Unchaining the Future

Overview of
Blockchain Technology
Vikram Puri
System
A system is a set of interconnected
components that work together to
achieve a common goal.
In the context of computer
networks, a network system is a
collection of two or more
computers or other electronic
devices that are interconnected for
the purpose of exchanging data and
sharing resources.

Use Case

• Sharing of files, data, and other

types of information,
• Giving authorized users the
ability to access information
stored on other computers on the
network

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 Types of Systems

Centralized System Decentralized System Distributed System

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 Centralized System

A centralized system is a type of system architecture

where one or more client nodes are directly
connected to a central server.

In this system, a single server handles the major

part of the network’s processing system, and the
central server owns all the resources.

Features:

• Single point control

• Ease to setup and deploy
• Standardized Workflow and Procedure

Source: Khoshavi, N., Tristani, G., & Sargolzaei, A. (2021). Blockchain applications to improve
operation and security of transportation systems: A survey. Electronics, 10(5), 629. 4
 Decentralized System

A decentralized system is a type of system

architecture where there is no single central
coordinating or governing unit.

Decentralized systems usually take the form of

networked computers, and they can be distinguished
from distributed systems, where there are no end
authoritative nodes.

Features:

• No single point failure issue.

• Transparent system.
• Highly secure and immutable such as blockchain.

Source: Khoshavi, N., Tristani, G., & Sargolzaei, A. (2021). Blockchain applications to improve
operation and security of transportation systems: A survey. Electronics, 10(5), 629. 5
 Distributed System

Distributed systems fall somewhere in between

centralized and decentralized systems. They have
multiple nodes, but there is still a central
authority that manages the system.

Features:

• More Scalable than Decentralized system

• Resources sharing capability such as cloud
platforms.
• Openness in the distributed system.

Source: Khoshavi, N., Tristani, G., & Sargolzaei, A. (2021). Blockchain applications to improve
operation and security of transportation systems: A survey. Electronics, 10(5), 629. 6
General Comparison

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 Distributed Ledger Technology

DLT refers to the technology used to enable the secure

operation of a ledger that is distributed among
multiple nodes. Terms Explanation
The nodes agree on and ensure consistency of ledger
information using consensus.
Ledger: A ledger refers to a digital
record-keeping system that tracks
Types of Ledgers: the movement of value.

A. Blockchain Next Slides

Consensus: Consensus refers to a
B. Hashgraph general agreement or decision
C. Directed Acyclic Graph Not Course Part among a group of people
D. Holochain
E. Tempo(Radix)

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 Blockchain

Why we need Blockchain ?

Blockchain is one type of • It is safer than any other technology.

Distributed ledger technology that • To avoid possible legal issues, a trusted
allows to record transactions in third party must supervise the
transactions and validate the
“blocks”, and each block is transactions.
connected to the previous, forming • There’s no one central point of attack.
a chain of blocks. • Data cannot be changed or manipulated,
it’s immutable.

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 Blockchain Components

Ledger:

Ledger in accounting refers to the registry

of debit and credit transactions.

A ledger in blockchain is defined as a

chain of blocks. Each block includes 0 to n
transactions based on the block size. The
transaction initiation invokes smart
contracts. Then, the block of transactions
will be appended to the chain based on a
specific consensus algorithm.

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 Blockchain Components

Smart Contract:

Smart contracts are programs stored in blockchain whose inputs and outputs are
verifiable by everyone, at any time, in the distributed ledger.

They can also be used to adjust or enforce the terms and conditions of business
agreements automatically. Smart contract execution happens automatically after
verifying that the conditions are met.

Nodes:

Blockchain’s trust mechanism is built on the fact that a single owner does not maintain
the ledger; instead, it is maintained by many owners called ‘nodes’ or ‘peers’.

Nodes refers to any device that participates in a Blockchain network by storing a copy of
the ledger. Such device connects to the existing network of nodes, synchronizes data, and
remains in synchronization in real-time.
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 Blocks

Block contains:

Data: Data about transactions

such as creating a new asset or
transferring an asset between
nodes.

For example, in the case of

currency, the transaction data
might include the sender
signature, recipient address and
amount of transfer. In the case of
perishable assets like medicine,
transaction data can also include
the medicine’s temperature at the
time of the transaction.
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 Blocks

Block contains:

Hash: Each block's content is hashed, and that hash will be included in the
next block. If block content changes, the block hash will change, and thus the
chain will be broken.

Linking each block to the previous block by referencing its cryptographic hash
is key to the fact that a Blockchain is a chain of records that cannot be
tampered with. Once a block is added and accepted in the network, it cannot be
changed. Any required change to the data means another block should be
added to reflect the change

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 Consensus Mechanism
The mechanism used by Blockchains to maintain the distributed agreement on
each newly added block is called ‘consensus’.

There are some following consensus mechanisms:

1. Proof of Work (PoW):

• Nodes, known as miners, use computational power and compete against
each other to create a new block.
• The newly created block will be then broadcasted to all nodes.
• If all transactions within the block are valid, the block will be accepted and
the miner receives a reward in the blockchain’s native currency.

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 Consensus Mechanism

2. Proof of Stake (PoS):

• Nodes commit a cryptocurrency stake (for example, 32 ETH in Ethereum
Blockchain) to become a validator.
• Then, validators are chosen randomly to create a new block.
• PoS requires users to use reduced computational power because they don’t
need to mine blocks; instead, they only validate proposed blocks when
elected.

3. Proof of Authority (PoA):

• In PoA consensus, specific nodes have 'authority' to add or accept new
blocks. PoA validators are not staking cryptocurrencies but are elected based
on their identity and reputation.
• The criteria to accept the new block can vary depending on the configuration
of the blockchain.
• PoA eliminates the need for excessive mining; therefore, it is an energy-
efficient, performant and scalable consensus mechanism compared to PoW.
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 Consensus Mechanism

4. Practical Byzantine Fault Tolerance (PBFT):

• PBFT is a type of PoA algorithm that makes a network fault-tolerant by

allowing consensus to be obtained only if the number of faulty nodes is less
than one-third of the total nodes available in the network

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Types of Blockchain

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 Public Blockchain

• A Public blockchain network is one that any node can enroll

and engage in the essential processes of the blockchain
network.
• The self-governed, decentralized structure of a public
blockchain system is made possible by the fact that anyone
may view, publish, and verify the current activity there.
• Ethereum and Bitcoin are the two main platforms for the
public blockchain network.
• The main features of the public blockchain is permissionless,
all node members can read and write data and no central
ownership.

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 Private Blockchain

• In the private blockchain network, nodes can join only by

invitation, and before doing so, a central authority will verify
their information.
• Instead of promoting network transparency, the private
blockchain network's top aims are network data integrity and
scalability.
• The primary characteristics of the private blockchain network
are that only authorized users can write data on the
network, while invited node members can read data.
• The organization controls the network's ownership, and the
network's transaction speed is faster than that of a public
blockchain.

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 Hybrid Blockchain

• Hybrid blockchain is the integration of the permissioned and

permission less blockchain network.
• The hybrid blockchain combines the benefits of public and
private blockchain to create an integrated system, despite the
fact that each has its own pros and cons.
• The primary workflow of a hybrid blockchain is the usage of a
public blockchain network for the private blockchain in
order to verify the data.
• Compared to private blockchain networks, hybrid blockchain
manages transactions with greater transparency and offers
more decentralized access to nodes.

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 Consortium Blockchain

• A consortium blockchain is a semi-decentralized blockchain

system where nodes permit groups of nodes rather than
accepting a single node.
• Compared to permission less blockchain networks, it offers
more security. There are numerous nodes from various
organizations and no centralized authority over the network
in the consortium blockchain.
• Setting up a trust bridge between the various organizations and
identifying the rule-breaker are simple tasks.
• Although consortium blockchain are sufficient for business
solutions, there are several drawbacks, such as the difficulty of
upgrading any networked system because of individual
authorization
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 Blockchain Technology Landscape

On top of the core components,

Blockchain solutions mainly
span over three layers:

1. Networks

2. Platforms

3. Applications.

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Platforms

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 Cryptography in Blockchain

• Crypto in the term 'Cryptography' refers to 'secrets' and hence

cryptographic techniques are aimed at ensuring complete or
partial anonymity.
• The primary purpose of cryptography in the blockchain is to
safeguard against double-spending, ensure participants'
security, and prevent the influence of external authorities on
users.
• Cryptography technologies make use of mathematical codes for
storing and transmitting data values in a more secure format.

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 Cryptography in Blockchain
General Example

• Cryptography is a technique
that ensures the secure
transmission of data or
messages between the sender
and receiver.
• The transmitting information is
encrypted by the sender using a
specific key & algorithm.
• The receiver upon receiving the
same decrypts it to get the
original message.
• The entire stated process of
cryptography is executed by
using encryption keys.

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 Types of Cryptography

Symmetric Cryptography:

• In this type of Cryptography, an encrypted code/key or

cipher is used to translate given information into cipher.
• It was the first cryptography ever used and here both the
sender and receiver use the same key for encryption as
well as decryption.
• To ensure the integrity of encryption keys, the other type
of cryptography comes into play as explained further.

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 Types of Cryptography
Asymmetric Cryptography:

• Asymmetric Cryptography different keys are used between

the sender and receiver to encrypt and decrypt the
information, respectively.
• With this technique, two keys namely public and private
keys work together to transmit the information. While
sending the message, the public key is used for
encryption, and to decrypt, a private key is used to unlock
it.
• Adds a set of digital signatures with private keys, anyone
online can decrypt it using their public key.

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 Types of Cryptography
Cryptography Hashing:

• "Hashing“ in the cryptography where any plain set of text

can be turned into a cryptographic hash (a unique string
of data) by using cryptographic algorithms.
• After sending data through a cryptographic hashing, it
can't be reversed and hence it holds a distinguished
significance other than the above two cryptography
techniques.
• The hashing process can also be used to compress the
data into a small string of text and hence can help in
reducing a large chunk of data.

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 Wallets

• Wallets allow users to submit transactions on the blockchain

(i.e., trade cryptocurrencies and tokens) by signing those with
the wallet itself.

• Digital signatures, which are used to encrypt transactions, are

computational schemes divided into two parts: the algorithm for
creating the signature, which utilizes a private key to sign the
message, and an algorithm for verifying the signature, which
uses the public key.

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 Wallets

• Private keys are in the only control of the individuals and can
be thought of as a password.
• Public keys work as a public address and can be tied up to
decentralized identity and used to be identified by service
providers.

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 Wallets

• Wallets can be in the form of a browser extension, a hardware

wallet, a mobile app or a web wallet.

• Wallets can be of two types:

a. Custodial, where a third party hold the private keys.

b. Non-custodial, where users have total control of the

assets in their wallets and their private keys

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 List of Wallets

• Coinbase Wallet: Coinbase Wallet is a self-custody crypto

wallet that allows users to have complete control over their
cryptocurrencies, keys, and data. It provides a secure and
convenient way to store and manage various cryptocurrencies,
including Bitcoin (BTC), Ethereum (ETH), Solana (SOL),
Avalanche (AVAX), Polygon (MATIC), BNB Chain (BNB), and
more.
• MetaMask: MetaMask is a popular cryptocurrency wallet that is
specifically designed for tokens on the Ethereum blockchain. It
is available as a browser extension and a mobile application,
allowing users to buy, sell, and swap coins, as well as access
decentralized applications (dapps)

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 List of Wallets

• Coinbase Wallet: Coinbase Wallet is a self-custody crypto

wallet that allows users to have complete control over their
cryptocurrencies, keys, and data. It provides a secure and
convenient way to store and manage various cryptocurrencies,
including Bitcoin (BTC), Ethereum (ETH), Solana (SOL),
Avalanche (AVAX), Polygon (MATIC), BNB Chain (BNB), and
more.
• MetaMask: MetaMask is a popular cryptocurrency wallet that is
specifically designed for tokens on the Ethereum blockchain. It
is available as a browser extension and a mobile application,
allowing users to buy, sell, and swap coins, as well as access
decentralized applications (dapps)

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 List of Wallets

• Zengo Wallet: Zengo Wallet is a non-custodial mobile

cryptocurrency wallet that prioritizes security and ease of use.

• Coinomi: Coinomi Wallet is a mobile and desktop multi-chain

wallet that provides native support for more than 125
blockchains and thousands of tokens

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Blockchain Trilemma

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 Blockchain Trilemma

• Blockchain scalability is mainly measured by the number of

transactions per second (TPS).
• The scalability of Layer 1 Blockchains is challenging.
• Ethereum, as an example of Layer 1 Blockchains, processes 15
TPS on average, whereas VISA processes 1700 TPS.
• The scalability problem introduced the Blockchain Trilemma,
which means one of the three Blockchain features (security,
decentralization, and scalability) must be sacrificed in order to
increase the other two.

Source: https://hrcak.srce.hr/253034
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Bitcoin VS Ethereum

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