Introduction to Blockchain

Unit 1
 Introduction to Block chain
• With the invention of Bitcoin in 2008, the world was introduced to a new
concept, which is now likely to revolutionize the whole of society.
• If we look at the last few years, we notice that in 2013 some ideas started
to emerge that suggested usage of blockchain in other areas than
cryptocurrencies.
• Around that time the primary usage of blockchain was cryptocurrencies,
and many new coins emerged during that time.
• Production ready projects and off the shelf products utilizing blockchain
technology will be available from 2020 and by 2021 mainstream usage of
blockchain technology is expected to start.
• More research is expected to continue along with adaption and further
maturity of blockchain technology, and finally, in 2025 it is expected that
the technology will be mature enough to be used on day to day basis
Blockchain Aka DLT (Distributed Ledger Technology) - rudimentary shared
accounting system
o Technologically, it is :
• Distributed database – public ledger (you can insert, select data, but can’t update or delete
data.
The –Solution
• Distributed computer &contracts
execute digital
Framework
• Based on p2p (peer-to-peer) technology, cryptology and API
Blockchain – What is it?
• In fact, the blockchain is more than a technology, it
o Usually contains financial transactions
o Is replicated across a number of systems in almost real-time
o Uses cryptography and digital signatures to prove identity, authenticity and
enforce read/write access rights
o Can be written by everyone in a public blockchain (but only certain participants in
a private blockchain)
o Can be read by participants, often a wider audience
o Has mechanisms to make it hard to change historical records, or at least make it
easy to detect when someone is trying to do so

hash hash hash hash

Block 1 Block 2 Block 3 Block 4
Immutable Secure Decentralized Use
Transparent Cases

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 Blockchain… . History
Blockchain technology was first introduced in a whitepaper entitled: “Bitcoin: A Peer-to-Peer Electronic Cash System,”
by Satoshi Nakamoto in 2008.

On October 31, 2008, Satoshi Nakamoto released the Bitcoin White Paper outlining a purely peer to peer electronic
cash/digital asset transfer system. Since then, additional Blockchains have been popularized, Ethereum, various
Hyperledger project solutions, as well as numerous others including “Blockchain like” solutions.
Bitcoin is not BLOCKCHAIN. It is just a cryptocurrency which uses concept of blockchain. Just same as:- GOOGLE IS NOT
INTERNET.
Main Features of Bitcoin whitepaper
 No reliance on trust
 Digital signatures
 Peer-to-peer network
 Proof-of-work
 Public history of transactions
 Honest, independent nodes control majority of
CPU computing power
 Nodes vote with CPU computing power
 Rules and incentives enforced through consensus
mechanism
Scope & Benefits of Blockchain… .

 Disruptive
 Immutable
 Transparent
 History of All Transactions from
Origin
 Decentralized & Distributed
 P2P Transactions
 Secured
 Use-Cases
 Time-Efficient (Case-oriented)
 Trustless
 DApps
and more… .
 Centralized Vs Decentralized System
Current Centralized System Concept Of Dentralised System

Single server stores the transactions or

user actions of the users / community

Community keeps a note of all

transactions / user actions and can
vote if next transaction is valid or not
 Third Party Business Network Vs Distributed Ledger Technology
So, basically Blockchain is provides transparency by providing a peer to peer concept i.e. distributed ledger, which is not on
a single server means Decentralised and can’t be changed once it has been updated means immutable.
These nodes each maintain a copy of ledger by applying transactions that have been validated by a consensus protocol,
grouped into blocks that include a hash that bind each block to preceding block.
PROBLEM - DIFFICULT TO MONITOR ASSET OWNERSHIP AND SOLUTION – A PERMISSIONED, REPLICATED, SHARED LEDGER
TRANSFERS IN A THIRD-PARTY BUSINESS NETWORK
Distributed Ledger Technology
Distributed Ledger Technology
Distributed ledger – How it works?
 Types of Blockchain
❑ Public Blockchain: Decision making happens by miner who perform various decentralized
consensus mechanisms such as proof of work (POW) and proof of stake (POS) etc. Open and
transparent hence anyone can review anything at a given point of time on a public blockchain.
Eg. -> Bitcoin, Ethereum etc.

❑ Private Blockchain: A private property of an individual or an organization. There is an in charge

who looks after of important things such as read/write or whom to selectively give access to read
or vice-versa. Consensus is achieved on the whims of the central in-charge who can give mining
rights to anyone or not give at all.
Eg. -> Hyperledger

❑ Consortium or Federated Blockchain: Instead of one in charge, you have more than one in
charge. Basically, you have a group of companies or representative individuals coming together
and making decisions for the best benefit of the whole network. Such groups are also called
consortiums
Eg. -> Corda, r3 etc.

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 Difference between Types of Blockchains
Public Blockchain Private Blockchain Consortium Blockchain

Anyone can run a full node Anyone can’t run a full node Selected members of consortium
can run a full node

Anyone can make transactions Anyone can’t make Selected members of the
transactions consortium can make transactions

Anyone can review/audit the Anyone can’t review/audit the Selected members of the
blockchain blockchain consortium can review/audit the
blockchain

Transactions are viewable to Transactions are secret Transactions are viewed to

anyone selected members
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 Blockchain Mining
The transactions in the blockchain will be stored in the
mempool.
Each and every miner try to attach that transactions details in
their block.
The miner those who solve the complex mathematical
problem(proof of work) in faster way will be able to attach that
block to their blockchain and will be rewarded with some coins.
Mining process is important in order to ensure the trust and
security in the blockchain network.
 Proof of Work (PoW)
• Proof of Work consensus is the mechanism of choice for the majority
of cryptocurrencies currently in circulation.
• The algorithm is used to verify the transaction and create a new block
in the blockchain.
• Cryptocurrencies like Litecoin, and Bitcoin are currently using PoW.
• Ethereum was using PoW mechanism, but now shifted to Proof of
Stake(PoS).
• The purpose of a consensus mechanism is to bring all the nodes in
agreement, that is, trust one another, in an environment where the
nodes don’t trust each other.
 Blockchain DApps
 The decentralized application is a peer-to-peer
network of computers against a centralized
server.
 DApp is developed on a blockchain that makes
it safe and secure.
 More technically, dApps are those type of
applications that run on P2P networks and not
on the same computer. It means it will stay on
the internet on the way that is not controlled
by any one organization.
 The software program is designed on the
internet where consensus is the control rather
than a single entity.
 The DApp focus on decentralized networks will
cause a paradigm shift in the industry’s
software models
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