Blockchain

The Future
History of Blockchain
Pre-Bitcoin Era

● 1991 : A cryptographically secured chain of blocks is described for the first time by Stuart
Haber and W Scott Stornetta

● 1998 : Computer scientist Nick Szabo works on ‘bit gold’, a decentralised digital currency

● 2000 : Stefan Konst publishes his theory of cryptographic secured chains, plus ideas for
implementation
Evolution of Blockchain: Phase 1 - Transactions

2008-2013: Blockchain 1.0: Bitcoin Emergence

● Most people believe that Bitcoin and Blockchain are one and the same thing. However, that is
not the case, as one is the underlying technology that powers most applications of which one
of them is cryptocurrencies.
● Bitcoin came into being in 2008 as the first application of Blockchain technology. Satoshi
Nakamoto in his whitepaper detailed it as an electronic peer-to-peer system. Nakamoto
formed the genesis block, from which other blocks were mined,interconnected resulting in one
of the largest chains of blocks carrying different pieces of information and transactions.
Evolution of Blockchain: Phase 2 - Contracts

2013-2015: Blockchain 2.0: Ethereum Development

● Vitalik Buterin is among a growing list of developers who felt Bitcoin had not yet reached there,
when it came to leveraging the full capabilities of blockchain technology, as one of the first
contributors to the Bitcoin codebase.
● Concerned by Bitcoin’s limitations, Buterin started working on what he felt would be a
malleable blockchain that can perform various functions in addition to being a peer-to-peer
network.
● Ethereum was born out as a new public blockchain in 2013 with added functionalities
compared to Bitcoin, a development that has turned out to be a pivotal moment in Blockchain
history.
● Do we really need to execute contracts at each node- State Machine replication
Proof Of Work (PoW)

● The idea came from Dwork & Naor in 1992 to combat junk emails
● Some work to be done to send a valid email. The attacker would be discouraged to send
junk emails.

● Hashcash (Hashcash stamp is attached to the message header)

● Based on Hashcash PoW system, the miners need to give a PoW that they have done
some work before proposing a new block.

● So the attacker will be discouraged to propose anew block/make changes to the existing
blocks
PoW Contd..
Pow contd..

PoW PoS

Do some work to mine a new block Acquire sufficient stake to mine a

new block

Power hungry Power Effiecient

Consumes physical resources like Consumes no external resources

CPU power & time but participate in transactions
Evolution of Blockchain: Phase 3 - Applications

2018: Blockchain 3.0: the Future

● Blockchain History and evolution does not stop with Ethereum and Bitcoin.
● In recent years, a number of projects have cropped up all leveraging blockchain technology
capabilities.
● Large enterprises are investing big in hiring professionals as they seek to gain a head start on
the use of technology. Companies like Microsoft and Microsoft appear to have taken the lead
when it comes to exploring blockchain technology applications resulting in what has come to
be known as private, hybrid, and federated blockchains.
Types of Block chain

● Permission-less Block chain

● Hybrid Blockchain
● Permissioned Block chain
Crash Network Faults

● PAXOS-
Make a Proposal , Accept the value, Handling Failures.
● RAFT-
Nodes collectively selects a leader , others become followers
The Leader is responsible for state transition log replication across the followers.
● Byzantine Fault Tolerance (BFT)-
The valid nodes of a network can be guaranteed to agree on the timing and order of
set of transactions.
● Practical Byzantine Fault Tolerance (PBFT)-
It works in Asynchronous Environments.
2015 : Hyperledger

● In 2015, the Linux Foundation unveiled an Umbrella project of open-source blockchain.

They went on to call it Hyperledger, which until to date acts as collaborative
development of distributed ledgers.

● Hyperledger focuses on encouraging the use of blockchain technology to improve the

performance and reliability of current systems to support global business transactions.

● This enables developing applications using Blockchain on a large scale.

Applications Interaction with the ledger
Hyperledger Fabric version 1 Architecture
Privacy in Fabric

● Transaction Data privacy-Transaction activity of an entity.

● State Data privacy- Data that the smart contract alters.

● Smart contract privacy-Logic of the chain code

● User privacy- Anonymity & unlinkability.

 COMMON SECURITY ISSUES

1. 51% Attacks
Computing power is quite crucial for gaining majority control over the Hashrate of a blockchain
through malicious entities. Therefore, compromised blockchains could result in the reversal of
transactions alongside double-spending. In 2018, three renowned cryptocurrency platforms
experienced issues from 51% attacks. The three platforms were Ethereum Classic, ZenCash, and
Verge. Furthermore, enterprises lost around $20 million dollar annually in recent times due to 51%
attacks.

If you have to avoid blockchain security issues due to 51% attacks, then you have to be careful about
certain measures. For example, you can improve monitoring of mining pools and ensure a higher
hashrate alongside refraining from the use of Proof-of-Work (PoW) consensus mechanisms.
51% attack
2. Blockchain Endpoint Vulnerabilities

Another notable instance of security risks in blockchain security explained properly refers to the
vulnerability of blockchain endpoints. The security of the blockchain is the talk of the town. However,
no one cares to address the concerns in the security of endpoints for blockchain transactions. For
example, Bitcoin investment or trading could result in a large amount of Bitcoin stored in a virtual
savings account.

The actual blocks are safe against hackers. On the other hand, the wallet accounts are not safe.
Furthermore, many third-party vendors are also important for facilitating blockchain transactions.
Some of these third-party vendors include blockchain payment platforms, payment processors, and
smart contracts. Such types of third-party blockchain vendors can increase vulnerability to hacking
due to weaker security in apps and websites.
3. Routing Attacks

The next prominent concern for security and privacy issues of blockchain technology refers to routing
attacks. Blockchain networks and applications depend on the massive volume of data transfer in real-
time. Now, hackers could easily intercept data during the course of its transmission to internet
service providers. The dangerous aspect of routing attacks in blockchain security lies in their
anonymity.

The blockchain participants could not find out the threat of routing attacks easily as everything
appears normal. Routing attacks are generally employed for leaking out confidential data or
extracting monetary benefits without alarming network participants. Therefore, it is quite clear that
routing attacks can be detrimental as they could impose considerable damage before detection.
TRANSACTIONS IN BLOCKCHAIN

A consensus mechanism and a reward system are required to maintain the integrity and
functionality of a blockchain. In the Bitcoin blockchain, consensus is achieved by ‘mining’, and
the reward system is a protocol awarding a miner some amount of Bitcoin upon successfully
mining a block. Mining is undertaken by powerful computers solving complex mathematical
puzzles.

Once a transaction verified, and accepted as true by the entire network, miners start working
on the next block.
 History of Ethereum

# Initially described

-by Vitalik Buterin in late 2013(white paper)

-Russian -canadian programmer
-Co-funded Ethereum when he was 19 years old

# Formally described

-by Gavin Wood in early 2014 (yellow paper)

# Launched in july 2015

-after a successful crowdfunding campaign(21

mio USD in Bitcoin within a month)
Timeline of Ethereum
 Ethereum

The P2P Network of computer is the hardware running the

Ethereum protocol.The Ethereum protocol is the operating system
on which you can build any decentralized app and run it on the P2P
Network ,just as you run an app on the phone ,but with a few
additional properties.

● Built-in Programming language

● Anyone can create any application with any rules by defining
it as a contract
● Two types of accounts:

>User account : controlled by private key

>Contracts : controlled by code

Features of Ethereum
 Ethereum Cryptocurrency

→ Ether(ETH) is a cryptocurrency that runs on Ethereum network

→ It is used to pay for the computational resources and transaction fees on the Ethereum network

→ Like Bitcoin , Ether is also a peer to peer currency

→ Apart from paying for transactions ,Ether is also used to buy gas, which is used to pay for computation
(Ether=T x Fees = Gas Limit * Gas Price)

→ Ether can be utilized for building decentralized applications, smart contract and making standard peer
to peer payments
 Smart Contract

→ A Smart Contract is a computer program that facilitates the exchange of

money,shares,property etc..

→ It contains the terms and conditions of a mutually agreed contract between the peers.

→ For the verification process,smart contract is carried out among anonymous parties of the
network without the need of a central authority.

→ It provides the transfer of any asset or currency in a transparent and trustworthy manner.
 Traditional system of contract
Vs
Smart Contract

Traditional system of contract Smart Contract

Agreement coded
Agreement in a program

Result is verified by
Third party for execution users of Ethereum
blockchain network

Once a contract is
Data tampering is possible executed ,it cannot
be tampered
Smart Contract Programming

● Solidity ( JavaScript based )

Solidity is a language similar to JavaScript which allows you to develop contracts and
compile to EVM bytecode.It is currently the flagship language of Ethereum and the most
popular.

● Serpent ( Python based )

Serpent is language similar to Python which can be used to develop contracts and
compile to EVM bytecode.It is intended to be maximally clean and simple ,combing many
of the efficiency benefits of a low-level language with ease-of-use in programming
style,and at the same time adding special domain-specific features for contract
programming .Serpent is compiled using LLL.
Ethereum Architecture