Introduction to

Blockchain Technology
 Bitcoin is so far the best known blockchain
application, but the technology will soon give rise to
countless others. If, at the moment, blockchain
technology records financial transactions made with
digital currencies such as Bitcoin, it will in the future
serve as a registrar for things as different as birth and
death certificates, titles of ownership, marriage
licenses, educational degrees, insurance claims,
medical procedures and votes—essentially any kind of
transaction that can be expressed in code.
- Klaus Schwab
Distributed Ledger Technology and Blockchain
Blind Signature Scheme
1983

1989
To create a certificate for a document, the timestamp server
includes a hash pointer to the previous document’s certificate,
the current time, and signs these three data elements together.
Surety, LLC is an information assurance software and services company founded in
1994 by prominent Bellcore scientists, who pioneered the concept of trusted, digital
timestamping. Surety continually builds on our founders’ legacy by improving and
expanding our suite of independent, cryptographical time-stamp software and services.
A later paper by Haber and Stornetta proposed an efficiency improvement:
Instead of linking documents individually, we can collect them into blocks and
link blocks together in a chain.
Within each block, the documents would again be linked together, but in a tree
structure instead of linearly. [Merkel Tree]
This decreases the amount of checking needed to verify that a particular
document appears at a particular point in the history of the system.
 Adam Back

HashCash – Proof of Work

(1997)
  Wei Dai proposed b-money in
1998.
 In b-money, anyone can create
money using a hashcash-like
system.
 There is a peer-to-peer network,
similar to Bitcoin.
 Each node maintains a ledger, but
it’s not a global ledger like in the
Bitcoin Blockchain.
Wei Dai
 Each node has its own ledger of
what it thinks everyone’s balance
is.
  In Szabo’s BitGold structure, a
participant would dedicate
computer power to solving
cryptographic puzzles.
 Each solution would become part
of the next challenge, creating a
growing chain of new property.
 This aspect of the system
provided a way for the network to
verify and time-stamp new coins,
because unless a majority of the
Nick Szabo parties agreed to accept new
Smart Contract solutions, they couldn’t start on
BitGold (1998) the next puzzle.
 October 31, 2008 18:15:05 UTC on January 3, 2009 May 22, 2010

2011 2012 2013 November 8, 2016 2017

New Cryptocurrencies
Cryptocurrency Demonetization Bitcoin Crash
Litecoin, Namecoin Bitcoin enters India
Exchanges in India and then Rise
and Swiftcoin

In 2013, the vintage era pizza shop known as Kolonial (Worli, Mumbai) became the first restaurant service in India to accept payments in
Bitcoin
 P2P Network
and
Cryptography Transactions
and Hashing

Consensus
Algorithm

Blockchain Technology
 Definition by NIST
Blockchains are distributed digital ledgers of
cryptographically signed transactions that are grouped into
blocks. Each block is cryptographically linked to the
previous one (making it tamper evident) after validation
and undergoing a consensus decision. As new blocks are
added, older blocks become more difficult to modify
(creating tamper resistance). New blocks are replicated
across copies of the ledger within the network, and any
conflicts are resolved automatically using established rules.
 Cryptographic Hash Function
SHA 256

 A cryptographic hash function is a special type of function which takes input of any size
and converts it to a small and fixed size output, called hash.
Cryptographic Properties:
 Preimage Resistant (One way): Infeasible to determine x from Hash(x).
 Collision Resistant: Infeasible to find and x and y where Hash(x) = Hash(y).
 Avalanche Effect: Change x slightly and Hash(x) changes significantly.
 Puzzle Friendliness: Knowing Hash(x) and part of x it is still very hard to find rest of
 Block
Block

Magic Number - Blockchain Identifier (4 Bytes)

 The main purpose of blocks is to record
transactions. Block Size (4 Bytes)

 Use of cryptographic hash functions Block Header (80 Bytes)

ensures that the blocks are valid and
Version (4 Bytes)
tamper-proof. (Immutability)
 A block’s validity is defined by a Previous Block Hash (32 Bytes)
blockchain protocol or consensus Hash of Merkel Root (32 Bytes)
protocol/mechanism.
Timestamp (4 Bytes)
 In a blockchain, blocks are connected
linearly like a chain using cryptographic Difficulty (4 Bytes)
hash functions, where contents of each Nonce (4 Bytes)
block in the chain contains the hash value
of its previous block, thus forming a chain Transaction Counter (1-9 Bytes)
of blocks connected through hash value.
Anatomy of a Block
 Types of Blockchain Technology
 Based on the ability to authenticate transactions, a Blockchain Technology
can be classified as permissioned (prior approval to participate necessary) or
permissionless (anyone can participate).
 A Permissionless Blockchain systems are highly transparent, as everyone can
see all the transaction on the ledger. However, they are time consuming to
operate, and not fit for solutions which require privacy of transactions.
 In a Permissioned Blockchain platforms, the permission to validate
transaction are given to select nodes. This is done to fulfil the requirements
of privacy. Additionally, such Blockchain system is designed so that a node
can see only its own transactions and not of others. This facilitates an
important requirement of privacy of transaction for business and financial
agents, including banks.
Application of Blockchain
 Ethereum
 Ethereum is a platform co-developed by Vitalik Buterin and Gavin Wood through
their Ethereum White Paper titled “A Next Generation Smart Contract &
Decentralized Application Platform” in 2013 and then implementation of the same in
2015.
 Ethereum is a next-generation distributed cryptographic ledger that is designed to
allow users to encode advanced transaction types, smart contracts and decentralized
applications into the blockchain.
 It is the world’s first programmable blockchain.
 Ethereum is a blockchain with a built-in Turing-complete programming language,
allowing anyone to write smart contracts and decentralized applications (DApps)
where they can create their own arbitrary rules for ownership, transaction formats and
 Why Ethereum?
 Bitcoin Blockchain network was able to develop a system, which was
anonymous, trustless and decentralised.
 However, it did not provide sufficiently powerful Turing-complete
scripting language.
 Therefore, Ethereum was empowered with sufficiently powerful
Turing-complete scripting language to facilitate advanced applications
such as domain and identity registration, user-issued currencies, smart
property, smart contracts, and decentralized exchange.
 Therefore, Ethereum is based on the philosophy of simplicity,
universality, modularity, non-discrimination and agility.
 July 22 – 03:26:13 PM UTC 01:20:40 PM UTC
November 27, 2013 April 01, 2014
September 02, 2014 July 30, 2015 July 20, 2016

The Introductory The Technical DAO Fork in

Initial Coin Offer Genesis Block
Ethereum White Ethereum Yellow response to
for Ether of Ethereum
Paper by Paper by DAO Attack (2016)
Vitalik Buterin Dr. Gavin Wood
 Smart Contracts
 Smart contracts are “cryptographic boxes” that contain value and only unlock it if
certain conditions are met, can also be built on top of Ethereum.
 Smart Contract is a software code executed on the blockchain, the terminology use of
the word ‘contract’ indicates that the code enforces some form of governance or rule.
 Smart Contract is an automated agent and is the main building block of Ethereum.
 A Smart Contract is like a computer program that lives inside the Ethereum network and
has its own Ethereum address, ether balance, memory and code.
 Every time someone send a transaction to a contract, the contract executes its code,
perhaps modifying its internal state, which can store data, send transactions and even
interact with other contracts.
 One can use contracts to issue currencies, construct one’s own escrow contracts or
financial derivatives, and even create on-blockchain data stores.
 Decentralised Applications (DApps)
 A Decentralized Application (DApp) is an application built on a decentralized network that
combines a smart contract and a frontend user interface.
 A DApp is a web application that has its backend code running on a open and decentralized peer-to-
peer network.
 A DApp can have frontend code and user interfaces written in any language (just like an app) that
can make calls to its backend code and processes.
 DApps may include decentralized storage, message protocol, etc.
 Characteristics of DApps are:
 Decentralized means they are independent, and no one can control them as a group.
 Deterministic i.e., they perform the same function irrespective of the environment they are executed.
 Turing complete, which means given the required resources, the dapp can perform any action.
 Isolated, which means they are executed in a virtual environment known as Ethereum Virtual Machine so that if
the smart contract happens to have a bug, it won’t hamper the normal functioning of the blockchain network.
Decentralised Autonomous Organisations (DAO)
 A company or other organization that operates without hierarchical
management.
 Decentralised Autonomous Organisations are like an internet-native
business that is collectively owned and managed by its members. They
have built-in treasuries that no one has the authority to access without
the approval of the group. Decisions are governed by proposals and
voting to ensure everyone in the organisation has a voice.
 Every activity is out in the open and the rules around spending are
baked into the Decentralised Autonomous Organisations via its code.
 DAO versus Traditional Organisations
Decentralised Autonomous Organisations Traditional Organisation

Usually flat, and fully democratized. Usually hierarchical.

Voting required by members for any changes to be Depending on structure, changes can be demanded
implemented. from a sole party, or voting may be offered.

Votes tallied, and outcome implemented If voting allowed, votes are tallied internally, and
automatically without trusted intermediary. outcome of voting must be handled manually.

Services offered are handled automatically in a

Requires human handling, or centrally controlled
decentralized manner (for example distribution of
automation, prone to manipulation.
philanthropic funds).

Activity is typically private, and limited to the

All activity is transparent and fully public.
public.
 DAO Membership
 There are different models for DAO membership. Membership can determine
how voting works and other key parts of the DAO.
 Token-based membership: Usually fully permissionless, depending on the token used.
Mostly these governance tokens can be traded for permissionlessly on a decentralized
exchange. Others must be earned through providing liquidity or some other consensus
mechanism. Either way, simply holding the token grants access to voting.
 Share-based membership: Share-based DAOs are more permissioned, but still quite
open. Any prospective members can submit a proposal to join the DAO, usually
offering tribute of some value in the form of tokens or work. Shares represent direct
voting power and ownership. Members can exit at anytime with their proportionate
share of the treasury.
 How do DAOs work?
• The backbone of a DAO is its smart contract. The contract defines the rules of
the organisation and holds the group’s treasury. Once the contract is live on
Ethereum, no one can change the rules except by a vote. If anyone tries to do
something that’s not covered by the rules and logic in the code, it will fail.
And because the treasury is defined by the smart contract too that means no
one can spend the money without the group’s approval. This means that
DAOs do not need a central authority (like CEO, etc.). Instead the group
makes decisions collectively and payments are authorised automatically when
votes pass.
• Smart contracts are tamper-proof once they go live on Ethereum. One cannot
edit the code (the DAOs rules) without majority approval. Any change is
 Thank You
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