, counterfeit-resistant, and trust-free in order to solve
the Byzantine General’s Problem. Bitcoin overcame the Byzantine General’s Problem by employing a Proof-of-
Work technique to create a clear, objective regulation for the blockchain. Proof of work (PoW) is a method of
adding fresh blocks of transactions to the blockchain of a cryptocurrency. In this scenario, the task consists of
creating a hash (a long string of characters) that matches the desired hash for the current block.
1. Counterfeit Resistant: Proof-of-Work requires network participants to present proof of their work in the
form of a valid hash in order for their block, i.e. piece of information, to be regarded as valid. Proof-of-Work
requires miners to expend significant amounts of energy and money in order to generate blocks, encouraging
them to broadcast accurate information and so protecting the network. Proof-of-Work is one of the only ways
for a decentralized network to agree on a single source of truth, which is essential for a monetary system.
There can be no disagreement or tampering with the information on the blockchain network because the rules
are objective. The ruleset defining which transactions are valid and which are invalid, as well as the system
for choosing who can mint new bitcoin, are both objectives.
2. Provable: Once a block is uploaded to the blockchain, it is incredibly difficult to erase, rendering Bitcoin’s
history immutable. As a result, participants of the blockchain network may always agree on the state of the
blockchain and all transactions inside it. Each node independently verifies whether blocks satisfy the Proof-
of-Work criterion and whether transactions satisfy additional requirements.
3. Trust-free: If any network member attempts to broadcast misleading information, all network nodes
immediately detect it as objectively invalid and ignore it. Because each node on the Bitcoin network can
verify every information on the network, there is no need to trust other network members, making Bitcoin a
trustless system.

Byzantine Fault Tolerance (BFT)

The Byzantine Fault Tolerance was developed as inspiration in order to address the Byzantine General’s Problem.
The Byzantine General’s Problem, a logical thought experiment where multiple generals must attack a city, is
where the idea for BFT originated.

 Byzantine Fault Tolerance is one of the core characteristics of developing trustworthy blockchain rules or
features is tolerance.
 When two-thirds of the network can agree or reach a consensus and the system still continues to operate
properly, it is said to have BFT.
 Blockchain networks’ most popular consensus protocols, such as proof-of-work, proof-of-stake, and proof-
of-authority, all have some BFT characteristics.
 In order to create a decentralized network, the BFT is essential.
The consensus method determines the precise network structure. For instance, BFT has a leader as well as peers
In order to maintain the sequence of the Blockchain SC transactions and the consistency of the global state
through local transaction replay, consensus messages must pass between the relevant peers.
More inventive approaches to designing BFT systems will be found and put into practice as more individuals and
companies investigate distributed and decentralized systems. Systems that use BFT are also employed in sectors
outside of blockchains, such as nuclear power, space exploration, and aviation.

Byzantine General’s Problem Example

A basic Byzantine fault is a digital signal that is stuck at “1/2,” i.e. a voltage that is anywhere between the
voltages for a valid logical “0” and a valid logical “1.” Because these voltages are in the region of a gate’s
transfer function’s maximum gain, little quantities of noise on the gate’s input become enormous amounts of
noise on the gate’s output. This is due to the fact that “digital circuits are simply analog circuitry driven to
extremes.”
This problem is solvable because, with a dominating input, even a Byzantine input has no output impact.
 An excellent composite example is the well-known 3-input majority logic “voter.”
 If one of the inputs is “1/2” and the other two are both 0 or both 1, the result is 0 or 1 (due to masking within
the voter).
 When one of the inputs is “1/2” and the other two are different values, the output can be 0, “1/2,” or 1,
depending on the precise gain and threshold voltages of the voter gates and the properties of the “1/2” signal.

Consensus as a distributed coordination problem

Distributed Consensus

Distributed consensus plays a vital role in decentralized systems, ensuring reliability, fault tolerance, and
agreement among multiple parties. Distributed consensus occurs when multiple parties try to accept some
values, which is difficult as agreeing is not easy. The complexity to achieve consensus increases as an increase
in the number of parties agree on an agreement. Various sites are working together to do a common task by
communicating with each other via a network and agreeing to some values which come under distributed
consensus.
Importance of Distributed Consensus in Distributed Systems
In a distributed or decentralized multi−agent platform, reaching a common agreement is crucial for maintaining
reliability and fault tolerance. When multiple individual parties are involved, each with the ability to make their own
decisions, it becomes necessary to establish a common point of view. This is especially important in environments
where malicious or faulty behavior can occur. The objective is to ensure correct operations even in the presence of
faulty individuals.
The conditions to achieve distributed consensus are

Termination: All non−faulty nodes eventually decide which ensures that the consensus is reached by all parties
involved.

Agreement: All non−faulty processes must agree on the same value which guarantees that all correct nodes in the
network will come to a consensus.

Validity: Every non−faulty process should begin and end with the same value. This ensures that the agreed−upon
value reflects the initial choice of some process.
Integrity: At least a single value should be decided by every individual, and then proposed by some individual.
This prevents multiple conflicting decisions and ensures the integrity of the consensus.Correctness of Distributed
Consensus Protocol.
Safety Property

The safety property ensures that correct individuals in a network will never converge to an incorrect value. It
guarantees that the agreed−upon value is always correct.
Liveness Property It asserts that every accurate value must finally be recognized, indicating that positive outcomes
are expected.
Agreement Property It ensures that all right procedures will ultimately concur on the same value. As a result, the
network will always reach a consensus with all valid nodes.
Fault Tolerance Distributed consensus techniques need to be able to withstand network and participant node
failures and faults. This guarantees that even in the face of errors, the system will continue to be correct and
functioning.
Termination Property Every valid process will inevitably choose a value, according to the Termination Property.
As a result, the procedure will finally terminate.
Byzantine Fault Tolerance Byzantine Fault Tolerance (BFT) is an extra characteristic of several distributed
consensus protocols, such as PBFT.
Scalability The protocol must be scalable to manage huge networks and a rising number of nodes without
compromising fault tolerance, liveness, or safety.
Applications of Distributed Consensus
Leader Election In a fault−tolerant environment, distributed consensus can be used to elect a leader. This allows
for the initiation of global actions without introducing a single point of failure.
Maintaining Consistency Distributed consensus protocols can ensure consistency in a distributed network. For
example, if multiple nodes are monitoring the same environment and one of the nodes crashes a consensus protocol
can ensure robustness against such faults.
Blockchain Technology Blockchain technology is based on the idea of distributed consensus which does not rely
on a centralized authority and enables several nodes to agree on a shared database. Consensus protocols, such as
Proof of Work (PoW) or Proof of Stake (PoS), ensure the integrity and security of the blockchain.
Distributed Databases Consensus protocols can be used to maintain consistency across multiple replicas of a
distributed database. This ensures that all replicas have the same information and that data integrity is maintained.
Load Balancing In a distributed system, the consensus method can be used to dynamically spread the workload
across several nodes. This guarantees that no node is overburdened and that the system runs smoothly.
Fault Tolerance In distributed systems, fault tolerance is provided through distributed consensus mechanisms.
They make sure that the system continues to function even amid errors by enabling nodes to recover from failures or
network partitions.
Agreement Protocols Multiple nodes in a distributed system can agree on a certain course of action or conclusion
by using consensus methods. This is helpful in situations when synchronization and cooperation are necessary.
 Coming to private or permissioned block chains
Private Blockchain

Participants can join a private blockchain network only through an invitation where their identity or other required
information is authentic and verified. The validation is done by the network operator(s) or by a clearly defined set
protocol implemented by the network through smart contracts or other automated approval methods.

Private blockchains control who is allowed to participate in the network. If the network is capable of mining, its
private nature could control which users can execute the consensus protocol that decides the mining rights and
rewards. Additionally, only select users might maintain the shared ledger. The owner or operator has the right to
override, edit, or delete the necessary entries on the blockchain as required or as they see fit.

Advantages

A private blockchain is not decentralized. It is a distributed ledger that operates as a closed database secured with
cryptographic concepts and the organization's needs. Only those with permission can run a full node, make
transactions, or validate/authenticate the blockchain changes.

By reducing the focus on protecting user identities and promoting transparency, private blockchains prioritize
efficiency and immutability—the state of not being able to be changed.

These are important features in supply, logistics, payroll, finances, accounting, and many other enterprise and
business areas.

Disadvantages

While purposefully designed for enterprise applications, private blockchains lose out on many of the valuable
attributes of permissionless systems simply because they are not widely applicable. They are instead built to
accomplish specific tasks and functions.
In this respect, private blockchains are susceptible to data breaches and other security threats. This is because there
is generally a limited number of validators used to reach a consensus about transactions and data if there is a
consensus mechanism.

In a private blockchain, there may not be consensus but only the immutability of entered data unless an operator or
administrator can make changes.

Permissioned Blockchain

Permissioned blockchains are a mix between the public and private blockchains and support many options for
customization.

Advantages

Permissioned blockchain advantages include allowing anyone to join the permissioned network after a suitable
identity verification process. Some give special and designated permissions to perform only specific activities on a
network. This allows participants to perform particular functions such as reading, accessing, or entering information
on the blockchain.

Permissioned blockchains allow for many functions, but one most interesting to businesses is Blockchain-as-a-
Service (BaaS)—a blockchain designed to be scalable for the needs of many companies or tasks that the providers
rent out to other businesses.

For example, say a business wants to improve transparency and accuracy in its accounting processes and financial
reporting. It could rent blockchain accounting services from a BaaS provider. The blockchain would provide an
interface where entries are made by end users and then automates the rest of the accounting processes.

In this way, there are fewer errors and no way for other parties to alter financial data after it is entered. As a result,
financial reports to management and executives become more accurate, and the blockchain is accessible for viewing
and generating real-time financial reports.

The business might choose to have its invoicing, payments, book-keeping, and tax reporting automated.
Additionally, blockchain can prevent anyone with dishonest intentions from altering financial data or taking
advantage of weaknesses in accounting processes.

Disadvantages

The disadvantages of permissioned blockchains mirror those of public and private blockchains, depending on how
they are configured. One key disadvantage is that because permissioned blockchains require internet connections,
they are vulnerable to hacking. By design, some might use immutability techniques such as cryptographic security
measures and validation through consensus mechanisms.

While most blockchains are thought to be unhackable, there are weaknesses. Cryptocurrency theft occurs when a
network is hacked into, and private keys are stolen. Permissioned blockchains also suffer this weakness because the
networks that connect the users to the service depend on security measures that can be bypassed. User information
can be stolen and accounts hacked into, similar to enterprise-level data breaches like the one Target suffered in 2013
when a third-party with access to the network was hacked.
 Introduction to Hyper ledger
Hyperledger provides the platform to create personalized blockchain services according to the need of business
work. Unlike other platforms for developing blockchain-based software, Hyperledger has the advantage of
creating a secured and personalized blockchain network.
 It is created to support the development of blockchain-based distributed ledgers.
 It includes a variety of enterprise-ready permissioned blockchain platforms.

 It is a global collaboration for developing high-performance and reliable blockchain and distributed ledger-
based technology frameworks.
Hyperledger Technology Layers

Hyperledger uses the following key business components:

1. Consensus layer: It takes care of creating an agreement on the order and confirming the correctness of the set
of transactions that constitute a block.
2. Smart layer: This layer is responsible for processing transaction requests and authorizing valid transactions.
3. Communication layer: It takes care of peer-to-peer message transport.
4. Identity management services: these are important for establishing trust on the blockchain.
5. API: It enables external applications and clients to interface with the blockchain.

Roles of Peers

In the hyperledger network, the peers are separated into three distinct roles at two-run times. This distinct feature
in this network makes notable changes as it allows a high degree of personalization. The 3 peer roles are:
1. Committer: Appends validated transactions to their specific ledger. They only add the transaction to the
specific ledger once the transaction is returned by the consenter.
2. Endorser: Endorser nodes are responsible for simulating transactions specific to their network and preventing
unreliable and non-deterministic transactions. All endorsers act as committers on the other hand committer
may or may not be endorsers depending on network restrictions.
3. Consenter: Their role is to validate the transaction by verifying the result produced by the affiliated peers
who want to proceed with a transaction. Their role is very specific and runs on separate run times, unlike
committers and endorsers who run on the same run time. Their role is to decide which ledger the transaction
be committed to.

Hyperledger Advantages

 Flexibility: Hyperledger provides a high degree of flexibility and modularity, allowing developers to
customize and configure the platform to meet their specific needs.
 Security: Hyperledger has a strong focus on security, with features such as access control, identity
management, and encryption. This makes it well-suited for enterprise applications that require a high level of
security.
 Scalability: Hyperledger is designed to handle large-scale enterprise applications, with the ability to support
thousands of transactions per second.
 Privacy: Hyperledger allows for the creation of private, permissioned blockchain networks, which means
that only authorized participants have access to the data on the network.
 Interoperability: Hyperledger provides a common platform for building blockchain applications, which
makes it easier to integrate with other systems and applications.
Hyperledger Disadvantages

 Complexity: Hyperledger can be complex to set up and maintain, particularly for organizations that are new
to blockchain technology. This can require significant technical expertise and resources.
 Limited decentralization: Hyperledger is a permissioned blockchain platform, which means that only
authorized parties can participate in the network. While this can provide increased security and privacy, it
also means that the network is less decentralized than public blockchain platforms.
 Limited community: While Hyperledger has a growing community of developers and contributors, it is still
smaller than some other blockchain platforms. This could make it more difficult to find support and
resources.
 Limited smart contract functionality: Hyperledger offers limited smart contract functionality compared to
some other blockchain platforms. While this may be sufficient for some use cases, it could be a disadvantage
for organizations that require more advanced smart contract capabilities.

CURRENCY
A cryptocurrency is not a type of currency that can be used in the real world. It can be used to perform
transactions only in the digital world. So in order to buy/sell using a cryptocurrency, it has to be converted from a
digital form to some existing currency that is used in the real world. For example, Dollars, Rupees, etc.
Cryptocurrencies don’t have a central issuing authority instead using a decentralized system to record transactions
and issue new units.

Cryptocurrency is a digital payment system that does not rely on banks to verify transactions. Cryptocurrency
payments exist purely as digital entries to an online database. When cryptocurrency funds are transferred, the
transactions are recorded in a public ledger.
 In cryptocurrency, “coins” (which are publicly agreed-on records of ownership) are generated or produced by
“miners”.
 These miners are people who run programs on ASIC (Application Specific Integrated Circuit) devices made
specifically to solve proof-of-work puzzles.
 The work behind mining coins gives them value, while the scarcity of coins and demand for them causes
their value to fluctuate.
 Cryptocurrencies can be used for buying goods just like fiat currency.
 Cryptocurrencies use encryption to verify and protect transactions.
 It does not exist in physical form and is not typically issued by any central authority.
 They use decentralized control in contrast to central bank digital currency.

Cryptocurrency Examples

Some of the best-known cryptocurrencies are:

1. Bitcoin: Bitcoin is the most widely accepted cryptocurrency. Founded in 2009 by Satoshi Nakamoto, it is still
the most commonly traded. It is a decentralized digital currency that can be transferred on a peer-to-peer
Bitcoin network.
2. Ether: Ether is the native cryptocurrency of the Ethereum blockchain network. Each Ethereum account has
an ETH balance and may send ETH to any other account. The smallest subunit of Ether is known as Wei.
3. Litecoin: Litecoin is a peer-to-peer cryptocurrency and in technical terms, Litecoin is nearly identical to
Bitcoin. It uses a script in its proof-of-work algorithm. It is an adaptation of Bitcoin that is intended to make
payment easier.
4. Stablecoins: These are the class of cryptocurrencies whose values are designed to stay stable relative to real-
world assets like the U.S. Dollar.
5. Solana: Solana is a competitor of Ethereum whose main emphasis is on speed and cost-effectiveness.
 TOKEN

Technically, “token” is just another word for “cryptocurrency” or “cryptoasset.” But increasingly it has taken on a
couple of more specific meanings depending on context. The first is to describe all cryptocurrencies besides
Bitcoin and Ethereum (even though they are technically also tokens). The second is to describe certain
digital assets that run on top of another cryptocurrencies’ blockchain, as many decentralized finance (or
DeFi) tokens do. Tokens have a huge range of potential functions, from helping make decentralized
exchanges possible to selling rare items in video games. But they can all be traded or held like any other
cryptocurrency.
“Token” is a word that you hear a lot in cryptocurrency. In fact, you might hear Bitcoin described as a “crypto
token” or something similar, because — technically — all cryptoassets can also be described as tokens. But the
word has increasingly taken on two specific meanings that are common enough that there’s a good chance you’ll
encounter them.

A “token” often refers to any cryptocurrency besides Bitcoin and Ethereum (even though they are also technically
tokens). Because Bitcoin and Ethereum are by far the biggest two cryptocurrencies, it’s useful to have a word to
describe the universe of other coins. (Another word you might hear with virtually the same meaning is “altcoin.”)

The other increasingly common meaning for “token” has an even more specific connotation, which is to describe
cryptoassets that run on top of another cryptocurrency’s blockchain. You’ll encounter this usage if you become
interested in decentralized finance (or DeFi). While a cryptocurrency like Bitcoin has its own dedicated blockchain,
DeFi tokens like Chainlink and Aave run on top of, or leverage, an existing blockchain, most commonly
Ethereum’s.

Tokens in this second category help decentralized applications to do everything from automate interest rates to sell
virtual real estate. But they can also be held or traded like any other cryptocurrency.