BLOCKCHAIN

IIT KHARAGPUR

Week 1: Introduction to Blockchain Technology and its Importance

Theory

What is Blockchain?

A blockchain is a distributed, decentralized ledger that records transactions across many

computers in a way that the registered transactions cannot be altered retroactively. It is often
referred to as a trustless system, meaning transactions can occur between parties that do not
know or trust each other. Blockchain is often the underlying technology behind
cryptocurrencies like Bitcoin and Ethereum but has broader applications beyond just digital
currencies.

Key Concepts:

• Block: A container of data in the blockchain. Each block typically contains a set of
transactions.
• Chain: A series of blocks connected in a linear, immutable way. Each block is linked
to the previous one through a cryptographic hash.
• Decentralization: The distribution of data across a network of nodes, eliminating the
need for a centralized authority.
• Distributed Ledger Technology (DLT): A type of database where data is shared and
synchronized across multiple locations.

How Blockchain Works:

• Transaction Initiation: When a transaction is initiated, the details are captured into a
block.
• Validation: Network participants (nodes) validate the transaction to ensure its
legitimacy (via consensus algorithms such as Proof of Work, Proof of Stake, etc.).
• Block Creation: After validation, the transaction is added to a block along with a
timestamp.
• Consensus: Nodes in the network reach a consensus to ensure the block is added to
the chain. Consensus mechanisms such as Proof of Work (PoW) or Proof of Stake
(PoS) ensure that the majority of the network agrees with the block addition.
• Immutability: Once a block is added to the chain, it cannot be altered without
altering every subsequent block, which would require the consensus of the majority of
the network.

Importance of Blockchain:
 1. Security and Transparency: Blockchain provides transparency and security in
transactions due to its cryptographic nature. Data is encrypted and decentralized,
making it nearly impossible for hackers to alter transaction records.
2. Decentralization: No central authority controls the blockchain, which means that it
removes the risk of a single point of failure.
3. Efficiency: Blockchain enables faster transactions and lowers the need for
intermediaries like banks or clearing houses, leading to reduced costs.
4. Trust and Accountability: The decentralized and transparent nature of blockchain
fosters trust between parties, as they can independently verify the information.
5. Automation: Blockchain facilitates smart contracts, which are self-executing
contracts with the terms of the agreement written into code. This eliminates manual
processing, reducing errors and costs.

Technical Insights

• Cryptographic Hashing: Blockchain uses cryptographic hashing functions (such as

SHA-256) to create unique identifiers for data in the blockchain. Each block contains
a hash of the previous block, making it nearly impossible to alter the data without
altering every subsequent block.
• Consensus Mechanisms:
o Proof of Work (PoW): A consensus mechanism used by Bitcoin, where
miners solve complex mathematical problems to validate transactions and add
new blocks to the chain.
o Proof of Stake (PoS): A more energy-efficient alternative to PoW. Validators
are chosen to create new blocks based on the amount of cryptocurrency they
hold and are willing to "stake" as collateral.
• Smart Contracts: These are self-executing contracts that automatically enforce and
execute the terms of a contract when predefined conditions are met. Ethereum is the
most widely used blockchain for deploying smart contracts.

Code

Here is an example of a simple blockchain in Python to understand how it works on a basic

level. This does not implement a full blockchain network, but serves as an introduction to
how a blockchain operates:

python
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import hashlib
import time

class Block:
def __init__(self, index, previous_hash, timestamp, data, hash):
self.index = index
self.previous_hash = previous_hash
self.timestamp = timestamp
self.data = data
self.hash = hash
 def __str__(self):
return f"Block #{self.index} [Timestamp: {self.timestamp}, Hash:
{self.hash}]"

def calculate_hash(index, previous_hash, timestamp, data):

block_string = str(index) + str(previous_hash) + str(timestamp) +
str(data)
return hashlib.sha256(block_string.encode('utf-8')).hexdigest()

def create_genesis_block():
return Block(0, "0", int(time.time()), "Genesis Block",
calculate_hash(0, "0", int(time.time()), "Genesis Block"))

def create_new_block(previous_block, data):

index = previous_block.index + 1
timestamp = int(time.time())
hash_value = calculate_hash(index, previous_block.hash, timestamp,
data)
return Block(index, previous_block.hash, timestamp, data, hash_value)

# Testing Blockchain
genesis_block = create_genesis_block()
blockchain = [genesis_block]

# Adding new blocks

num_blocks = 5
for i in range(1, num_blocks + 1):
new_block = create_new_block(blockchain[-1], f"Block {i} data")
blockchain.append(new_block)

# Display blockchain
for block in blockchain:
print(block)

Explanation:

• The Block class represents a block in the blockchain.

• The calculate_hash function computes the SHA-256 hash of the block’s data.
• create_genesis_block creates the first block of the blockchain.
• create_new_block creates subsequent blocks in the chain.

Expected Output:

less
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Block #0 [Timestamp: 1603085199, Hash:
3f8d9c6c423b8e0d2f98c4d09a21a7d0be4310c70d9c2c957d7f79ec346c2b09]
Block #1 [Timestamp: 1603085200, Hash:
2f59b0c1c74fa4a0188a32ac8d8b66ea7fa7f68db647ce1e8d4f4014505fe9f0]
Block #2 [Timestamp: 1603085201, Hash:
4a7581c34ee6e0ed3f9068cd7f03860367460d00ea7b1fdfeb65768c4700f849]
Block #3 [Timestamp: 1603085202, Hash:
4c0eae49d200337c6f086bb48f1a6c14b217feb63ac1793885c8ef65f35418de]
Block #4 [Timestamp: 1603085203, Hash:
bde924f8ff33f3fbe7b4e3b8d5de5f09bfaad83e6f5a1bbaf22372da3a22a13e]
Block #5 [Timestamp: 1603085204, Hash:
c38aeb6d6a45a06b416b0d75ad1d0cc4e3eeb92b06099e30e30619f7b537f340]
Applications

1. Cryptocurrencies: The most well-known application of blockchain is the creation of

cryptocurrencies such as Bitcoin and Ethereum. These platforms leverage
blockchain’s decentralized nature to allow secure, transparent transactions.
2. Supply Chain Management: Blockchain can provide transparency in supply chains
by allowing every participant in the chain to access the same data, ensuring
traceability and accountability. It can track the movement of goods and verify the
authenticity of products.
3. Voting Systems: Blockchain could offer secure, tamper-proof voting systems.
Voters’ identities and their votes can be recorded on the blockchain, making it nearly
impossible to manipulate the results.
4. Healthcare: Blockchain technology can be used in the healthcare sector to securely
store and share patient records. It can also be used to track pharmaceuticals, ensuring
that drugs are authentic and have not been tampered with.
5. Digital Identity: Blockchain can provide decentralized identity solutions, allowing
individuals to have more control over their personal data and reducing the need for
multiple identity verification services.
6. Smart Contracts: Platforms like Ethereum enable the creation of self-executing
contracts. These contracts automatically execute transactions when predefined
conditions are met, reducing the need for intermediaries in various business
transactions.
7. Financial Services: Blockchain has applications in reducing the complexity and costs
associated with traditional banking systems. Cross-border payments can be faster and
cheaper, and blockchain can also enable decentralized finance (DeFi).

Conclusion

In Week 1, we have introduced blockchain technology, explored its importance in various

domains, and created a basic blockchain using Python. Blockchain’s potential to disrupt
industries and offer secure, decentralized solutions is vast, and its applications continue to
grow in areas like cryptocurrency, supply chain management, voting, and healthcare.
Understanding blockchain is fundamental to exploring its applications in creating trustless,
transparent systems.

In subsequent weeks, we will delve deeper into consensus mechanisms, smart contracts, and
more complex applications of blockchain technology.
Week 2: Basic Crypto Primitives I – Cryptographic Hash

Theory

Cryptographic Hash Functions

A cryptographic hash function is a mathematical algorithm that takes an input (or

'message') and returns a fixed-size string of bytes, typically a digest that is unique to each
unique input. Cryptographic hash functions have a number of properties that make them ideal
for use in security protocols, particularly in blockchain technology.

Key Properties of Cryptographic Hash Functions:

1. Deterministic: For a given input, the output (hash) will always be the same.
2. Fixed Output Length: No matter the size of the input, the output hash will always
have a fixed length. For example, SHA-256 produces a 256-bit hash.
3. Fast Computation: It is computationally efficient to calculate the hash of an input.
4. Pre-image Resistance: Given a hash value, it is computationally infeasible to find the
original input that produced that hash.
5. Small Changes in Input Yield Drastic Changes in Output: Even a tiny change in
the input will produce a completely different hash, making it difficult to predict output
values.
6. Collision Resistance: It is computationally infeasible to find two different inputs that
hash to the same output (i.e., no collisions).
7. Puzzle Friendliness: Cryptographic hash functions are used to create puzzles in Proof
of Work (PoW) systems, such as Bitcoin, where miners must find the correct hash for
a block to be added to the blockchain.

Common Cryptographic Hash Functions:

• SHA-256 (Secure Hash Algorithm 256-bit): Commonly used in Bitcoin and

Ethereum.
• MD5 (Message Digest Algorithm 5): Less secure and deprecated in favor of more
secure algorithms.
• SHA-1: Deprecated for most security purposes due to vulnerabilities.
• RIPEMD-160: Often used in Bitcoin for creating public key hashes.

Applications of Cryptographic Hash Functions in Blockchain:

 • Integrity Verification: Hash functions are used to verify that data hasn’t been
tampered with. If data changes, the hash changes, signaling tampering.
• Digital Signatures: Hash functions are used to create digital signatures, which are
used to verify the authenticity and integrity of messages or documents.
• Proof of Work: Miners in blockchain networks use hash functions in PoW to solve
computational puzzles.
• Merkle Trees: Hash functions are used in Merkle trees, a type of binary tree where
each leaf node is a hash of data, and each parent node is the hash of its children,
ensuring data integrity and fast verification.

Technical Insights

• SHA-256 Algorithm: The SHA-256 algorithm is part of the SHA-2 family and
outputs a fixed 256-bit hash. The algorithm performs multiple rounds of operations on
the input data, including logical operations and modular arithmetic, to produce the
hash.
• Block Size: In SHA-256, the input data is divided into 512-bit blocks, and each block
is processed individually. Padding is added to the input data to make sure that it is a
multiple of 512 bits.
• Hashing Process:
0. Message Padding: The original message is padded to ensure its length is a
multiple of 512 bits.
1. Message Parsing: The padded message is divided into 512-bit blocks.
2. Initialize Hash Values: SHA-256 initializes eight 32-bit words, which are
used during the hash calculation.
3. Compression Function: Each block is processed in a loop using bitwise
operations like XOR and AND.
4. Final Hash: After all blocks are processed, the final hash is obtained by
combining the intermediate results.
• Speed vs Security: Cryptographic hash functions like SHA-256 are designed to be
fast, but not so fast that they are vulnerable to brute-force attacks. This makes them
efficient for blockchain applications, where large numbers of hash computations need
to be performed quickly.

Code

Let's look at an example of how to implement a cryptographic hash function (SHA-256) in

Python using the hashlib library.

python
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import hashlib

def hash_message(message):
# Encode the message as bytes
message_bytes = message.encode('utf-8')

# Create a SHA-256 hash object

 sha256_hash = hashlib.sha256()

# Update the hash object with the message bytes

sha256_hash.update(message_bytes)

# Get the hexadecimal representation of the hash

return sha256_hash.hexdigest()

# Test the hash function

message = "Blockchain is revolutionary!"
hashed_message = hash_message(message)

print(f"Original Message: {message}")

print(f"SHA-256 Hash: {hashed_message}")

Explanation:

• The function hash_message accepts a message string, encodes it into bytes, and then
hashes it using SHA-256.
• The update() method of the SHA-256 hash object processes the input message, and
hexdigest() provides the resulting hash as a hexadecimal string.

Expected Output:

mathematica
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Original Message: Blockchain is revolutionary!
SHA-256 Hash:
7a5d8fcb209b1207f19ebf1a594d37c907e93792b32d2b43f4649b05237ec5a9

• Message Integrity: If even a single character of the original message changes, the
output hash will be completely different.
o For example, changing the message to "Blockchain is awesome!" will
produce a different hash.

Applications

1. Blockchain:
o Transaction Verification: In a blockchain, when a transaction is made, the
transaction's details are hashed, and the resulting hash is included in the block.
The hash is then used to verify that the transaction has not been tampered
with.
o Mining: In Proof of Work (PoW) blockchains like Bitcoin, miners must find a
hash that meets certain criteria (e.g., starting with a certain number of leading
zeros). This requires trying many different nonce values until a valid hash is
found.
o Block Integrity: Each block in the blockchain contains a hash of the previous
block. This ensures that the entire chain is tamper-resistant; if any block is
altered, the hash will change, and the tampered block will be detected.
2. Digital Signatures: Cryptographic hash functions are used in digital signature
algorithms (e.g., RSA, ECDSA). A message is hashed, and the hash is then signed.
 The recipient verifies the signature by hashing the message again and checking that
the signature matches.
3. File Integrity: Hash functions are used to verify the integrity of files. When
downloading files from the internet, the website might provide a hash of the file. After
downloading, users can compute the hash of the file themselves and compare it to the
provided hash. If the hashes match, the file is intact; if not, the file may have been
corrupted or tampered with.
4. Password Storage: Instead of storing plaintext passwords, systems can store the hash
of the password. When a user attempts to log in, the system hashes the entered
password and compares it to the stored hash. This way, even if the password database
is compromised, the passwords remain secure.
5. Merkle Trees: In blockchain, Merkle Trees use hash functions to create a tree of
hashes where each leaf node is a hash of the data, and each internal node is a hash of
its children. This structure allows for efficient and secure verification of large sets of
data, making it useful for validating transactions in a blockchain.

Conclusion

In Week 2, we've explored cryptographic hash functions, which are foundational to many
blockchain protocols and applications. We've examined how these functions work, their key
properties, and their relevance in securing data. Through the code example, we learned how
to hash messages in Python using SHA-256, a widely used hash function in blockchain.
Hashing serves a critical role in ensuring data integrity, enabling decentralized security, and
facilitating efficient verification processes in blockchain systems and other domains.

In the next week, we will continue to explore more cryptographic primitives that are essential
in the broader landscape of blockchain technology.
Week 3: Basic Crypto Primitives II – Digital Signature

Theory

What is a Digital Signature?

A digital signature is a cryptographic mechanism used to authenticate the identity of the

sender and verify the integrity of a message. It uses a pair of keys: a private key and a public
key. The private key is kept secret by the sender, while the public key is shared with anyone
who needs to verify the signature.

How Digital Signatures Work:

1. Signing Process:
o The sender creates a message (or document) that they wish to send.
o The sender uses their private key to generate a digital signature for the
message. The digital signature is typically a hash of the message encrypted
with the sender's private key.
2. Verification Process:
o The recipient gets the message and the accompanying digital signature.
o The recipient uses the sender's public key to decrypt the signature and obtain
the hash of the original message.
o The recipient also computes the hash of the received message.
o If the computed hash matches the decrypted hash from the digital signature,
the recipient knows that the message is authentic and unaltered.

Properties of Digital Signatures:

1. Authentication: Confirms the identity of the sender.

2. Integrity: Ensures that the message has not been altered.
3. Non-repudiation: The sender cannot deny sending the message once it is signed.

Digital Signature Algorithms:

There are several algorithms that can be used to generate digital signatures. The two most
widely used ones are:

• RSA (Rivest–Shamir–Adleman): RSA is an asymmetric cryptographic algorithm

widely used for digital signatures. It uses large prime numbers to generate the public
and private keys.
• ECDSA (Elliptic Curve Digital Signature Algorithm): ECDSA is based on elliptic
curve cryptography (ECC) and is preferred in modern systems for its efficiency and
smaller key sizes compared to RSA.

Applications of Digital Signatures:

1. Blockchain: In blockchain technology, digital signatures are used to verify

transactions. Each transaction is signed by the sender’s private key, ensuring
authenticity.
2. Email and Documents: Digital signatures ensure that emails or documents are from
the claimed sender and have not been tampered with.
3. Software Distribution: Digital signatures ensure that software downloaded from the
internet has not been altered by malicious actors.

Technical Insights

1. RSA Digital Signature:

o Key Generation:
 RSA key generation involves selecting two large prime numbers ppp
and qqq.
 The public key consists of the modulus n=p×qn = p \times qn=p×q and
the public exponent eee.
 The private key consists of the modulus nnn and the private exponent
ddd, where ddd is calculated using the extended Euclidean algorithm.
o Signing:
 The message is hashed using a cryptographic hash function (e.g., SHA-
256).
 The hash is then encrypted with the sender’s private key to create the
digital signature.
o Verification:
 The receiver hashes the received message and decrypts the digital
signature using the sender’s public key.
 If the decrypted signature matches the hash of the received message,
the signature is valid.
2. ECDSA Digital Signature:
o Key Generation:
 In ECDSA, the key generation involves selecting a point on an elliptic
curve and performing scalar multiplication to generate the public and
private keys.
o Signing:
 The message is hashed, and then a signature is generated using the
private key and a random number.
 o Verification:
 The verification process involves checking if the signature corresponds
to the received message using the sender’s public key.

Code

Here is an implementation of RSA and ECDSA for generating and verifying digital
signatures using Python's cryptography library.

RSA Digital Signature Example:

python
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from cryptography.hazmat.primitives.asymmetric import rsa
from cryptography.hazmat.primitives import hashes
from cryptography.hazmat.primitives.asymmetric import padding
from cryptography.hazmat.primitives import hashes

# Generate RSA Private and Public Keys

private_key = rsa.generate_private_key(public_exponent=65537,
key_size=2048)
public_key = private_key.public_key()

# Message to be signed
message = b"Blockchain is changing the world"

# Create a digital signature

signature = private_key.sign(
message,
padding.PSS(
mgf=padding.MGF1(hashes.SHA256()),
salt_length=padding.PSS.MAX_LENGTH
),
hashes.SHA256()
)

# Verify the digital signature

try:
public_key.verify(
signature,
message,
padding.PSS(
mgf=padding.MGF1(hashes.SHA256()),
salt_length=padding.PSS.MAX_LENGTH
),
hashes.SHA256()
)
print("The signature is valid!")
except Exception as e:
print("The signature is invalid:", e)

Explanation:

• rsa.generate_private_key: Generates the private key for signing.

 • private_key.sign: Signs the message using the private key and creates a digital
signature.
• public_key.verify: Verifies the signature by comparing it to the message using the
sender’s public key.

Expected Output:

csharp
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The signature is valid!

ECDSA Digital Signature Example:

python
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from cryptography.hazmat.primitives.asymmetric import ec
from cryptography.hazmat.primitives import hashes
from cryptography.hazmat.primitives.asymmetric import padding
from cryptography.hazmat.primitives import hashes

# Generate ECDSA Private and Public Keys

private_key = ec.generate_private_key(ec.SECP384R1())
public_key = private_key.public_key()

# Message to be signed
message = b"Blockchain technology is revolutionary!"

# Create a digital signature

signature = private_key.sign(
message,
ec.ECDSA(hashes.SHA256())
)

# Verify the digital signature

try:
public_key.verify(
signature,
message,
ec.ECDSA(hashes.SHA256())
)
print("The ECDSA signature is valid!")
except Exception as e:
print("The signature is invalid:", e)

Explanation:

• ec.generate_private_key: Generates an ECDSA private key.

• private_key.sign: Signs the message using the ECDSA private key and creates a
digital signature.
• public_key.verify: Verifies the ECDSA signature using the sender's public key.

Expected Output:

csharp
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The ECDSA signature is valid!
Applications

1. Blockchain Applications:
o Bitcoin: Digital signatures in Bitcoin ensure that transactions are authentic and
that only the owner of a private key can authorize spending from their wallet.
o Ethereum: Ethereum uses digital signatures for transactions in smart
contracts, ensuring that only authorized participants can execute actions on the
blockchain.
2. Email Security:
o PGP (Pretty Good Privacy): Digital signatures in PGP encrypt and sign
emails to ensure that the email content is authentic and hasn’t been tampered
with. PGP is widely used for email encryption and digital signatures.
3. Software Distribution:
o Software developers use digital signatures to ensure that the software being
distributed has not been altered. Users can verify that they are downloading
the correct, unmodified version of software by checking the digital signature.
4. Authentication:
o SSH: In SSH, digital signatures are used to authenticate the identity of the user
or server. This ensures secure communication between remote systems and
verifies that they are the entities they claim to be.
5. Digital Contracts:
o Smart contracts in blockchain technology often use digital signatures to verify
that both parties have agreed to the contract terms. These signatures ensure
that a contract is enforceable and that no party can deny their participation.

Conclusion

In Week 3, we delved into the concept of digital signatures, which provide authentication,
integrity, and non-repudiation in digital communications. We explored how RSA and
ECDSA algorithms work for signing and verifying messages, and we implemented both in
Python. Digital signatures are crucial in blockchain systems, email security, software
distribution, and many other applications. They ensure that data is authentic, secure, and
tamper-proof, thus playing a pivotal role in the integrity of blockchain-based systems and
cryptographic protocols.

In the upcoming week, we will continue with more cryptographic primitives, focusing on
topics related to encryption and security in blockchain systems.
Week 4: Evolution of Blockchain Technology

Theory

What is Blockchain Technology?

At its core, blockchain is a distributed, decentralized ledger technology that ensures

transparency, immutability, and security of data. A blockchain is essentially a chain of blocks
where each block contains a record of transactions. Each block is cryptographically linked to
the previous one, forming an unbreakable chain.

Evolution of Blockchain Technology:

1. The Beginning – Bitcoin (2008):

o The concept of blockchain was introduced in 2008 by an anonymous
individual (or group) known as Satoshi Nakamoto as part of the
cryptocurrency Bitcoin. The whitepaper titled “Bitcoin: A Peer-to-Peer
Electronic Cash System” proposed a decentralized financial system that does
not rely on intermediaries like banks or governments.
o Bitcoin used blockchain technology to ensure the security and transparency of
transactions without requiring trust in a central authority.
o Bitcoin’s blockchain was primarily designed to support the Bitcoin
cryptocurrency, allowing peer-to-peer transactions without the need for trust
between participants.
2. The Advent of Smart Contracts – Ethereum (2015):
o In 2015, Vitalik Buterin launched Ethereum, a blockchain platform designed
not only for cryptocurrencies but also for decentralized applications (dApps).
Ethereum introduced the concept of smart contracts, self-executing contracts
where the terms are written directly into code.
 o Smart contracts enabled Ethereum to go beyond just financial transactions and
support a variety of applications, from supply chain management to
decentralized finance (DeFi), governance, and gaming.
3. The Rise of Private Blockchains (2015 - 2020):
o As the potential of blockchain technology was realized, many organizations
began developing private or permissioned blockchains. Unlike the public
nature of Bitcoin and Ethereum, private blockchains are restricted to selected
participants who have the required permissions to access and validate
transactions.
o Examples include Hyperledger and R3 Corda, both of which focus on
business and enterprise use cases, such as supply chain management, financial
settlements, and asset tracking.
o Private blockchains are useful for companies that want to harness the benefits
of blockchain (security, transparency) without exposing their data to the public
or relying on public consensus.
4. Interoperability and Cross-Chain Technology (2020 and beyond):
o One limitation of early blockchain systems was the lack of interoperability—
blockchains could not easily communicate or share data with one another. This
issue led to the rise of cross-chain technologies and interoperability
protocols, such as Polkadot, Cosmos, and Chainlink.
o These solutions enable different blockchains to interact with each other, share
information, and work together, opening the door to more complex and
integrated decentralized applications.
5. Scalability and Layer-2 Solutions (2021 and beyond):
o As blockchain adoption grew, scalability became a major concern, particularly
with platforms like Ethereum, which faced high gas fees and slow transaction
speeds during periods of high demand.
o Layer-2 solutions, such as Optimistic Rollups, zk-Rollups, and Polygon,
were developed to solve these scalability issues. These technologies operate
on top of existing blockchains (Layer-1), reducing transaction costs and
improving speed while still leveraging the security of the base layer.
6. Decentralized Finance (DeFi) and NFTs (2020 and beyond):
o With the rise of Ethereum and smart contracts, the world saw the explosion of
DeFi (Decentralized Finance) applications, which enable users to engage in
financial activities—such as lending, borrowing, trading, and yield farming—
without relying on centralized institutions.
o In 2020, the world saw the rapid rise of NFTs (Non-Fungible Tokens), which
use blockchain technology to represent ownership of unique assets, such as
digital art, music, and virtual real estate.
o These developments helped fuel the mass adoption of blockchain technology
in various sectors, from finance to entertainment.
7. Enterprise Adoption & Blockchain-as-a-Service (BaaS) (2020 and beyond):
o Large enterprises began exploring blockchain technology to improve
efficiency, reduce fraud, and ensure transparency in their operations. Some
companies partnered with cloud service providers to offer Blockchain-as-a-
Service (BaaS).
o Microsoft Azure, Amazon Web Services (AWS), and IBM Blockchain are
some of the key players in this space, providing enterprises with tools and
platforms to build and deploy blockchain-based solutions.
8. Sustainability and Green Blockchain (2021 and beyond):
 o As blockchain technology expanded, concerns about its environmental impact,
particularly the energy consumption of proof-of-work (PoW) systems like
Bitcoin, became more prominent.
o Proof-of-stake (PoS) consensus mechanisms, such as Ethereum’s Ethereum
2.0, and new projects like Algorand and Cardano, focused on energy-
efficient alternatives to PoW, allowing blockchain to grow sustainably.
o These efforts are part of the broader movement toward creating green
blockchain systems that prioritize environmental sustainability.

Technical Insights

1. Consensus Mechanisms:
o Blockchain relies on consensus mechanisms to validate transactions. Initially,
Proof-of-Work (PoW) was used, where miners solve complex mathematical
problems to add blocks to the blockchain (used by Bitcoin).
o Later, Proof-of-Stake (PoS) was introduced, where validators are selected
based on the amount of cryptocurrency they hold and are willing to "stake" as
collateral (used by Ethereum 2.0).
o Newer consensus mechanisms, like Delegated Proof-of-Stake (DPoS),
Proof-of-Authority (PoA), and Byzantine Fault Tolerance (BFT), are also
used in various blockchain systems to enhance scalability, efficiency, and
security.
2. Smart Contracts:
o Smart contracts are self-executing contracts where the terms are directly
written into lines of code.
o These contracts are executed by blockchain nodes and automatically enforce
the rules encoded in the contract. Ethereum’s Solidity programming language
is the most popular tool for creating smart contracts.
o Smart contracts eliminate intermediaries, making transactions faster, cheaper,
and more secure. They enable a wide range of decentralized applications
(dApps) in finance, insurance, real estate, and beyond.
3. Sharding:
o Sharding is a technique used to improve the scalability of blockchains. It
involves splitting the blockchain into smaller "shards," each of which
processes a subset of the total transactions, allowing multiple transactions to
occur in parallel.
o Ethereum 2.0 plans to implement sharding to increase throughput and reduce
congestion on the network.
4. Layer-2 Solutions:
o Layer-2 solutions work on top of the main blockchain (Layer-1) to increase
scalability without compromising security. These include:
 State Channels: Allowing users to transact off-chain, with only the
final state recorded on the blockchain.
 Rollups: Bundling multiple transactions into a single batch for
processing on the main blockchain, reducing transaction fees and
congestion.
 Plasma: A framework for creating child blockchains connected to the
main blockchain to improve scalability and reduce costs.
Code Example

Here’s a simple implementation of a smart contract using Ethereum's Solidity:

Solidity Smart Contract: Simple Storage Example

solidity
Copy code
// SPDX-License-Identifier: MIT
pragma solidity ^0.8.0;

contract SimpleStorage {
uint256 private storedData;

// Function to set the stored data

function set(uint256 x) public {
storedData = x;
}

// Function to retrieve the stored data

function get() public view returns (uint256) {
return storedData;
}
}

Explanation:

• This contract stores an unsigned integer (storedData) and provides two functions:
0. set(uint256 x) allows users to set a value.
1. get() returns the stored value.

Deployment: To deploy this contract, you can use tools like Remix or Truffle for
development, testing, and deployment.

Applications

1. Cryptocurrency:
o Bitcoin: The first application of blockchain technology, Bitcoin,
revolutionized digital payments by allowing peer-to-peer transactions without
intermediaries.
o Ethereum: Beyond cryptocurrency, Ethereum enabled the development of
decentralized applications (dApps) and smart contracts, creating new
possibilities for financial services, gaming, and other industries.
2. Supply Chain Management:
o Blockchain ensures the transparency and traceability of goods as they move
through the supply chain. IBM’s Food Trust Blockchain helps track food
products from farm to table, ensuring the authenticity of the products.
3. Decentralized Finance (DeFi):
 o Platforms like Uniswap, Aave, and Compound use blockchain technology to
provide decentralized financial services, such as lending, borrowing, and
trading, without the need for intermediaries like banks.
4. Voting:
o Blockchain-based voting systems, such as Follow My Vote, aim to provide
secure, transparent, and tamper-proof voting mechanisms, reducing the
potential for election fraud.
5. Healthcare:
o Blockchain ensures the privacy and security of patient records while enabling
easy sharing of medical data across different healthcare providers. Solve.Care
is one such platform that uses blockchain for healthcare administration.
6. Digital Identity:
o Blockchain can be used to create secure and verifiable digital identities. Sovrin
is an example of a platform that provides decentralized digital identity solutions,
where individuals control access to their personal data.
Week 5: Elements of a Blockchain

Theory

What are the Elements of a Blockchain?

Blockchain technology consists of various fundamental components that work together to

ensure its decentralized, secure, and transparent nature. Understanding these elements is
crucial for grasping how blockchains function and how they are implemented in different use
cases. The key elements of a blockchain are:

1. Block:
o A block is a container that holds a list of transactions. It is the basic unit of a
blockchain.
o A typical block contains:
 Block header: Contains metadata such as the hash of the previous
block, timestamp, and a reference to the block's content.
 Transaction data: The actual data that describes the transactions
made, such as sender, receiver, amount, and any additional metadata.
o Blocks are linked together to form a continuous, immutable chain of records.
2. Chain:
o The chain refers to the interconnected sequence of blocks, where each block is
linked to its predecessor using a hash pointer.
o The linkage ensures the integrity of the blockchain, making it tamper-evident.
If an attacker attempts to modify a block, the hash of the block changes,
breaking the chain and alerting the network.
3. Cryptographic Hash:
o Each block contains a cryptographic hash of its contents, which is a fixed-
size output derived from a mathematical function.
o The hash of a block is used to uniquely identify it and link it to the previous
block. This ensures that any changes to the data within a block will result in a
different hash, which is easily detectable.
o The most common cryptographic hash function used in blockchain systems is
SHA-256 (Secure Hash Algorithm 256-bit).
4. Distributed Ledger:
 o A distributed ledger is a database that is shared and synchronized across
multiple participants, often in different geographical locations.
o The distributed nature of the blockchain ensures that no single entity has
control over the data. Each participant has a copy of the entire blockchain, and
all transactions are verified by the network.
o This decentralized structure eliminates the need for trusted intermediaries, like
banks or governments, to validate transactions.
5. Consensus Mechanism:
o A consensus mechanism is the process used to achieve agreement among
participants in the network about the validity of transactions and the order in
which they are added to the blockchain.
o Common consensus algorithms include:
 Proof of Work (PoW): Miners solve complex mathematical problems
to add new blocks to the chain (used in Bitcoin).
 Proof of Stake (PoS): Validators are selected based on the amount of
cryptocurrency they hold and are willing to "stake" as collateral (used
in Ethereum 2.0).
 Delegated Proof of Stake (DPoS), Proof of Authority (PoA), and
Byzantine Fault Tolerance (BFT) are also used in various
blockchains.
6. Public and Private Keys:
o Blockchain uses public key cryptography to secure transactions.
o Each user has a public key (which can be shared with others) and a private
key (which must remain secret).
o When a user wants to send a transaction, they use their private key to sign the
transaction. This ensures that only the owner of the private key can initiate a
transaction and that the transaction cannot be altered once it is signed.
o The recipient can verify the authenticity of the transaction using the sender’s
public key.
7. Nodes:
o Nodes are the individual participants or computers that form the blockchain
network. Each node stores a copy of the blockchain and plays a role in
validating transactions.
o There are different types of nodes:
 Full nodes: These store the entire blockchain and validate all
transactions.
 Lightweight nodes: These store only part of the blockchain and rely
on full nodes to validate transactions.
 Mining nodes: In networks that use Proof of Work, mining nodes
participate in solving cryptographic puzzles to add new blocks to the
chain.
8. Transaction:
o A transaction is a record of an action or exchange between users on the
blockchain. It typically involves the transfer of cryptocurrency or assets but
can also represent other forms of data exchange.
o Transactions are grouped together and added to a block, which is then verified
by the blockchain network.
9. Immutability:
o One of the defining features of blockchain is its immutability. Once a block is
added to the chain, it is nearly impossible to alter or delete. This is due to the
 cryptographic linking of blocks and the consensus mechanism used to validate
them.
o The immutability of blockchain ensures that the record of transactions is
tamper-proof, making it highly reliable for applications that require integrity
and trust.
10. Smart Contracts (Optional):
o A smart contract is a self-executing contract with the terms of the agreement
directly written into code. Smart contracts automatically execute actions when
predefined conditions are met, reducing the need for intermediaries.
o Ethereum is the most popular blockchain platform for deploying smart
contracts, enabling decentralized applications (dApps).

Technical Insights

1. Hashing and Integrity:

o In blockchain, hashing is used extensively to ensure data integrity. Each block
contains a hash of the previous block, creating a secure chain of blocks. If an
attacker tries to modify a block’s data, the hash will change, breaking the link
and alerting the network.
o Example of hash generation using SHA-256:

python
Copy code
import hashlib

data = "Hello Blockchain"

hash_object = hashlib.sha256(data.encode())
print(hash_object.hexdigest())

This will output the hash of the string "Hello Blockchain".

2. Consensus Algorithms:
o Proof of Work (PoW):
 In PoW, miners compete to solve complex mathematical puzzles to
validate transactions and add new blocks. The first miner to solve the
puzzle is rewarded with cryptocurrency.
o Proof of Stake (PoS):
 In PoS, validators are chosen to create new blocks based on the amount
of cryptocurrency they hold and are willing to stake. PoS is considered
more energy-efficient than PoW.
3. Smart Contract Execution:
o Smart contracts are executed by nodes on the blockchain network. Each time a
smart contract is invoked, the code within the contract is executed, and the
transaction is validated by the network.
o Example of Solidity code for a simple smart contract:

solidity
Copy code
// SPDX-License-Identifier: MIT
pragma solidity ^0.8.0;
 contract SimpleStorage {
uint256 public storedData;

function set(uint256 x) public {

storedData = x;
}

function get() public view returns (uint256) {

return storedData;
}
}

o This contract stores and retrieves a value, and it is executed on the Ethereum
blockchain.

Code Example

Hashing in Python using SHA-256:

python
Copy code
import hashlib

# Sample data
data = "Blockchain is amazing"

# Create SHA-256 hash object

hash_object = hashlib.sha256(data.encode())

# Output the hash

print(f"SHA-256 Hash: {hash_object.hexdigest()}")

Explanation:

• This Python code demonstrates how to generate a cryptographic hash (SHA-256) of a

string. The string "Blockchain is amazing" is hashed using the hashlib library, and the
result is printed.

Applications

1. Cryptocurrency:
o Bitcoin: Bitcoin uses blockchain for secure and transparent transactions
without the need for a centralized authority. The blockchain ensures the
integrity of transactions through cryptographic hashes and consensus
mechanisms like Proof of Work.
o Ethereum: Ethereum’s blockchain is used for decentralized applications and
smart contracts, expanding the potential of blockchain beyond just currency.
2. Supply Chain Management:
 o Blockchain can be used to track goods as they move through a supply chain,
ensuring transparency and preventing fraud. IBM’s Food Trust Blockchain is
an example of a blockchain solution that enables companies to trace food
products from farm to table.
3. Voting Systems:
o Blockchain-based voting systems aim to eliminate election fraud by providing
transparent and tamper-proof voting records. Voters can cast their votes on the
blockchain, and the results are publicly verifiable and immutable.
4. Healthcare:
o Blockchain can securely store patient records and ensure that healthcare
providers have access to up-to-date and accurate information. Platforms like
Solve.Care are developing blockchain-based solutions for healthcare
administration.
5. Digital Identity:
o Blockchain is also being used to create decentralized digital identities, where
users control their personal information. Sovrin is an example of a
decentralized identity platform based on blockchain.

Conclusion

The elements of a blockchain—such as blocks, cryptographic hashes, consensus mechanisms,

and nodes—work together to form a decentralized, secure, and immutable system for
recording transactions. These elements are foundational to the technology’s ability to disrupt
various industries, from cryptocurrency and finance to supply chain management and
healthcare. The ongoing evolution of blockchain technology will continue to unlock new use
cases and improve the efficiency, security, and scalability of decentralized systems.
Week 6: Blockchain Consensus I – Permissionless Models

Theory

What is Blockchain Consensus?

In blockchain networks, consensus mechanisms are algorithms used to achieve agreement

among distributed nodes about the validity of transactions and the state of the blockchain.
Consensus is crucial for ensuring that all participants in the network share the same view of
the blockchain without relying on a central authority.

Permissionless Blockchain Models:

A permissionless blockchain is one in which anyone can participate in the network without
requiring permission from a central authority. These blockchains are typically decentralized,
open-source, and trustless, meaning participants don't need to trust any central entity.

In permissionless blockchain models, consensus mechanisms are particularly important

because they enable participants to agree on the validity of transactions without the need for
trusted third parties.

Key Features of Permissionless Blockchains:

• Open Participation: Anyone can join the network as a node without restrictions.
• Decentralization: No central authority controls the network. The control is
distributed across all participants.
• Trustless: Participants don't need to trust any single entity or institution; trust is
distributed across the network.
• Immutability: Once data is added to the blockchain, it cannot be altered without
detection.

Common Permissionless Blockchain Consensus Mechanisms:

1. Proof of Work (PoW):

 o Proof of Work is the consensus algorithm used by Bitcoin and other early
blockchains. In PoW, participants (miners) compete to solve complex
cryptographic puzzles.
o The miner who solves the puzzle first gets the right to add the next block to
the blockchain and is rewarded with a cryptocurrency incentive (e.g., Bitcoin).
o Characteristics:
 Security: PoW makes it computationally infeasible for any single
entity to control the blockchain.
 Energy-Intensive: PoW requires significant computational power and
energy, which has raised concerns about its environmental impact.
2. Proof of Stake (PoS):
o Proof of Stake is an alternative to PoW that is used by networks like
Ethereum (after its transition to Ethereum 2.0) and Cardano.
o In PoS, instead of miners, validators are chosen to create new blocks based on
the amount of cryptocurrency they hold and are willing to "stake" as collateral.
o The more cryptocurrency a validator stakes, the higher the chances of being
selected to add a new block.
o Characteristics:
 Energy Efficient: PoS is less energy-intensive than PoW.
 Security: In PoS, validators are incentivized to act honestly, as they
risk losing their staked cryptocurrency if they validate fraudulent
transactions.
3. Delegated Proof of Stake (DPoS):
o Delegated Proof of Stake is a variant of PoS, used by platforms like EOS and
Tron. In DPoS, token holders elect a set of delegates (also called witnesses) to
validate transactions and create new blocks.
o DPoS aims to improve scalability and reduce centralization by having a
smaller number of validators compared to PoS.
o Characteristics:
 Faster and Scalable: DPoS offers faster block generation times and
improved scalability compared to PoW and PoS.
 Centralization Risk: While DPoS reduces the number of validators,
this can lead to centralization as power may become concentrated in
the hands of a few delegates.
4. Proof of Authority (PoA):
o Proof of Authority is a consensus mechanism where validators are not chosen
based on their stake or work but on their identity and reputation.
o PoA is used by blockchains such as VeChain and Ethereum’s private chains.
Validators in PoA networks are pre-approved, trusted entities.
o Characteristics:
 High Throughput: PoA offers faster transaction finality and greater
scalability.
 Centralization: PoA has a centralization risk because only a few
trusted validators control the network.
5. Proof of Space (PoSpace) and Proof of Time (PoTime):
o Proof of Space and Proof of Time are consensus algorithms used by Chia, a
cryptocurrency focused on sustainability. In these systems, participants prove
they have allocated hard drive space (PoSpace) and wait a period of time to
ensure fairness (PoTime).
o Characteristics:
  Environmentally Friendly: PoSpace and PoTime consume much less
energy than PoW.
 Security: These mechanisms are still relatively new and face
challenges regarding decentralization and security.

Technical Insights

1. Proof of Work (PoW) - Technical Mechanics:

o PoW requires miners to find a nonce (a random number) that, when hashed
with the block's content, produces a hash that satisfies a specific difficulty
target. This process is known as mining.
o Example of a simple PoW problem:

python
Copy code
import hashlib
import time

def mine_block(block_data, difficulty):

nonce = 0
target = "0" * difficulty
while True:
hash_object =
hashlib.sha256(f"{block_data}{nonce}".encode())
block_hash = hash_object.hexdigest()
if block_hash[:difficulty] == target:
return nonce, block_hash
nonce += 1

block_data = "Blockchain Block"

difficulty = 4 # Requires a hash that starts with 4 zeros
start_time = time.time()
nonce, block_hash = mine_block(block_data, difficulty)
end_time = time.time()

print(f"Block mined with nonce: {nonce}")

print(f"Block hash: {block_hash}")
print(f"Time taken: {end_time - start_time} seconds")

Explanation:

 The mining process iteratively increments the nonce until the resulting
hash begins with a certain number of leading zeros, defined by the
difficulty.
 This simulation represents the Proof of Work concept and shows how
mining works in a blockchain network.
2. Proof of Stake (PoS) - Validator Selection:
o In PoS, validators are chosen based on the amount of cryptocurrency they hold
and are willing to stake. This incentivizes honest behavior since validators risk
losing their staked funds if they validate fraudulent transactions.
o Example PoS validator selection mechanism:

python
 Copy code
import random

def select_validator(validators, total_staked):

"""Selects a validator based on their stake"""
stake_probabilities = [validator['stake'] / total_staked
for validator in validators]
selected_validator = random.choices(validators,
stake_probabilities)[0]
return selected_validator

validators = [
{'name': 'Validator1', 'stake': 1000},
{'name': 'Validator2', 'stake': 5000},
{'name': 'Validator3', 'stake': 3000},
]
total_staked = sum(validator['stake'] for validator in
validators)

selected_validator = select_validator(validators, total_staked)

print(f"Selected validator: {selected_validator['name']}")

Explanation:

 In this simulation, validators are selected based on the proportion of

their stake relative to the total amount staked in the network.
 The more stake a validator has, the higher the chance of being selected
to create a new block.
3. Delegated Proof of Stake (DPoS) - Delegate Election:
o In DPoS, token holders elect delegates to validate transactions and add blocks.
This reduces the number of validators but increases scalability.
o Example of delegate election in DPoS:

python
Copy code
def elect_delegate(candidates, votes):
"""Selects a delegate based on votes"""
sorted_candidates = sorted(candidates, key=lambda x:
votes[x], reverse=True)
return sorted_candidates[0]

candidates = ['Delegate1', 'Delegate2', 'Delegate3']

votes = {'Delegate1': 100, 'Delegate2': 250, 'Delegate3': 150}

selected_delegate = elect_delegate(candidates, votes)

print(f"Selected delegate: {selected_delegate}")

Explanation:

 The delegate with the most votes is selected. This model allows for
faster block production and is more scalable compared to PoW and
PoS.

Code Example
Mining a Block with Proof of Work (Simulating PoW):

python
Copy code
import hashlib

# Function to mine a block with PoW

def mine_block(block_data, difficulty):
nonce = 0
target = "0" * difficulty
while True:
hash_object = hashlib.sha256(f"{block_data}{nonce}".encode())
block_hash = hash_object.hexdigest()
if block_hash[:difficulty] == target:
return nonce, block_hash
nonce += 1

block_data = "Blockchain Block"

difficulty = 4 # Requires a hash that starts with 4 zeros
nonce, block_hash = mine_block(block_data, difficulty)

print(f"Block mined with nonce: {nonce}")

print(f"Block hash: {block_hash}")

Applications

1. Cryptocurrency:
o Bitcoin: Bitcoin uses Proof of Work as its consensus mechanism, where
miners compete to solve cryptographic puzzles in order to add blocks to the
chain.
o Ethereum 2.0: Ethereum switched from Proof of Work to Proof of Stake to
increase scalability and reduce energy consumption.
2. Decentralized Finance (DeFi):
o Many DeFi platforms use blockchain networks that rely on consensus
mechanisms like PoW or PoS to ensure security and decentralization.

Conclusion

Understanding consensus mechanisms in permissionless blockchain networks is essential for

the development and improvement of decentralized applications. By exploring algorithms
like Proof of Work, Proof of Stake, and Delegated Proof of Stake, we gain insights into
the trade-offs between security, scalability, and energy consumption in blockchain systems.
Week 7: Blockchain Consensus II – Permissioned Models

Theory

What are Permissioned Blockchains?

A permissioned blockchain is a type of blockchain network where participants are restricted

and must be granted permission to join and interact with the network. Unlike permissionless
blockchains, where anyone can participate, permissioned blockchains allow for greater
control and can be tailored to the specific needs of organizations or enterprises. This makes
them suitable for use cases where privacy, speed, and regulatory compliance are important.

Key Characteristics of Permissioned Blockchains:

• Access Control: Only authorized participants can join the network, ensuring that only
trusted entities can validate transactions.
• Centralized Control: While permissioned blockchains maintain some decentralized
aspects, they are often governed by a central authority or consortium.
• Scalability: Due to the limited number of participants, permissioned blockchains can
offer better scalability and faster transaction processing compared to permissionless
blockchains.
• Privacy: Transaction details may be kept private between participants, unlike in
permissionless blockchains where transaction data is public.

Common Consensus Mechanisms in Permissioned Blockchains:

1. Practical Byzantine Fault Tolerance (PBFT):

o PBFT is a consensus mechanism designed to tolerate up to one-third of
malicious nodes in the network. It was initially designed for distributed
systems but has found its application in permissioned blockchains.
o In PBFT, a leader node is selected to propose a block, and other nodes vote on
its validity. A block is added only if a sufficient number of nodes (usually
more than two-thirds) agree that the block is valid.
o Characteristics:
 High throughput: PBFT allows for high transaction rates since
consensus can be achieved quickly with fewer nodes.
  Fault tolerance: Can tolerate up to one-third of the nodes being faulty
or malicious.
 Latency: The consensus process may introduce latency due to the need
for multiple rounds of communication.
2. Raft Consensus:
o Raft is a consensus algorithm used in distributed systems, and it is simpler and
more understandable than PBFT. It is often used in permissioned blockchain
systems like Hyperledger Fabric.
o In Raft, a leader is chosen to manage the log of transactions, and followers
replicate the log. If the leader fails, a new leader is elected, ensuring fault
tolerance.
o Characteristics:
 Simplicity: Raft is easier to implement and understand compared to
PBFT.
 Fault tolerance: Raft can tolerate a minority of failed nodes.
 Efficiency: Provides fast block production with less overhead.
3. Proof of Authority (PoA):
o Proof of Authority is often used in permissioned blockchains and private
blockchains. In PoA, instead of relying on miners or stakers, trusted validators
are pre-approved to create new blocks.
o Characteristics:
 Centralized control: The validators are typically known and trusted
entities.
 Low resource consumption: Since only a small number of trusted
validators participate, the resource consumption is significantly lower
than in permissionless consensus mechanisms.
 High throughput: PoA enables faster transaction validation and can
achieve higher throughput.
4. Federated Consensus:
o Federated Consensus involves multiple federated nodes or a consortium of
trusted entities that participate in validating transactions and achieving
consensus.
o This mechanism is often used in consortium blockchains, where a group of
entities work together to maintain the blockchain.
o Characteristics:
 Decentralized governance: While there is some centralization in the
form of a consortium, the governance is more decentralized than in
centralized models.
 Trust: The network participants are trusted entities that are pre-
approved.

Technical Insights

1. Practical Byzantine Fault Tolerance (PBFT):

o PBFT works in three phases: Pre-prepare, Prepare, and Commit.
 Pre-prepare: A leader node proposes a block to all other nodes.
 Prepare: Nodes exchange messages to confirm the proposed block.
  Commit: Once a sufficient number of nodes (usually two-thirds)
confirm the block, it is committed to the blockchain.

Technical Flow of PBFT:

o A block is proposed, and nodes send prepare messages to each other.

o Once the block is verified, nodes send commit messages, and the block is
added to the blockchain.

Example of the PBFT flow in code:

python
Copy code
# A basic PBFT-like consensus process
from collections import Counter

def pbft_consensus(block, validators):

prepare_messages = []
commit_messages = []

# Step 1: Pre-prepare (leader proposes the block)

leader = validators[0]
print(f"Leader {leader} proposes block: {block}")

# Step 2: Prepare (validators send prepare messages)

for validator in validators:
prepare_messages.append(f"{validator} prepared block")

# Step 3: Commit (validators send commit messages)

for message in prepare_messages:
commit_messages.append(f"Committed: {message}")

# Consensus reached if more than two-thirds agree

if len(commit_messages) >= len(validators) * 2 / 3:
print(f"Block {block} added to blockchain.")
return True
else:
print(f"Consensus failed for block: {block}")
return False

validators = ['Validator1', 'Validator2', 'Validator3']

block = 'New Block Data'

pbft_consensus(block, validators)

Explanation:

o The code simulates the process of proposing a block, validating it through

prepare and commit messages, and checking if the majority of validators agree
on the block.
2. Raft Consensus:
o In Raft, a leader is elected from a pool of candidate nodes. The leader then
proposes transactions, which followers replicate. If the leader crashes, a new
leader is elected to ensure fault tolerance.

Example of a simplified Raft leader election:

 python
Copy code
import random

class RaftNode:
def __init__(self, name):
self.name = name
self.state = 'Follower'

def become_leader(self):
self.state = 'Leader'
print(f"{self.name} is now the leader.")

def elect_new_leader(self, nodes):

leader = random.choice(nodes)
leader.become_leader()

nodes = [RaftNode("Node1"), RaftNode("Node2"), RaftNode("Node3")]

nodes[0].elect_new_leader(nodes)

Explanation:

o In this example, one node is randomly elected as the leader from a set of
nodes. The leader is responsible for transaction proposals and log replication.
3. Proof of Authority (PoA):
o PoA selects pre-approved validators to create blocks. A common approach in
PoA is to have a list of trusted validators and allow them to validate and
propose blocks.

Example of simple PoA block creation:

python
Copy code
class Validator:
def __init__(self, name):
self.name = name

def create_block(self, block_data):

print(f"{self.name} created block: {block_data}")

validators = [Validator("Validator1"), Validator("Validator2"),

Validator("Validator3")]
selected_validator = validators[0] # Pre-approved validator
selected_validator.create_block("New Block Data")

Explanation:

o In this example, the first validator in the list is pre-approved to create blocks.
PoA ensures that only a small set of trusted validators are responsible for
block creation.

Code Example

Raft Consensus: Leader Election

python
Copy code
import random

class RaftNode:
def __init__(self, name):
self.name = name
self.state = 'Follower'

def become_leader(self):
self.state = 'Leader'
print(f"{self.name} is now the leader.")

def elect_new_leader(self, nodes):

leader = random.choice(nodes)
leader.become_leader()

# Simulate Raft consensus

nodes = [RaftNode("Node1"), RaftNode("Node2"), RaftNode("Node3")]
nodes[0].elect_new_leader(nodes)

Explanation:

• This code simulates a leader election in a Raft-based consensus model. One of the
nodes is randomly elected as the leader, and that node will manage block creation and
transaction log replication.

Applications

1. Enterprise Blockchain Solutions:

o Hyperledger Fabric: A permissioned blockchain platform that uses Raft for
consensus. It is used in industries like supply chain, healthcare, and finance,
where privacy and transaction speed are critical.
2. Private Blockchains:
o Ethereum Private Networks: Ethereum can also operate as a permissioned
blockchain with Proof of Authority, allowing private enterprise blockchain
solutions where only approved validators can create blocks.
3. Consortium Blockchains:
o Corda: A permissioned blockchain used in finance and banking, where only
authorized participants can validate and see transactions, ensuring privacy and
regulatory compliance.

Conclusion

Permissioned blockchains offer tailored solutions for enterprises that need more control over
their network participants. Consensus mechanisms like PBFT, Raft, and PoA help achieve
high throughput, fault tolerance, and privacy while maintaining efficiency in controlled
environments. By understanding the technical nuances of these mechanisms, developers can
implement robust blockchain systems suitable for a variety of industries
Week 8: Smart Contract Hands-On I – Ethereum Smart Contracts
(Permissionless Model)

Theory

What is a Smart Contract?

A smart contract is a self-executing contract with the terms of the agreement directly written
into code. They run on a blockchain, ensuring that once deployed, the contract cannot be
altered, providing security and transparency. Smart contracts are designed to automatically
execute transactions when predefined conditions are met.

Smart Contracts on Ethereum (Permissionless Blockchain):

• Ethereum is the most widely used permissionless blockchain for deploying smart
contracts.
• It is a decentralized platform that enables developers to create decentralized
applications (dApps) by writing smart contracts in Solidity, the most popular
language for Ethereum smart contracts.
• Ethereum's permissionless model allows anyone to participate in the network, which
is vital for decentralized applications (dApps) and decentralized finance (DeFi)
protocols.

Core Concepts of Ethereum Smart Contracts:

1. Ethereum Virtual Machine (EVM): The EVM is a decentralized computing

environment where smart contracts are executed. Every Ethereum node runs a copy of
the EVM, ensuring that all participants in the network execute smart contracts in the
same way.
2. Gas: Every operation on the Ethereum network, including the execution of smart
contracts, requires a certain amount of computational resources, which are measured
in gas. Gas needs to be paid by the user executing the contract in the form of Ether
(ETH).
3. Accounts:
o Externally Owned Accounts (EOAs): These are user accounts controlled by
private keys and are used to initiate transactions.
 o Contract Accounts: These accounts hold the code of smart contracts and are
controlled by the rules set in the contract.

Technical Insights

1. Solidity:
o Solidity is the programming language used to write smart contracts for the
Ethereum blockchain. It is a contract-oriented, high-level programming
language designed to target the EVM.
o Solidity Syntax:
 State Variables: These variables are used to store data on the
blockchain.
 Functions: Functions define the logic of the smart contract.
 Modifiers: Modifiers are used to add extra functionality to functions.

Example of a simple Solidity contract:

solidity
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// SPDX-License-Identifier: MIT
pragma solidity ^0.8.0;

contract SimpleStorage {
uint256 storedData;

// Set the value of storedData

function set(uint256 x) public {
storedData = x;
}

// Get the value of storedData

function get() public view returns (uint256) {
return storedData;
}
}

Explanation:

o storedData: A state variable to store a number.

o set(uint256 x): A function to set the value of storedData.
o get(): A view function that returns the current value of storedData.
2. Deployment on Ethereum:
o To deploy a smart contract on the Ethereum network, you need to compile the
contract into bytecode, which can be executed by the EVM.
o Truffle or Hardhat are popular frameworks that help in the development,
testing, and deployment of smart contracts.

Steps for deployment:

o Write the contract in Solidity.

o Compile the contract using tools like Solc (Solidity compiler).
 o Deploy the contract on the Ethereum test network (e.g., Rinkeby or Goerli) or
the main network.
o Interact with the contract using a frontend or command-line tools like
Web3.js or Ethers.js.

Code Example

Ethereum Smart Contract Example:

Here’s a simple smart contract for managing a list of stored values using Solidity.

solidity
Copy code
// SPDX-License-Identifier: MIT
pragma solidity ^0.8.0;

contract ValueManager {
uint[] public values;

// Function to add a value to the array

function addValue(uint value) public {
values.push(value);
}

// Function to get the value at a specific index

function getValue(uint index) public view returns (uint) {
require(index < values.length, "Index out of bounds");
return values[index];
}

// Function to get the total number of stored values

function getValuesCount() public view returns (uint) {
return values.length;
}
}

Explanation:

• values: An array that stores integers.

• addValue(uint value): Adds a new value to the values array.
• getValue(uint index): Returns the value stored at a specific index.
• getValuesCount(): Returns the total number of values stored in the contract.

Deploying and Interacting with the Contract:

Using Hardhat to deploy the contract:

1. Install Hardhat:

bash
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npm install --save-dev hardhat
2. Set up Hardhat Project:

bash
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npx hardhat

3. Create a deployment script in the scripts folder:

js
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async function main() {
const [deployer] = await ethers.getSigners();
console.log("Deploying contracts with the account:",
deployer.address);

const Contract = await ethers.getContractFactory("ValueManager");

const contract = await Contract.deploy();
console.log("Contract deployed to:", contract.address);
}

main()
.then(() => process.exit(0))
.catch((error) => {
console.error(error);
process.exit(1);
});

4. Deploy to Test Network:

To deploy your contract on a test network (e.g., Goerli), configure your Hardhat
project with your wallet's private key and the Infura or Alchemy URL for the test
network. Then, run:

bash
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npx hardhat run scripts/deploy.js --network goerli

5. Interacting with the Contract using Web3.js:

After deployment, you can interact with the smart contract using Web3.js or
Ethers.js.

Example using Web3.js:

js
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const Web3 = require('web3');
const web3 = new
Web3('https://goerli.infura.io/v3/YOUR_INFURA_PROJECT_ID');
const contractAddress = 'YOUR_CONTRACT_ADDRESS';
const abi = [ /* Contract ABI */ ];

const contract = new web3.eth.Contract(abi, contractAddress);

async function interact() {

const accounts = await web3.eth.getAccounts();
await contract.methods.addValue(10).send({ from: accounts[0] });
 const value = await contract.methods.getValue(0).call();
console.log("Stored value:", value);
}

interact();

Applications

1. Decentralized Finance (DeFi):

o Ethereum smart contracts power most DeFi applications, which allow users to
trade assets, borrow funds, and earn interest without intermediaries.
o Examples: Uniswap (decentralized exchange), Aave (decentralized lending).
2. Decentralized Autonomous Organizations (DAOs):
o DAOs use smart contracts to create decentralized governance systems where
decisions are made through voting by token holders.
o Examples: MakerDAO, Compound.
3. Supply Chain Management:
o Ethereum smart contracts can track goods as they move through the supply
chain, ensuring transparency and accountability.
o Examples: VeChain, IBM Food Trust.
4. NFTs (Non-Fungible Tokens):
o Smart contracts on Ethereum enable the creation and exchange of NFTs,
providing proof of ownership and authenticity for digital assets.
o Examples: CryptoKitties, Bored Ape Yacht Club.

Conclusion

Ethereum smart contracts are a powerful tool in the world of permissionless blockchains,
enabling decentralized applications across various domains such as finance, governance,
supply chain, and NFTs. By understanding the Solidity programming language and how to
deploy and interact with smart contracts on the Ethereum network, developers can harness the
full potential of blockchain technology to create decentralized solutions. The hands-on
experience of deploying and interacting with these contracts will provide foundational
knowledge for building advanced decentralized applications.
Week 9: Smart Contract Hands-On II – Hyperledger Fabric (Permissioned
Model)

Theory

What is Hyperledger Fabric?

Hyperledger Fabric is an open-source blockchain framework designed for building

permissioned blockchain networks. It is one of the Hyperledger projects hosted by the Linux
Foundation and is widely used in enterprise applications, particularly in supply chain,
finance, and healthcare industries. Unlike Ethereum, which is designed for permissionless
blockchains, Hyperledger Fabric is aimed at permissioned blockchains, which are ideal for
use cases where privacy, scalability, and regulatory compliance are essential.

Key Features of Hyperledger Fabric:

• Permissioned Network: Hyperledger Fabric is a permissioned blockchain, meaning

only authorized participants can join and interact with the network. This provides
better control over data access and enhances privacy.
• Modular Architecture: Fabric allows different components (such as consensus and
membership services) to be customized based on specific business needs.
• Smart Contracts (Chaincode): In Hyperledger Fabric, smart contracts are referred to
as Chaincode. They define the rules and logic that govern transactions on the
blockchain network.
• Consensus: Hyperledger Fabric uses a pluggable consensus model, allowing
organizations to choose a consensus protocol that best fits their needs (e.g., Raft,
Kafka).
• Private Data: Hyperledger Fabric supports privacy by allowing organizations to keep
certain data off the public ledger, ensuring confidentiality between parties.

Technical Insights

1. Chaincode:
 o Chaincode in Hyperledger Fabric is the equivalent of a smart contract in
permissioned blockchains. Chaincode is executed by peers in the network, and
it defines the business logic for transactions.
o Chaincode can be written in Go, Java, or JavaScript (Node.js), and it interacts
with the Fabric ledger to record the transaction state.

Structure of Chaincode:

o Init: This function is called to initialize the smart contract.

o Invoke: This function is used to execute specific logic, such as creating,
updating, or deleting records.

Example of Chaincode (Go):

go
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package main

import (
"fmt"
"github.com/hyperledger/fabric-contract-api-go/contractapi"
)

// SimpleChaincode defines the chaincode

type SimpleChaincode struct {
contractapi.Contract
}

// Init function to initialize the chaincode

func (s *SimpleChaincode) Init(ctx
contractapi.TransactionContextInterface) error {
return nil
}

// Invoke function handles all transactions

func (s *SimpleChaincode) Invoke(ctx
contractapi.TransactionContextInterface) error {
function, args := ctx.GetStub().GetFunctionAndParameters()

switch function {
case "set":
return s.set(ctx, args)
case "get":
return s.get(ctx, args)
default:
return fmt.Errorf("Invalid function name")
}
}

// Set function to store data

func (s *SimpleChaincode) set(ctx
contractapi.TransactionContextInterface, args []string) error {
if len(args) != 2 {
return fmt.Errorf("Expecting two arguments: key and value")
}

err := ctx.GetStub().PutState(args[0], []byte(args[1]))

if err != nil {
 return fmt.Errorf("Failed to set value: %s", err.Error())
}
return nil
}

// Get function to retrieve data

func (s *SimpleChaincode) get(ctx
contractapi.TransactionContextInterface, args []string) (string,
error) {
if len(args) != 1 {
return "", fmt.Errorf("Expecting one argument: key")
}

value, err := ctx.GetStub().GetState(args[0])

if err != nil {
return "", fmt.Errorf("Failed to get value: %s", err.Error())
}
return string(value), nil
}

func main() {
chaincode, err := contractapi.NewChaincode(&SimpleChaincode{})
if err != nil {
fmt.Printf("Error creating chaincode: %s", err.Error())
return
}

if err := chaincode.Start(); err != nil {

fmt.Printf("Error starting chaincode: %s", err.Error())
}
}

Explanation:

o Init: Initializes the chaincode.

o Invoke: Handles function calls (set and get).
o set: Stores a key-value pair in the ledger.
o get: Retrieves the value stored under a specific key.
2. Peer-to-Peer Communication:
o In Hyperledger Fabric, peers maintain a ledger, and transactions are initiated
by clients. These peers validate and commit the transactions to the ledger.
o Each peer can hold a copy of the ledger or maintain a subset of the ledger.
3. Fabric Network Configuration:
o Hyperledger Fabric allows you to configure and deploy the network with
multiple organizations. Each organization can have its own set of peers, and
they all interact via channels.
o Channels: A channel is a private communication layer within the Fabric
network where only authorized participants can view the data and participate
in the transactions.

Code Example: Setting Up Hyperledger Fabric Environment

1. Prerequisites:
 o Docker: Hyperledger Fabric uses Docker containers to simulate a network of
peers and orderers.
o Go: Used to write the chaincode.
o Node.js: To interact with the Hyperledger Fabric network.
2. Install Fabric Samples:

bash
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git clone https://github.com/hyperledger/fabric-samples.git
cd fabric-samples

The fabric-samples repository includes example network configurations,

chaincode, and deployment scripts.

3. Run the Fabric Test Network: Hyperledger Fabric provides a test network to get
started quickly. Navigate to the test network directory:

bash
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cd fabric-samples/test-network

To bring up the network:

bash
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./network.sh up

This will start the network with several organizations and peers running in Docker
containers.

4. Deploy Chaincode:

Use the following script to deploy your chaincode on the network:

bash
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./network.sh deployCC -ccn mychaincode -ccp ../chaincode/simple -ccl
go

This command deploys a Go chaincode (mychaincode) on the Fabric network.

Applications

1. Supply Chain Management: Hyperledger Fabric is widely used in supply chain

applications, allowing multiple stakeholders (e.g., suppliers, manufacturers, retailers)
to securely track and verify the provenance of goods.
o Example: IBM Food Trust uses Hyperledger Fabric to track the movement of
food items through the supply chain, ensuring transparency and reducing
fraud.
 2. Finance and Banking: Financial institutions use Hyperledger Fabric for interbank
transactions, cross-border payments, and trade finance, where privacy and security are
paramount.
o Example: Finastra uses Hyperledger Fabric for financial services to enhance
trust and streamline processes.
3. Healthcare: Hyperledger Fabric is used in healthcare applications for maintaining
patient records and drug traceability, ensuring the privacy and integrity of medical
data.
o Example: MedRec uses Hyperledger Fabric for secure and decentralized
management of electronic medical records (EMRs).
4. Governance and Voting: Hyperledger Fabric can also be used for secure and
transparent voting systems. It ensures that votes are recorded accurately and cannot be
tampered with.
o Example: A local government could use Fabric to implement an electronic
voting system for secure elections.

Conclusion

Hyperledger Fabric provides a robust, flexible, and secure platform for developing smart
contracts on permissioned blockchains. The hands-on approach with Chaincode allows
developers to gain practical experience in creating business logic that drives enterprise
applications. With its modular architecture, privacy features, and custom consensus
mechanisms, Hyperledger Fabric is an excellent choice for applications that require private,
permissioned blockchain networks. By mastering Hyperledger Fabric, developers can
contribute to the growing ecosystem of decentralized solutions for industries ranging from
finance and supply chain to healthcare and governance.
Week 10: Decentralized Identity Management

Theory

What is Decentralized Identity Management?

Decentralized Identity (DID) refers to a new model for managing digital identities where
individuals, organizations, or things control their own identities without relying on a central
authority. In traditional identity management systems, identities are controlled and verified
by central entities (like governments, corporations, or service providers), leading to privacy
issues and single points of failure. Decentralized identity aims to give individuals control
over their data and allow them to share only the necessary information, thus enhancing
privacy and security.

Decentralized Identity Management leverages blockchain technology to create, store, and

manage identities in a decentralized manner. Key concepts involved in decentralized identity
management include:

1. Self-sovereign identity (SSI): The concept that individuals or organizations own and
control their identity, without needing to rely on a central authority.
2. Decentralized Identifiers (DIDs): Unique identifiers that are created, owned, and
controlled by the subject of the identifier (e.g., a person or an organization).
3. Verifiable Credentials (VCs): These are tamper-evident claims about an entity that
are digitally signed by an issuer, and the recipient can use them to prove their identity
without revealing additional information.

Components of Decentralized Identity System:

• Issuer: The entity that creates and signs a verifiable credential (e.g., a government
issuing a driver’s license).
 • Holder: The individual or entity that controls the DID and associated credentials
(e.g., a person holding a driver’s license).
• Verifier: The entity that checks the validity of a DID or verifiable credential (e.g., a
bank checking an identity for account opening).

Technical Insights

1. Decentralized Identifiers (DIDs):

o DIDs are a new type of identifier that enables decentralized identification.
Unlike traditional identifiers like email addresses or usernames, DIDs are not
tied to any centralized registry, identity provider, or certificate authority.
o DIDs are stored on a blockchain or distributed ledger and can be created,
updated, or deactivated by the DID subject.
o DIDs are typically represented as URLs in the format:

ruby
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did:<method>:<identifier>

Where method is the DID method (such as ethereum, sov, ipfs) and
identifier is a unique string.

2. Example:
o did:example:123456789abcdefghi
3. Verifiable Credentials (VCs):
o Verifiable Credentials are digital statements made by an issuer about a subject,
and they are cryptographically signed to ensure their authenticity and integrity.
o The credential format is based on JSON-LD (Linked Data), allowing for easy
integration with web technologies.
o Example: A university might issue a verifiable credential stating that a person
has earned a degree. This credential can be verified by anyone without
revealing unnecessary information.

VC Example:

json
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{
"@context": ["https://www.w3.org/2018/credentials/v1"],
"type": ["VerifiableCredential", "DegreeCredential"],
"issuer": "did:example:123",
"issuanceDate": "2024-10-10T12:00:00Z",
"credentialSubject": {
"id": "did:example:456",
"degree": {
"type": "BachelorDegree",
"degreeDate": "2024-06-15"
}
}
}
 4. Blockchain as the Backbone:
o Blockchain serves as the backbone for decentralized identity systems because
of its immutability and distributed nature. A blockchain-based DID is secured
using the cryptographic features of the blockchain, making it tamper-resistant
and providing proof of ownership and control.
o Various blockchains and distributed ledger technologies (DLTs) are used for
DID management, such as Ethereum, Sovrin, Hyperledger Indy, and
Bitcoin.
5. DID Methods and Interoperability:
o DID methods specify the rules for creating and managing DIDs. Each DID
method is governed by a specific blockchain or distributed ledger, ensuring
interoperability across different networks.
o For example:
 Ethereum: did:ethr:0x...
 Sovrin: did:sov:...
 IPFS: did:ipfs:...

Interoperability between different DID methods is crucial for a universal

decentralized identity system.

6. Privacy and Security Considerations:

o Selective Disclosure: One of the key advantages of decentralized identity
systems is selective disclosure, where users can share only specific parts of
their identity (e.g., sharing only the fact that they are over 18 without revealing
their exact date of birth).
o Zero-Knowledge Proofs (ZKPs): ZKPs can be used to prove certain claims
(e.g., age, citizenship) without revealing underlying data. This ensures privacy
while maintaining trust.

Example: A person could prove they are eligible to vote using a ZKP, without
revealing their full name, address, or any other sensitive information.

Code Example

To create a simple decentralized identity using the Sovrin network (one of the popular DID
implementations), we can use the indy-sdk in Python. This example demonstrates creating a
DID and issuing a credential.

Prerequisites:

• Install indy-sdk:

bash
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pip install indy-sdk

Python Example:
python
Copy code
import asyncio
from indy import did, anoncreds, wallet, pool

async def create_did():

# Create a wallet
wallet_config = json.dumps({"id": "wallet_name"})
wallet_credentials = json.dumps({"key": "wallet_key"})
await wallet.create_wallet(wallet_config, wallet_credentials)
wallet_handle = await wallet.open_wallet(wallet_config,
wallet_credentials)

# Create DID
(did_info, verkey) = await did.create_and_store_my_did(wallet_handle,
"{}")

print("DID: ", did_info)

print("Verkey: ", verkey)

return wallet_handle, did_info, verkey

async def issue_credential(wallet_handle, did_info, verkey):

# Issue a verifiable credential
credential_definition_id = "credential_definition_id"
credential_offer = json.dumps({
"type": "credentialOffer",
"issuer": did_info,
"schema": "Degree",
})
credential_request = await
anoncreds.create_credential_request(wallet_handle, did_info,
credential_offer, verkey)

# Issue and store the credential

credential = json.dumps({
"issuer": did_info,
"credential_data": {
"degree": "Bachelor of Science",
"year": "2024"
}
})
await anoncreds.store_credential(wallet_handle, None,
credential_request, credential, None)

print("Credential Issued")

async def main():

wallet_handle, did_info, verkey = await create_did()
await issue_credential(wallet_handle, did_info, verkey)

if __name__ == "__main__":
asyncio.run(main())

Explanation:

1. Create DID: The script first creates a wallet and a decentralized identifier (DID) on
the Sovrin network.
2. Issue Verifiable Credential: It then creates a credential for the DID and stores it in
the wallet.
 3. Issuing Credentials: A verifiable credential (in this case, a degree credential) is
created and associated with the DID.

Applications

1. Self-Sovereign Identity (SSI):

o Individuals can manage and share their identities without relying on
centralized authorities. For example, users can share their age, qualifications,
or citizenship status using verifiable credentials without exposing their
complete identity.
2. Digital Identity Verification:
o Banks and financial institutions use decentralized identities for onboarding
customers (KYC), allowing them to verify the identity of customers without
centralized records.
o Example: Civic uses decentralized identities for providing secure and private
access to services while reducing the need for password management.
3. Healthcare:
o In healthcare, decentralized identity management can be used to store and
share medical records securely. Healthcare providers can access a patient's
credentials (e.g., insurance status or medical history) through a decentralized
identity without needing to contact centralized authorities.
4. Voting and Governance:
o Decentralized identity management systems can be applied in secure voting
systems, ensuring that each vote is traceable to a unique individual while
maintaining voter privacy. For example, FollowMyVote is a decentralized
voting platform that uses blockchain for election integrity.
5. Education:
o Educational institutions can issue diplomas, certificates, and other verifiable
credentials to students, allowing students to manage their academic records
independently. ID2020 is an initiative focused on providing decentralized
digital IDs for refugees and marginalized communities.

Conclusion

Decentralized Identity Management is an essential aspect of the future of digital identity

systems. By empowering individuals to control their own identities, it enhances privacy,
security, and user autonomy. Hyperledger Indy and Sovrin provide the foundation for
decentralized identity systems, while DIDs and verifiable credentials ensure the integrity and
authenticity of identity claims. As we move towards more decentralized and user-centric
systems, decentralized identity will play a crucial role in a variety of applications, from
healthcare to voting and education, offering a new paradigm for managing and sharing
identity data securely and privately.
Week 11: Blockchain Interoperability

Theory

What is Blockchain Interoperability?

Blockchain interoperability refers to the ability of different blockchain networks to

communicate, share, and transfer data and assets with one another. While each blockchain is
typically designed with its own consensus mechanisms, governance structures, and protocols,
interoperability aims to overcome the isolation of these networks by enabling them to work
together. This is critical for the broader adoption and scalability of blockchain technologies,
allowing assets and information to move seamlessly across various platforms.

Without interoperability, blockchain ecosystems remain fragmented, making it difficult to

transfer assets, data, or use the full potential of the distributed ledger technology (DLT). By
facilitating communication between different blockchain networks, interoperability helps
maximize the efficiency and utility of blockchain systems.

Types of Blockchain Interoperability:

1. Cross-chain Interoperability: This type involves the transfer of assets or data

between different blockchain platforms, allowing tokens or smart contracts from one
chain to interact with those of another.
2. Interoperability at the Consensus Layer: This type involves enabling blockchains
to connect at the consensus level (i.e., how transactions are verified and validated),
allowing them to share or verify information in a way that makes sense to each other.
3. Interoperability at the Application Layer: At this level, interoperability enables
decentralized applications (dApps) to interact across blockchains, promoting shared
utility and data use.

Challenges in Blockchain Interoperability:

 • Standardization: Lack of common standards makes it difficult for different
blockchain platforms to interact efficiently.
• Security: Ensuring secure cross-chain transactions requires robust cryptographic
techniques to avoid vulnerabilities.
• Scalability: The transfer of large volumes of data between blockchains can create
bottlenecks, affecting the scalability of the entire system.
• Trust Models: Blockchains use various trust models, and aligning them in a cross-
chain system can be complex.

Technical Insights

1. Atomic Swaps:
o Atomic Swaps enable the exchange of cryptocurrencies between different
blockchain networks without the need for an intermediary. This allows for
peer-to-peer trading between different blockchains by using smart contracts.
o Example: A user could exchange Bitcoin (BTC) for Ethereum (ETH) using
atomic swaps without needing a centralized exchange. The transaction is
either completed successfully or not at all, ensuring trustless transactions.
o How It Works: Atomic swaps use a combination of hash time-locked
contracts (HTLCs) and public keys to facilitate exchanges. A hash lock
ensures that the transaction is only valid if the second party can provide the
correct key, and a time lock prevents the transaction from being executed after
a certain period.
2. Relay Chains and Sidechains:
o Relay Chains: These are central chains that connect multiple blockchains. A
relay chain allows different blockchains to communicate by acting as a
mediator. For example, the Polkadot network uses a relay chain to facilitate
interoperability between different blockchains in its ecosystem.
o Sidechains: A sidechain is a blockchain that runs parallel to the main
blockchain and can facilitate the movement of assets between the two.
Sidechains can be used to implement features such as scalability, privacy, or
interoperability between chains. For example, the Liquid Network is a
sidechain built on top of Bitcoin that allows for faster and more private
Bitcoin transactions.
3. Cross-Chain Bridges:
o Cross-chain bridges are mechanisms that allow the transfer of tokens and data
between different blockchain networks. These bridges can be centralized or
decentralized.
 Centralized Bridges: In this model, a central authority is responsible
for locking tokens on the source chain and issuing equivalent tokens on
the destination chain.
 Decentralized Bridges: These use smart contracts and consensus
protocols to ensure that tokens are moved between chains in a trustless
manner. Examples of decentralized bridges include the Thorchain
network, which facilitates cross-chain liquidity without relying on
centralized exchanges.
4. Interledger Protocol (ILP):
 oThe Interledger Protocol (ILP) is designed to facilitate payments between
different payment networks, including blockchains. It is an open protocol for
transferring payments across different ledgers and networks.
o ILP allows for atomic swaps across various types of ledgers, such as
blockchains, traditional financial systems, and other distributed ledgers. The
protocol enables interoperability between blockchains by using "connector
accounts," which allow users to move payments across chains using a series of
intermediaries.
5. Blockchain as a Service (BaaS) Interoperability:
o Several companies offer Blockchain-as-a-Service (BaaS) solutions that
enable interoperability between blockchains and other enterprise systems. By
offering APIs, tools, and frameworks to connect different blockchain
networks, BaaS providers facilitate seamless cross-chain communication for
businesses and developers.
o Example: Microsoft Azure Blockchain Service and IBM Blockchain
provide BaaS solutions that allow businesses to connect their private
blockchains with public blockchains or even with other private blockchains.

Code Example: Cross-chain Token Transfer with a Bridge

In this example, we'll simulate the process of transferring a token between two Ethereum-
based blockchains using a cross-chain bridge. The implementation focuses on the smart
contract deployment that locks tokens on the source blockchain and mints them on the
destination blockchain.

Step 1: Deploying a Locking Contract on the Source Chain

solidity
Copy code
// SPDX-License-Identifier: MIT
pragma solidity ^0.8.0;

contract LockingContract {
address public owner;
mapping(address => uint256) public balances;

event Locked(address indexed user, uint256 amount);

event Unlocked(address indexed user, uint256 amount);

constructor() {
owner = msg.sender;
}

function lockTokens(uint256 amount) public {

require(amount > 0, "Amount must be greater than zero");
balances[msg.sender] += amount;
emit Locked(msg.sender, amount);
}

function unlockTokens(uint256 amount) public {

require(balances[msg.sender] >= amount, "Insufficient balance");
balances[msg.sender] -= amount;
emit Unlocked(msg.sender, amount);
 }
}

Step 2: Deploying a Minting Contract on the Destination Chain

solidity
Copy code
// SPDX-License-Identifier: MIT
pragma solidity ^0.8.0;

contract MintingContract {
address public owner;
mapping(address => uint256) public balances;

event Minted(address indexed user, uint256 amount);

event Burned(address indexed user, uint256 amount);

constructor() {
owner = msg.sender;
}

function mintTokens(address user, uint256 amount) public {

require(msg.sender == owner, "Only owner can mint tokens");
balances[user] += amount;
emit Minted(user, amount);
}

function burnTokens(address user, uint256 amount) public {

require(msg.sender == owner, "Only owner can burn tokens");
require(balances[user] >= amount, "Insufficient balance");
balances[user] -= amount;
emit Burned(user, amount);
}
}

Step 3: Interoperability through Cross-Chain Bridge

In a real-world scenario, the mintTokens function on the destination chain would be

triggered by an event listener on the source chain after the tokens are locked. For this, we
would need an off-chain component (like an oracle) that listens for the Locked event on the
source blockchain and triggers the minting function on the destination blockchain.

The actual implementation of such a bridge would involve:

• Listening to events on both chains.

• Verifying that tokens have been locked and triggering the minting process.
• Implementing a security mechanism to ensure that only the trusted bridge can unlock
or mint tokens.

Applications

1. Cross-Chain DeFi Platforms:

 oCross-chain interoperability is essential for decentralized finance (DeFi)
applications. By enabling users to move assets between different blockchains
(e.g., Ethereum, Binance Smart Chain, Polkadot), DeFi protocols can tap into
liquidity from multiple ecosystems. Cross-chain bridges and atomic swaps
make it possible for users to swap assets without going through centralized
exchanges.
2. Multi-Chain NFTs:
o Non-fungible tokens (NFTs) are being created on various blockchains (such as
Ethereum, Solana, and Tezos). Interoperability allows NFTs to be moved
across different chains, increasing their visibility and potential value. For
example, an NFT minted on Ethereum could be traded or displayed on Solana,
leveraging the different ecosystems' strengths.
3. Supply Chain and Logistics:
o Blockchain interoperability can streamline supply chain and logistics by
allowing data sharing across different blockchains used by different parties.
For instance, a manufacturer could use a private blockchain for production,
while a logistics company might use a public blockchain for tracking
shipments. Interoperability would enable them to share data seamlessly.
4. Cross-Chain Governance:
o Some blockchain projects require governance models that span multiple
chains. Interoperability allows decentralized autonomous organizations
(DAOs) to manage multiple blockchains in a single ecosystem, enabling more
efficient cross-chain voting and decision-making.

Conclusion

Blockchain interoperability is a crucial component for the future of decentralized systems,

ensuring that different blockchain platforms can work together efficiently and securely. As
more diverse blockchain networks emerge, the need for interoperability solutions such as
cross-chain bridges, atomic swaps, and relay chains will increase. These technologies will
unlock new possibilities for decentralized finance, supply chain management, and other
applications that require seamless data and asset transfers between different blockchains.
Overcoming the challenges of security, scalability, and trust will be key to the widespread
adoption of interoperable blockchain systems
Week 12: Blockchain Applications

Theory

Blockchain technology has evolved from being a simple solution for cryptocurrencies to a
powerful tool with diverse applications in various industries. The decentralized, secure, and
transparent nature of blockchain enables it to address problems in multiple sectors, such as
finance, supply chain, healthcare, real estate, and more.

Key benefits of blockchain applications include:

1. Transparency: Blockchain provides a transparent ledger, making it easy to verify

transactions and ensure data integrity.
2. Security: Blockchain uses cryptographic techniques to secure transactions, ensuring
that the data is tamper-proof.
3. Decentralization: The decentralized nature of blockchain removes the need for
intermediaries, reducing single points of failure and enhancing trust.
4. Efficiency: Blockchain allows for faster and more efficient transactions, reducing the
need for paperwork and administrative processes.
5. Cost Reduction: By eliminating intermediaries and reducing the complexity of
operations, blockchain can lower transaction and operational costs.

Technical Insights

1. Blockchain in Finance (DeFi):

o Decentralized Finance (DeFi) refers to financial services built on blockchain
technology without relying on central intermediaries like banks or brokers.
DeFi applications include lending platforms, decentralized exchanges (DEX),
and stablecoins.
o Example: MakerDAO is a decentralized lending platform that allows users to
lock up cryptocurrency as collateral and borrow a stablecoin (DAI) in return.
 The platform operates entirely on the Ethereum blockchain, ensuring
transparency and decentralization.
o Automated Market Makers (AMM): AMMs are used in decentralized
exchanges to enable token swaps without the need for traditional order books.
Protocols like Uniswap and Sushiswap use AMMs to match buyers and
sellers based on liquidity pools.
2. Blockchain in Supply Chain Management:
o Blockchain's ability to provide traceability, transparency, and security makes it
an ideal technology for improving supply chain management.
o Example: IBM Food Trust is a blockchain-based solution that enables
participants in the food supply chain to trace the origin of food products. This
ensures food safety, quality, and transparency, helping to prevent fraud and
reduce waste.
o Tracking: Blockchain helps track products as they move from the
manufacturer to the consumer. Every participant in the supply chain records
their actions on the blockchain, providing real-time updates on the product's
status.
3. Blockchain in Healthcare:
o Blockchain can be used to improve healthcare systems by providing secure
and immutable records for patient data, allowing for seamless sharing between
authorized parties while ensuring privacy.
o Example: Medicalchain is a blockchain-based platform that enables
healthcare providers to securely store and share electronic health records
(EHRs). This ensures patients’ medical data is secure and accessible only by
authorized medical professionals.
o Pharmaceutical Supply Chain: Blockchain helps track the movement of
drugs from manufacturers to end-users, reducing the risk of counterfeit drugs
entering the market.
4. Blockchain in Real Estate:
o Blockchain has the potential to revolutionize the real estate industry by
simplifying the buying, selling, and leasing processes, reducing fraud, and
enhancing transparency.
o Example: Propy is a blockchain-based real estate platform that allows users to
buy and sell properties across borders. The platform ensures that real estate
transactions are transparent, tamper-proof, and executed in real time.
o Tokenization of Real Estate: Blockchain allows the tokenization of real
estate assets, enabling fractional ownership. This allows investors to buy and
sell shares in properties without the need for intermediaries.
5. Blockchain in Voting:
o Blockchain can be used to create secure, transparent, and tamper-proof voting
systems. By using blockchain, voters can cast their ballots securely while
ensuring that the results are immutable and verifiable.
o Example: Voatz is a mobile voting platform that uses blockchain to enable
secure voting. The platform ensures the integrity of elections by providing an
auditable trail of every vote cast.
o Blockchain-based voting systems can help reduce voter fraud, improve voter
turnout, and increase trust in the electoral process.
6. Blockchain in Identity Management:
 oBlockchain can provide a decentralized and secure solution for managing
digital identities. This is especially useful in scenarios where privacy and
security are paramount.
o Example: SelfKey is a blockchain-based identity management platform that
allows users to control and protect their personal data. Users can store their
identity information on the blockchain, granting access to services without the
need for intermediaries.
7. Blockchain in Intellectual Property (IP) and Digital Content:
o Blockchain can provide a secure and transparent way to manage intellectual
property rights and digital content distribution.
o Example: Audius is a decentralized music streaming platform built on
blockchain, where artists can upload and distribute their music while retaining
ownership and control over their content.
o Copyright Protection: Blockchain can be used to timestamp digital content,
ensuring the creator's rights are recognized and preventing unauthorized use or
duplication.

Code Example: Blockchain-Based Voting System

In this example, we'll implement a basic blockchain-based voting system using smart
contracts in Solidity. The system allows voters to cast their votes securely and immutably,
and only authorized users can vote.

Step 1: Smart Contract for Voting System

solidity
Copy code
// SPDX-License-Identifier: MIT
pragma solidity ^0.8.0;

contract Voting {
address public owner;
mapping(address => bool) public voters;
mapping(string => uint256) public votes;

event Voted(address indexed voter, string candidate);

modifier onlyOwner() {
require(msg.sender == owner, "Only the owner can perform this
action");
_;
}

modifier hasNotVoted() {
require(voters[msg.sender] == false, "You have already voted");
_;
}

constructor() {
owner = msg.sender;
}

function addVoter(address voter) public onlyOwner {

 voters[voter] = false;
}

function vote(string memory candidate) public hasNotVoted {

require(bytes(candidate).length > 0, "Invalid candidate name");
votes[candidate]++;
voters[msg.sender] = true;
emit Voted(msg.sender, candidate);
}

function getVotes(string memory candidate) public view returns

(uint256) {
return votes[candidate];
}
}

Explanation:

• The Voting contract allows a user to vote for a candidate once.

• The contract owner (who deploys the contract) can add new voters.
• The vote function allows a voter to cast a vote for a specified candidate.
• The contract tracks the votes for each candidate, and the getVotes function allows
anyone to view the vote count for each candidate.

Step 2: Deploying the Contract

You can deploy this contract to an Ethereum network (testnet or mainnet) using Remix IDE
or Truffle.

Step 3: Interacting with the Contract

1. Add Voters: The contract owner can add eligible voters using the addVoter function.
2. Casting Votes: Voters can cast their votes using the vote function.
3. View Results: Anyone can view the total votes for a candidate using the getVotes
function.

Applications

1. Decentralized Finance (DeFi):

o Platforms like Aave, Compound, and Uniswap leverage blockchain to
provide decentralized lending, borrowing, and trading services without
intermediaries. These platforms allow users to earn interest, borrow assets, and
trade cryptocurrencies while maintaining full control over their funds.
2. Supply Chain Transparency:
o Walmart and Nestle are using blockchain to track the provenance of food
products from farm to table, ensuring food safety, reducing fraud, and
improving efficiency in the supply chain.
o VeChain is another example of a blockchain platform used for supply chain
logistics and product authentication.
3. Healthcare Data Management:
 o MediLedger is a blockchain-based platform that improves the pharmaceutical
supply chain by tracking the movement of drugs, reducing fraud, and ensuring
compliance with regulations.
o Healthereum uses blockchain to engage patients in managing their healthcare
data securely, allowing them to share data with providers as needed while
maintaining control over it.
4. Real Estate Transactions:
o RealT offers a platform that tokenizes real estate properties, allowing
investors to own fractional shares in properties and earn rental income via
blockchain-based transactions.
o Propy facilitates international property transactions using blockchain,
ensuring transparency and reducing the complexity of cross-border real estate
deals.
5. Digital Content Distribution:
o Audius is a decentralized music streaming platform that allows artists to
distribute music directly to fans, bypassing intermediaries such as record
labels and streaming platforms.
o Steemit is a decentralized blogging platform where users can earn
cryptocurrency for their content, ensuring creators are compensated for their
work.
6. Voting and Governance:
o Blockchain-based voting platforms, such as Voatz, have been used in real-
world elections to ensure transparent, secure, and verifiable voting processes.
o Aragon uses blockchain for decentralized governance, enabling organizations
to make decisions in a transparent and secure manner without central
authorities.

Conclusion

Blockchain applications are revolutionizing a wide range of industries by providing secure,

transparent, and decentralized solutions to long-standing problems. From decentralized
finance to supply chain management, blockchain’s potential for disrupting traditional systems
is immense. As technology matures and more use cases emerge, blockchain will continue to
shape the future of business, governance, and society.