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Blockchain
and DLT
(BLCH)
ITC801

Subject In-charge
Dr. Joanne Gomes
Professor Dept. of Information Technology SFIT
Room No. 316
email: [email protected]
Module 1
Lecture 3
Introduction To Blockchain Technology
 Rev: Blockchain Solution to achieve BFT
• The protocol with fault-tolerant measures helps in making the best decisions in the face of
uncertainty.
• In Blockchain, most transactions occur between strangers who do not know or trust one
another. A blockchain creates a layer that can be trusted without needing to trust every
individual. This is accomplished by a network of nodes coming together to agree on the truth
before it is recorded.
• Once one node has recorded it, a copy is sent to all other nodes in the network, making the
information redundant.
• The PoW consensus algorithm is designed to achieve this goal. Bad actors will still try to
game the system because the information isn't always accurate.
• Since the system was designed to be utilized by the general public, fault-tolerant
mechanisms and security are in place in a blockchain.
• In this scenario, cryptography was required to ensure that the messages could not be
altered. The system provides key pairs for digitally signing a communication to verify identity
as proof that it comes from the persons purported to have sent it.
• Consistency is sacrificed in Blockchain due to the priority given to Availability and Partition
Tolerance. In this case, Partition tolerance (P)
Blockchain Solution to achieve BFT
 Topics
• Consensus Mechanism and its Type Cryptographic primitives
 Cryptographic Hash
• Cryptographically secured Hash Functions: Used to connect
blocks in a chain in tamper-proof way
• Arbitrarily sized string input message M and fixed size output
called hash or message digest (256 bits in Blockchain)
Properties of cryptographic hash:
• Hiding:
– Original message is hidden
• Deterministic:
– Identical hash output for identical string input
• Collision Free:
– One way, Given H(x) cannot find x, so if H(x) = H(y) then x=y.
– For two different messages you get two different digests
• Puzzle Friendly:
– Given X and Y Find out Y = H(X || k)
http://www.blockchain-basics.com/HashFunctions.html
http://www.blockchain-basics.com/HashPuzzle.html
SHA 256 Algorithm
 Patterns of Hashing Data
• Independent hashing • Sequential hashing

• Repeated hashing
• Hierarchical hashing

• Combined hashing
Hash Pointer
 Consensus Mechanisms
• Consensus mechanisms are the protocols,
algorithms, or other computer systems that allow
cryptocurrencies to work, to achieve agreement,
trust, and security across a decentralized
computer network.
• They are systems of agreement that determine
the validity of transactions (agree on the
legitimacy of transactions) and governance of the
blockchain.
• It influences how transactions are verified, how
much energy is used, network fees, transaction
speed, and other details for the currency and
network applications.
• The computers that validate new transactions on
most blockchains are called miners.

https://crypto.com/university/consensus-mechanisms-in-blockchain
 Proof of Work
• Proof of work is a leader-based consensus mechanism, also known as mining where the
participating nodes are called miners. It was developed by Satoshi Nakamoto
• In a proof-of-work protocol, these miners compete against each other to solve some complex
math puzzle in order to validate the next block of transactions. The winning miner earns a
lucrative mining fee, paid for by those who send transactions on the network.
• Miners solve the mathematical problem or task, form a new block, and confirm transactions.
• This task becomes more difficult each time as the number of users grows, and the load on
the network increases.
• The problem is nothing more than guessing a nonce, a long string of numbers with millions
or billions of trial and error. In order words, brute-forcing the result.
• A miner must guess a nonce, add it to the hash of the current header, rehash the value, and
compare the result to the target hash with the required number of leading zeros.
 Proof of Work Algorithm

https://www.researchgate.net/figure/a-Flow-chart-of-Hash-algorithm-
b-Proof-of-Work-POW-consensus-algorithm_fig2_360101186
 Pros and Cons of POW
• Pros:
– Scalability of the network (in terms of node count)
– Security increases with node count, i.e. bigger the mining community, the more secure it is
– Miners receive an incentive in exchange for their computing power contribution to the network
– Very secure in most cases
• Cons:
– Vulnerable to 51% attacks (in small proof of work blockchains)
– Mining difficulty usually gets harder, and mining hardware get obsolete quickly
– Mining is expensive and usually requires specialized hardware to be profitable
– It requires huge quantities of electricity
– Proof of work blockchains generally have low throughput (studies show that proof of work
blockchains can achieve up to 60 transactions per second without compromising security)
– It takes time to have a transaction verified in the blockchain depending on the blockchain protocol
being used — this is why it is recommended to wait 10 to 20 minutes until a transaction is
verified/committed in the Bitcoin network (1 or 2 blocks) or 5 minutes in the Ethereum blockchain.
 Proof of Stake POS
• As the name suggests, this popular method of consensus revolves around a process known
as staking.
• In a proof of stake (PoS) system, miners are required to pledge a ‘stake’ of digital currency
for a chance to be randomly chosen as a validator.
• In PoS system minor simply earns a transaction fee and not reward.
• Pros
– PoS is seen as a more sustainable and environmentally-friendly alternative to PoW, and one that’s
more secure against 51% attack.
– Low power consumption, does not require sophisticated hardware to facilitate the mining process,
cost effective.
– Mining is fast and efficient. Used in Cardano (ADA), Solana (SOL), and Tezos (XTC).
• Cons:
– Any bad actor who can procure a very large amount of tokens can suddenly overpower all the other
validators and take control of the network.
– As the system favours entities with a higher number of tokens, PoS has drawn criticism for its
potential to lead to centralisation.
POS
 Proof of Activity
• Proof of activity (PoA) is a hybrid of the PoW and PoS consensus mechanisms. It is
used by the Decred (DCR) and Espers (ESP) blockchain projects.
• In PoA systems, the mining process begins like PoW, with miners competing to
solve an elaborate mathematical problem using immense computing power.
• Once the block is mined, however, the system switches to resemble PoS, with the
successfully generated block header being broadcast to the PoA network.
• A group of validators are then randomly selected based on their stake, to sign off on
the hash, validating the new block.
• Once every chosen validator has signed the block, it is added to the blockchain
network and ready to record transactions. The block rewards are then shared
among the miner and validators.
• Its disadvantage is its energy-intensive mining phase and inherent partiality towards
validators holding a greater number of coins.
 Other Consensus Mechanisms
• Delegated POS:
– Here participants stake their coin and vote for a certain number of delegates such that
the more they invest, the more weightage they receive.
• Proof of Authority:
– It is a modified version of Proof of Stake in which the identities of validators in the
network are at stake. To verify the validator’s identity, personal identification and their
official documentation is used. Validators put their reputation on the network.
• Proof of Burn (PoB)
– This consensus model works on the principle of letting miners ‘burn’ or ‘ruin’ the virtual
cryptocurrency tokens, which further provides them with a privilege to write blocks in
proportion to the coins. The more coins they burn, the more are the chances of picking
the new block for every coin they get.
 Hands-on
• Solve the mathematical Puzzle in POW
• http://www.blockchain-basics.com/HashFunctions.html
Thank You