A blockchain in one sentence

• An “append only transaction log”

 A short history of Bitcoin.
• 2008: The first description of Bitcoin was published in
2008 by an individual or a group under the pseudonym
“Satoshi Nakamoto” in a now very famous white paper.
• 2009: The Bitcoin Network goes live and the first
Bitcoins are mined.
• 2010: The first cryptocurrency stock exchange for
trading Bitcoin is launched.
• 2011: One Bitcoin equals one USD.
• 2013: One Bitcoin now equals 100 USD.
• 2014: Microsoft starts accepting Bitcoin as payments.
• 2017: One Bitcoin equals 10'000 USD.
 Is Bitcoin same as Blockchain?

• Bitcoin does not equal Blockchain.

• Bitcoin is a currency and a system that uses a
blockchain as underlying data structure, which
can be used for many things, including
cryptocurrencies.
• Blockchain is the underlying data structure.
What actually happens in blockchain?
 What is a Blockchain?

A blockchain is a datastructure, which is a growing list of data blocks.

The data blocks are linked together, such that old blocks cannot be
removed or altered.
 What is a Bitcoin?

• Bitcoin (₿) is a decentralized digital currency, without

a central bank or single administrator, that can be sent
from user to user on the peer-to-peer bitcoin
network without the need for intermediaries.
• Transactions are verified by
network nodes through cryptography and recorded in a
public distributed ledger called a blockchain.
• The crypto currency was invented in 2008 by an
unknown person or group of people using the
name Satoshi Nakamoto.
 Bitcoin Ecosystem

• Bitcoins are created as a reward for a process

known as mining.
• They can be exchanged for other currencies,
products, and services.
• Bitcoin has been criticized for its use in illegal
transactions, the large amount of electricity
(and thus carbon footprint) used by mining,
price volatility, and thefts from exchanges.
 Key Features

A public blockchain has some characteristic

features:
• Write-only, immutable, transparent data
storage.
• Decentralized, no need for intermediaries.
• Consistent state across all participants.
• Resistant against malicious participants.
• Open to everyone.
 Cutting the Middleman
Blockchain technology makes
middlemen (so-called trusted
third parties) obsolete in
many applications. Bitcoin can
serve as an example here.
Bitcoins are not routed via a
central instance, e.g. a bank,
but can be transferred directly
between the parties.
 Building Consensus

• Blockchain technology has a wide range of applications for

consensus building. In a finite timeframe, all participants of
the blockchain agree on a proposal, which was worked out by
a participant. At Bitcoin, for example, all participants agree on
who owns how many bitcoins
 Creating Witnesses

• Finally, a public blockchain can also be used

for the automated creation of witnesses. If
something is published on a public blockchain,
all participants become witnesses.
 So now what is a blockchain?
• A blockchain is a growing list of records,
called blocks, that are linked together
using cryptography. Each block contains
a cryptographic hash of the previous block,
a timestamp, and transaction data
 What is cryptography?
• The art and science of concealing the messages to introduce
secrecy in information security is recognized as cryptography.
• The word ‘cryptography’ was coined by combining two Greek
words, ‘Krypto’ meaning hidden and ‘graphene’ meaning
writing.
Tools and techniques in Cryptography
• Encryption
• Hash functions
• Message Authentication codes (MAC)
• Digital Signatures
 What is hash function?
• A hash function is a mathematical function
that converts a numerical input value into
another compressed numerical value. The
input to the hash function is of arbitrary
length but output is always of fixed length.
• Values returned by a hash function are
called message digest or simply hash values.
Hash functions are extremely useful and appear in almost all
information security applications.
 Popular Hash Functions

• MD5(Message Direct) was most popular and widely

used hash function for quite some years.
• The MD family comprises of hash functions MD2, MD4,
MD5 and MD6. It was adopted as Internet Standard
RFC 1321. It is a 128-bit hash function.
• Secure Hash Function (SHA)- Family of SHA comprise of
four SHA algorithms; SHA-0, SHA-1, SHA-2….
• RIPEMD-The RIPEMD is an acronym for RACE Integrity
Primitives Evaluation Message Digest. This set of hash
functions was designed by open research community
and generally known as a family of European hash
functions.
 Blockchain Types.
• Blockchains can be public, private or partner.
• A public blockchain is available to any business or user,
which allows anyone to add a data block to the chain
Eg: Bitcoin, Ethereum
• Private blockchains are intended for use within a single
organization -- or even more narrowly, for specific teams or
personnel -- but the database can usually be viewed by
anyone in that organization.
Eg: Multichain, Monax
• A partner blockchain supports a group of organizations that
share transactions, such as government agencies.
• Eg: R3, Corda
 Blockchain Versions
• Blockchain 1.0 represents the early introduction of the
technology, focused primarily on financial transactions.
• Blockchain 2.0 expands capabilities to support "smart
contracts" that replace traditional paper contracts. Small
applets within the chain create, validate, monitor and
enforce the terms and conditions of an agreement. Such
types of blockchain are increasingly used in supply chain
management operations where goods are bought, sold and
transported.
• Blockchain 3.0 Third-gen blockchains aim to resolve
fundamental flaws including scalability and interoperability
which means blockchain can sustain mass adoption and not
suffer problems like slow transaction time and closed
systems.
 Challenges

Although Blockchain technology has a strong disruptive

power and can change many areas of our daily lives, there
are still some challenges that need to be addressed.
• The high energy consumption - Bitcoin uses a lot of energy.
• The scalability issue - Bitcoin supports far less transactions
per second than e.g. VISA.
• It opens up possibilities for money laundering - Some
blockchains as Monero are anonymous.
• The question remains as to how far we want to bypass the
middleman. Often he can also protect us, e.g. a bank can
protects us to the extend that we do not transfer the
money to the wrong person.
 Blockchain Applications

Blockchain companies have begun disrupting all industries from

financial services to online gaming, supply chain and media.