Experiment No : 8

Aim: Study of emerging platforms, tools, and issues in Blockchain.

Theory:
1. Explain Blockchain Technology

Blockchain is a system of recording information in a way that makes it difficult or impossible to

change, hack, or cheat the system. A blockchain is essentially a digital ledger of transactions
that is duplicated and distributed across the entire network of computer systems on the
blockchain. Each block in the chain contains a number of transactions, and every time a new
transaction occurs on the blockchain, a record of that transaction is added to every participant's
ledger. The decentralized database managed by multiple participants is known as Distributed
Ledger Technology (DLT). Blockchain is a type of DLT in which transactions are recorded with
an immutable cryptographic signature called a hash. This means if one block in one chain was
changed, it would be immediately apparent it had been tampered with. If hackers wanted to
corrupt a blockchain system, they would have to change every block in the chain, across all of
the distributed versions of the chain. Blockchains such as Bitcoin and Ethereum are constantly
and continually growing as blocks are being added to the chain, which significantly adds to the
security of the ledger.

2. Types of blockchain and platforms

The Different types of blockchain are as follows -

⚫ Ethereum -Ethereum is one of the oldest and most established blockchain platforms. It
provides a truly decentralized blockchain that is comparable to the Bitcoin blockchain network.
Manders said its key strength is that it enables true decentralization with support for smart
contracts. Its key weaknesses include slow processing times and higher transaction processing
costs compared to other platforms. Besides its role as a blockchain platform that underpins
enterprise applications, it has its own cryptocurrency called ether. IBM Blockchain - IBM
Blockchain is a private, decentralized blockchain network that has been the most successful
with enterprise clients who are less risk-averse, Manders said. He sees the biggest
opportunities in using it to link into enterprise cloud and legacy technologies more seamlessly
than is possible in other decentralized networks.

⚫Hyperledger Fabric - Hyperledger Fabric is a set of tools that help create blockchain
applications. Championed by The Linux Foundation, it was built from the ground up with
enterprise distributed ledger uses in mind. It has a rich ecosystem of components that can be
plugged into a modular architecture. It works well in closed blockchain deployments, which can
improve security and speed. It also supports an open smart contract model that can support
various data models, such as account and unspent transaction output, or UTXO models.

⚫ Hyperledger Sawtooth - Another open source blockchain initiative hosted by Hyperledger and
The Linux Foundation, Hyperledger Sawtooth uses a novel consensus mechanism called proof
of elapsed time that can integrate with hardware-based security technologies to enable "trusted
execution environments" of program code to run in secure enclaves, which are protected areas
of computer memory.

•R3 Corda There is some debate whether R3 Corda is technically a blockchain or an alternative
type of distributed ledger. It uses a novel consensus mechanism in which transactions are
cryptographically linked but does not periodically batch multiple transactions into a block. One
of the key benefits of this approach is that all transactions are processed in real time, which can
improve performance compared to other types of blockchains.

3. Mining and Consensus mechanism

•Mining - A peer-to-peer computer process, Blockchain mining is used to secure and verify
bitcoin transactions. Mining involves Blockchain miners who add bitcoin transaction data to
Bitcoin's global public ledger of past transactions. In the ledgers, blocks are secured by
Blockchain miners and are connected to each other forming a chain.

•Consensus Mechanism - Every cryptocurrency blockchain operates using a consensus

mechanism. It is a system that users of a blockchain network follow to agree on the legitimacy
of transactions. This system ensures that all legitimate transactions are recorded on the
blockchain and that each copy of the blockchain contains all valid transactions. The consensus
mechanism is extremely important to the blockchain network. 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. In a proof-of-work protocol, these miners compete against each
other 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. The consensus mechanism ensures all
miners agree on the next block of transactions and distributes the information in each new
block to all other miners. Anyone can download a copy of the blockchain to their device as a
node. Every copy of the ledger matches exactly. The consensus mechanism ensures the
continued agreement on which wallet owns which assets.

4. Coin and Tokens

•Cryptocurrencies -The "crypto" in cryptocurrencies refers to complicated cryptography that

allows for creating and processing digital currencies and their transactions across
decentralized systems. Alongside this important "crypto" feature is a common commitment to
decentralization; cryptocurrencies are typically developed as code by teams who build in
mechanisms for issuance (often, although not always, through a process called mining) and
other controls. Cryptocurrencies are intended for payments, transmitting value (akin to digital
money) across a decentralized network of users. Many altcoins are classified in this way and
may sometimes be called value tokens.

•Tokens - There are also blockchain-based tokens that are meant to serve a different purpose
from that of money. One example could be a token issued as part of an initial coin offering (ICO)
that represents a stake in a blockchain or decentralized finance (DeFi) project. If the tokens are
linked to the value of the company or project, they can be called security tokens (as in securities
like stocks, not safety). Other tokens have a particular use case or function. Examples include
Storj tokens, which allow people to share files across a decentralized network, or Namecoin,
which provides decentralized Domain Name System (DNS) service for Internet addresses.
These are known as utility tokens.

5. UTXO

In bitcoin, the transaction lives until it has been executed till the time another transaction is
done out of that UTXO. UTXO stands for Unspent Transaction Output. It is the amount of digital
currency someone has left remaining after executing a transaction. When a transaction is
completed, the unspent output is deposited back into the database as input which can be used
later for another transaction. UTXOS are created through the consumption of existing UTXOS
Every Bitcoin transaction is composed of inputs and outputs. Inputs consume an existing UTXO.
while outputs create a new UTXO. The UTXO model does not incorporate wallets at the protocol
level. It is based on individual transactions that are grouped in blocks. The UTXO model is a
design common to many cryptocurrencies, most notably Bitcoin.

• Cryptocurrencies that use the UTXO model do not use accounts or balances. Instead, UTXOs
are transferred between users much like physical cash.

•Each transaction in the UTXO model can transition the system to a new state, but transitioning
to a new state with each transaction is infeasible.

•The network participants must stay in sync with the current state.

6. Challenges in Blockchain Technology

• Scalability - The ability to manage a large number of users at a single time is still a challenge
for the blockchain industry. Blockchain technology involves several complex algorithms to
process a single transaction. As of October 2017, the total number of coinbase users is
recorded to be 11.7 million. As more and more people are getting used to it, the average
transactions have also increased dramatically.

• Hackers and shadow dealing - The one thing that the blockchain industry lacks is a set of
regulatory oversight making it a volatile environment and an easy target for market
manipulation. For instance, the infamous one coin scam where a lot of investors lost money
thinking it to be the next revolutionary digital currency was revealed to be a Ponzi scheme scam.
No matter how good you are with your cryptocurrency understanding. there is always a chance
that the online wallet you are using may get hacked or be blocked by the government due to
some shadowy practices.

Complex to understand and adopt Blockchain technology and the complexities it involves
makes it hard for a layperson to understand and comprehend its benefits. Before diving into this
revolutionary application, one needs to read it through and understand the principles of
encryption and distributed ledger. Another point that makes blockchain hard to adopt is that
financial institutions are adequate to provide secure payment gateways and other services at
affordable prices compared to the costs incurred with blockchain. Privacy Blockchain is an open
ledger which is visible for everyone to view. It is an essential aspect in many cases, but it
becomes a liability if used in a sensitive environment. Blockchain technology still has to go a
long way to be adopted on a broad scale. The ledger needs to be remodeled in a way that allows
restricted access and is accessible only to people who are authorized to view it.

Costs Blockchain is implemented usually for eliminating the expenses related to the third
parties and intermediaries involved in the process of transferring values. Though the blockchain
technology is quite beneficial it is still in the nascent stages of innovation making it tough to
integrate into the legacy systems. It makes it an expensive affair overall, preventing its adoption
by the government as well as private firms.

Blockchain is still a distant dream - The market pundits are going gaga over blockchain
technology, its benefits and how it is re-shaping the infrastructure of emerging technologies like
InsurTech and others. But, the truth is that the challenges mentioned above are still hard to
conquer, and it will take some good time before blockchain becomes an integral part of all the
industries.

7. Best Practices to create a smart contract

Be ready for failure - All significant contracts are always prone to errors. Hence, you must be
ready to deal with them and your contract must have the ability to respond to them. You can do
so by: Pausing the contract or 'breaking the circuit' whenever things go wrong Formulating an
effective upgrade strategy with improvements and methods to fix bugs, loopholes, etc.
Effectively managing the money at risk by limiting the maximum usage rate and managing the
total amount well.

Ensure careful rollouts - Careful rollouts can help you to detect and resolve bugs before the full
production phase. It can be done by thoroughly testing contracts. Rolling out the contract in
incremental phases with increased usage and testing in each phase. Providing bug bounties
from as early as the alpha testnet releases. Adding tests at the discovery of every new attack
vector.

Always keep the contracts simple - If you make your contracts complex, you can expect more
potential errors and bugs. Hence, keeping them simple is a sure shot way to reduce the chances
of errors. You can keep contracts simple by implementing the following practices

i. You can make sure that the contract logic is simple.

ii. Wherever possible, use code or tools that you have already written before.

iii. You can modularize the code to make the contracts and functions small.

iv. Use blockchain only for those parts of your system that need decentralization.

v. Wherever possible, give preference to clarity over performance.

 Stay updated and keep track of new developments - You must always stay up to date
with any new security developments or changes. You can do so by

vi. Regularly checking your contracts for new bugs and errors.
vii. Being open to adopting new security techniques.

viii.When using a tool or library, upgrading to its latest version as soon as possible.

Be attentive to blockchain properties - Developers with enough programming experience can

handle Ethereum programming conveniently. However, they must be aware of and attentive to
certain pitfalls and blockchain properties by

ix. Being careful about external contract calls as they can execute malicious code and tamper
with the control flow.

x. Keeping in mind that anyone can also view private data in smart contracts. xi. Understanding
that attackers can maliciously call public functions as they are public.

xii. Keeping in mind that on a blockchain, timestamps are imprecise and miners can alter or
impact the time of a transaction's execution in a margin of several seconds.

Xiii. Being aware of the block gas limits and gas costs.

xiv.Being aware of approaches to random number generation on at blockchain is mostly

gameable and non-trivial.

• Consider fundamental trade-offs From the point of view of software engineering, an ideal
smart contract system should be modular, support upgradeable components, and reuse code
without duplicating it. However, from the security architecture's standpoint, an ideal smart
contract may or may not share the same approach. Hence, when assessing the security and
structure of your smart contract system, you must find a balance between these trade-offs.

8. Tools for Blockchain based research

• Lunar Crush - The most dependable social media provider in the crypto market is Lunar Crush.
Luna Crush uses artificial intelligence, machine learning, and all that great stuff together to
organize information about different cryptocurrencies and make sense of it all.

• Glassnode - Glassnode is a blockchain data and intelligence provider that generates innovative
on-chain metrics and tools for digital asset stakeholders. It gathers data from multiple
blockchains and generating meaningful information from it necessitates high operational costs
and time commitments, as well as a comprehensive infrastructure of databases, tools, and
skilled data scientists.

• Messari - Messari is a platform that collects crypto data and analyzes charts which enable
investors to make better investment decisions. It provides a screener that can be used to sort
coin information through personalized filters.

• CoinMarketCal - This is a cryptocurrency calendar that tells you about all the upcoming events
for that crypto project. You can search the coin in CoinMarketCal and it will bring up all the listed
events for the selected period with just a few clicks. It's community- driven and upcoming
events validated by the community.

• Coin Metrics - Coin Metrics was founded in 2017 as an open-source project to determine the
economic significance of public blockchains. Today, it expanded on that original purpose in the
hopes of empowering people to make informed crypto-financial decisions. Santiment -
Santiment is a tool to help you analyze the crypto market and help you locate those data-driven
opportunities. The tool combines on-chain social and development data for over 900 projects
and delivers that to you in an easily digestible way. So, one way that you can use sentiment is to
help you spot X's opportunities.

Activity:

Case study on emerging blockchain platform and application

Asset registry Perhaps the clearest case for where blockchain could be advantageous is
provenance and transfer of ownership of assets, and land registry is a particularly good case.
There have been several pilot studies and proofs-of-concept made, including in Georgia, Sweden
and Honduras, but none have yet reached large-scale testing. If property transactions were
handled on a blockchain, it could record the entire transaction history of a property, which would
increase the efficiency of transaction processing and fight corruption by distributing the
maintenance of records to all parties. Using smart contracts, asset exchange could also follow
specific instructions encoded as part of the transaction to be executed automatically once
agreed criteria have been met, further increasing the efficiency of the exchange process. As a
public register, the openness of the blockchain is not an obstruction for land registry. It is
acceptable for participants to see who owns, sells, and divides land. Furthermore, the
verifiability aspect can help to add transparency where needed. A land registry blockchain would
have to start by tokenizing land assets that is, creating a representation of each section of land
as a legally- equivalent digital asset, stored on the blockchain. This would be followed by
ensuring the present owners had the ownership of the appropriate tokens assigned to them.
This is no small undertaking as existing systems are already very complex, and there is a need
to be flexible in future if existing land deeds are altered or split. While bitcoin works because it is
a wholly online system, with all participants agreeing to the ownership and provenance records,
blockchain application in areas like land registry is more complex due to the need to register the
ownership of assets and tie the records to the real world. This causes problems in that the
register must reliably reflect real-world existence and condition of assets, and there must be
legal mechanisms for enforcing ownership rights when blockchain records indicate these are
held, even against parties who are not part of the blockchain, or do not recognise it as legitimate.
Assuming that these challenges could be overcome, then a land registry blockchain could
record sales of land (or other similar transactions), creating a verifiable and permanent record.
The distributed nature of the ledger would mean that neither downtime nor server failure would
ever affect the availability of the service.

Conclusion:

From all the experiments that we studied in blockchain we learnt about all the different things
that we can do in blockchain right from creating the merkle tree to deploying applications and
connecting the metamask wallet and trying multiple related applications. Also we studied the
consensus mechanism that is used by different blockchain platforms. We learned about how
the blockchain works and how it is possible to make it applicable in our daily life.