Blockchain - Things you need to know

1. CHAPTER II: BLOCKCHAIN BASICS BY. ABHISHEK NIRMAL JAIN FCA, ISA, FAFD, CBE

2. Lets Recapitulate • Blockchain is a cryptography based software technology which functions as a distributed ledger that is heavily secured due to its attributes of peer to peer verification and authentication. • Blockchain is a decentralized computation and information sharing platform which enables multiple authoritative domains which do not trust each other to cooperate, coordinate and collaborate in a rational decision making process. • The Public Blockchain system’s task is to ensure that all this individual copies are consistent with each other, that the local copies every node has are identical, and are updated based on the global information.

3. Features Decentr- alised Transpa- rency Security Anonym- ity Immuta- bility Trust Building Irrevers- ible

4. PotentialBenefits

5. Working of Cryptocurrency A Verified Transaction can involve Crypto- currency, Contracts, Records or any other Information Validation The Network Nodes Validates the Transactions and the User Status using known Algorithms Some one request the Transaction The requested transaction is broadcasted to a P2P network nodes Once verified, the transaction is combined with other transactions, to create a new block of data in the ledger. The new block is then added to the existing blockchain, in a way that is permanent and unalterable Transaction is Complete

6. Public Ledgers • The local information is a public ledger. It is something like everyone possesses his or her own copy of data. • Public ledger work like a data base, Public Ledger contains the historical information which is available to everyone and can be utilized for future computation. • The ledger which is available in an environment to everyone containing the information of all the transactions. • The parties in the network by looking into their local public ledger will be able to understand that the particular transaction is valid or not valid.

7. Much more than public ledger • Blockchain works like a public ledger however requires ensuring of different aspects such as protocol for commitment, Consensus, Security and privacy & authenticity. Consensus / Validity Protocol for commitment Privacy and Authenticity Security

8. Network Architecture CENTRALISED NETWORK DECENTRALISED NETWORK DISTRIBUTED NETWORK

9. Continue…. • Centralized Architecture Network: The Complete reliance for the information is on the Single point/ Node. The entire information get lost or denied if the main node collapses • Decentralized Architecture Network: The Reliance for the Information is on multiple points, which are again connected to their Individual nodes, these points acts as Mediators for individual nodes. • Distributed Architecture Network: In a complete distributed architecture you have all the nodes participating in the information sharing process where nodes coordinate with each other. • Conclusion: Blockchain is a platform which helps you to support this kind of decentralized platform or a distributed platform where you can share the information among yourselves in a very custody manner.

10. Hashing - ####### • Hash function is a function that map any sized data to a fixed size. • One advantage of this hash function is one way function, that means, for given a x and n, H(x) can be computed. But if H(x) is given then the corresponding value of x cannot be uniquely identified. • It can be said blockchain is nothing, but data structures which are built upon the concept of hash function.

11. Conti### • This hash function concept is used widely in cryptographic context and this is called as cryptographically secured hash function. The properties of this cryptographically secured hash function are 1. Function is one way: that means, given a x, you can compute H(x), but given H(x) you cannot compute x with any deterministic algorithm. 2. For any two differentx1 and x2, the H(x)1 and H(x)2 will be different. • The cryptographically secured hash function have an important property which is called avalanche effect. The avalanche property of this cryptographically secured hash function - given an input whenever computing the digest, if you make little change in the input you will see significant change in the digest. • Link for Demo: http://www.sha1-online.com/

12. Harber and Stornetta • The first use of this concept of cryptographically secured chain or blocks it came in 1991 in a paper by Harber and Stornetta. • What they did? They have taken parameters like the initial number in order the people have accessed the document, it started from 0 1 2 3, then corresponding change value constructed. • This particular architecture looks like something similar to blockchain, where you have multiple blocks of data and these blocks of data are connected by hash value. • This was the first use of this concept of the chain of blocks which was a earlier version blockchain in securing this digital document.

13. Merkle tree • Merkle Tree is widely used and is also the foundation for blockchain concept. Lets understand what is a Merkle tree? Merkle tree is a tree structure, where the leaf nodes will contain the hash of the document and every individual node and intermediate node will contain the hash of the combination of the Childs.

14. A Chain of Blocks The Longest Chain Rule ensures that network will recognise the “chain with most work” as the main chain. The chain with the most work is typically the longest of the Chain.

15. Working of Bitcoins • Satoshi Nakamoto through his Bitcoin paper “digital currency or crypto currency,” which is completely Decentralised where no central authority (bank or a government) will have control over the currency. S S S S H H H A H A S S S S H H H A A H

16. Continue…. WalletThe Wallet transactions, sign using Senders Private Key, and broadcasts it to the Network NetworkThe network based on existing Blockchain and propagate the transactions to the miners MinersThe miners the next block to be mined within the time duration as per the mining procedure UpdationOnce the block is included in the existing blockchain in the network. constructs the nodes validates transactions adds the transactions to Mining is done and the harsh is obtained the

17. Building Blocks

18. Continue….

19. Blockchain 2.0 • The concept of blockchain gradually applied to multiple other sectors like Healthcare industry, Banking and Finance, Government, Supply chain and many more, it is some times termed as blockchain 2.0. • Satoshi Nakamoto in 2010 envisioned that "the blockchain design supports a tremendous variety of possible transaction types. Escrow transactions, bonded contracts, third party arbitration, multiparty signatures, etc. • Blockchain 2.0 expands the scope of the technology to enable the decentralisation of markets more generally, and the transaction involving variety of assets by providing registers for certificates and rights and obligations. • As blockchain 2.0 is code the new application is said to be running on a new set of protocols ("blockchain 2.0 protocol"). Blockchain 2.0 applications would be akin to browsers, social networks and file sharing services

20. Continue…. • The main idea behind Ethereum was to use blockchain in applications which were not limited to cryptocurrency, though it started with Crypto. • Architecture of Ethereum is more developer-friendly and allows more use-cases and applications. • Few of the applications made with the (https:// www.dapp.com/) Ethereum Platform Dapps

21. Lets have your

22. That’s all

23. You can Connect with us through