Blockchain Technologies

IT5044
 Name of the Course: Blockchain Technologies

• Course Code: IT5044 Teaching Scheme

• Semester: VI Theory:3 hrs./week
• Duration: 4 months
• Maximum Marks: 100
Objective of the Course
• To understand the basic concepts of Blockchain fundamentals.
• To understand the concept of Smart Contracts in Blockchain technologies.
• To explore Legal and Governance Use Cases in Blockchain technologies.
Blockchain technologies
IT5044
 Syllabus
• Unit-1: Introduction to Blockchain
• Unit-2: Business Use Cases
• Unit-3: Technology Use Cases
• Unit-4: Legal and Governance Use Cases
• Unit-5: Blockchain Challenges
• Unit-6: Recent Trends in the field of Blockchain

Textbook: Joseph J. Bambara and Paul R. Allen, “Blockchain: A Practical Guide to

Developing Business, Law, and Technology Solutions”, McGraw-Hill Education.
Introduction to Blockchain
 Introduction to Blockchain
A blockchain is a digital, decentralized, distributed public ledger database where
blocks are linked cryptographically, and transactions are digitally signed and managed
using consensus model.
Each block contains a timestamp and a link to the previous block, forming a chain of
blocks that cannot be altered once they are added to the blockchain.
 Key vocabulary while discussing Blockchain
Blockchain: a decentralized, distributed ledger that records transactions on multiple
computers so that the record cannot be altered retroactively without the alteration
of all subsequent blocks and the consensus of the network.
Cryptocurrency: a digital or virtual currency that uses cryptography for secure
financial transactions.
Bitcoin: a decentralized cryptocurrency that uses peer-to-peer technology to
facilitate instant payments. It is the first and most widely used cryptocurrency.
Distributed ledger: a ledger of digital transactions that is stored and maintained by a
network of computers rather than a central authority.
Mining: the process of adding transaction records to a blockchain public ledger. In
the case of Bitcoin, mining involves solving complex mathematical problems in
exchange for a reward in the form of cryptocurrency.
 Key vocabulary while discussing Blockchain
Node: a computer that participates in the operation of a blockchain network.
Smart contract: a self-executing contract with the terms of the agreement between
buyer and seller being directly written into lines of code. The code and the
agreements contained therein are stored and replicated on the blockchain network.
Consensus: the agreement of the majority of nodes on a blockchain network to the
validity of a transaction or block of transactions.
Hash: a unique fixed-size alphanumeric string that represents the contents of a block
in a blockchain.
Private key: a secret piece of data that is used to access the cryptocurrency stored in
a wallet. It should be kept secret and secure, as it allows the owner to spend or
transfer their cryptocurrency.
 Key vocabulary while discussing Blockchain
Miners: Burns energy to create blocks, get rewarded by Block Reward + transaction
fees.
Block Reward: New coins created with each block, goes to miner.
Transaction Fees: Small percentage of transaction value, which goes to the miner.
 History of Blockchain
In 1982, David Chaum proposed the first-ever blockchain-like protocol in his
dissertation, Computer Systems Established, Maintained, and Trusted by Mutually
Suspicious Groups.
In 1991,researcher scientists named Stuart Haber and W. Scott Stornetta introduce
Blockchain Technology. In this System, the time-stamped documents are stored in a
Chain of Blocks.
After that in 1992, Merkle Trees formed a legal corporation by using a system
developed by Stuart Haber and W. Scott Stornetta with some more features. Merkle
used a Secured Chain of Block which stores multiple data records in a sequence.
In the year 2004, Cryptographic activist Hal Finney introduced a system for digital
cash known as "Reusable Proof of Work". This System helps others to solve the
Double Spending Problem by keeping the ownership of tokens registered on a trusted
server.
 History of Blockchain
After that in 2008, Satoshi Nakamoto conceptualized the concept of "Distributed
Blockchain" under his white paper: "A Peer to Peer Electronic Cash System".
He modified the model of Merkle Tree and created a system that is more secure and
contains the secure history of data exchange.
His System follows a peer-to-peer network of time stamping. His system became so
useful that Blockchain become the backbone of Cryptography.
Blockchain transaction flow
 Blockchain transaction flow
• Blockchains ideal for recording events, medical records and other records
management activities, identity management, transaction processing, and a host
of emerging applications.
• Blockchain is a revolutionary technology that has the potential to transform
various industries.
• It is a decentralized, distributed ledger that records transactions across many
computers, making it difficult or impossible to alter, hack, or cheat the system.
Types of Blockchain
 Types of Blockchain
There are majorly four types of Blockchain
• Public Blockchain
• Private Blockchain
• Hybrid Blockchain
• Consortium Blockchain
 Public Blockchain
• It is a permissionless distributed ledger on which anybody can join and conduct
transactions.
• It is a non-restrictive form of the ledger in which each peer has a copy.
• This also means that anyone with an internet connection can access the public
Blockchain.
• This user has access to historical and contemporary records and the ability to
perform mining operations.
• These complex computations must be performed to verify transactions and add
them to the ledger.
• On the blockchain network, no valid record or transaction may be altered.
Because the source code is usually open, anybody can check the transactions,
uncover problems, and suggest fixes.
 Advantages of Public Blockchain
• Trustable: Public Blockchain nodes do not need to know or trust each other
because the proof-of-work procedure ensures no fraudulent transactions.
• Secure: A public network can have as many participants or nodes as it wants,
making it a secure network. The higher the network's size, the more records are
distributed, and the more difficult it is for hackers to hack the entire network.
• Open and Transparent: The data on a public blockchain is transparent to all
member nodes. Every authorized node has a copy of the blockchain records or
digital ledger.
 Disadvantages of Public Blockchain
• Lower TPS: The number of transactions per second in a public blockchain is
extremely low. This is because it is a large network with many nodes which take
time to verify a transaction and do proof-of-work.
• Scalability Issues: Its transactions are processed and completed slowly. This
harms scalability. Because the more we try to expand the network's size, the
slower it will become.
• High Energy Consumption: The proof-of-work device is expensive and requires
lots of energy. Technology will undoubtedly need to develop energy-efficient
consensus methods.
 Use of Public Blockchain
• Voting: Governments can use a public blockchain to vote, ensuring openness and
trust.
• Fundraising: Businesses or initiatives can use the public Blockchain to improve
transparency and trust.
 Private Blockchain
• A blockchain network operates in a private context, such as a restricted network,
or is controlled by a single identity.
• While it has a similar peer-to-peer connection and decentralization to a public
blockchain network, this Blockchain is far smaller.
• They are often run on a small network within a firm or organization rather than
open to anybody who wants to contribute processing power.
• Permissioned blockchains and business blockchains are two more terms for
them.
 Advantages of Private Blockchain
• Speed: Private Blockchain transactions are faster. This is because a private
network has a smaller number of nodes, which shortens the time it takes to verify
a transaction.
• Scalability: You can tailor the size of your private Blockchain to meet your specific
requirements. This makes private blockchains particularly scalable since they
allow companies to easily raise or decrease their network size.
 Disadvantages of Private Blockchain
• Trust Building: In a private network, there are fewer participants than in a private
network.
• Lower Security: A private blockchain network has fewer nodes or members, so it
is more vulnerable to a security compromise.
• Centralization: Private blockchains are limited in that they require a central
Identity and Access Management (IAM) system to function. This system provides
full administrative and monitoring capabilities.
 Use of Private Blockchain
• Supply Chain Management: A private blockchain can be used to manage a
company's supply chain.
• Asset Ownership: A private blockchain can be used to track and verify assets.
• Internal Voting: Internal voting is also possible with a private blockchain.
 Hybrid Blockchain
• Organizations who expect the best of both worlds use a hybrid blockchain, which
combines the features of both private and public blockchains.
• It enables enterprises to construct a private, permission-based system alongside
a public, permissionless system, allowing them to choose who has access to
certain Blockchain data and what data is made public.
• In a hybrid blockchain, transactions and records are typically not made public,
but they can be validated if necessary by granting access via a smart contract.
 Advantages of Hybrid Blockchain
• Secure: Hybrid Blockchain operates within a closed environment, preventing
outside hackers from launching a 51 percent attack on the network.
• Cost-Effective: It also safeguards privacy while allowing third-party contact.
Transactions are inexpensive and quick and scale better than a public blockchain
network.
 Disadvantages of Hybrid Blockchain
• Lack of Transparency: Because information can be hidden, this type of blockchain
isn't completely transparent.
• Less Incentive: Upgrading can be difficult, and users have no incentive to
participate in or contribute to the network.
 Use of Hybrid Blockchain
• Real Estate: Real-estate companies can use hybrid networks to run their systems
and offer information to the public.
• Retail: The hybrid network can also help retailers streamline their processes.
• Highly Regulated Markets: Hybrid blockchains are also well-suited to highly
regulated areas like the banking sector.
 Consortium Blockchain
• In the same way that a hybrid blockchain has both private and public blockchain
features, a Consortium blockchain, also known as a federated blockchain, does.
• However, it differs because it involves various organizational members working
together on a decentralized network.
• Predetermined nodes control the consensus methods in a consortium blockchain.
• It has a validator node responsible for initiating, receiving, and validating
transactions. Transactions can be initiated or received by member nodes.
 Advantages of Consortium Blockchain
• Secure: A consortium blockchain is more secure, scalable, and efficient than a
public blockchain network. It, like private and mixed blockchains, has access
controls.
 Disadvantages of Consortium Blockchain
• Lack of Transparency: The consortium blockchain has a lower degree of
transparency. If a member node is infiltrated, it can still be hacked, and the
Blockchain's rules can render the network inoperable.
 Use of Consortium Blockchain
• Banking and Payments: A consortium can be formed by a group of banks working
together. They have control over which nodes will validate transactions.
• Research: A consortium blockchain can be employed to share research data and
outcomes.
• Food Tracking: It is also apt for food tracking.
Blockchain implementations
 Bitcoin
• Bitcoin can be seen as the original Blockchain.
• This Blockchain was used to implement a cryptocurrency to create the first
purely peer-to-peer version of electronic cash without central authority.
• Bitcoin was created by an unknown (group of) person(s) who invented the
Blockchain.
• Its development is driven by a core group of Open Source developers.
 Namecoin
• Namecoin is a decentralized name registration database.
• In decentralized protocols like Tor, Bitcoin, and Bitmessage, there needs to
be some way of identifying accounts so that other people can interact with
them.
• Namecoin is the oldest and most successful implementation of a name
registration system using such an idea.
• It is open-source technology which improves decentralization, security,
censorship resistance, privacy, and speed of certain components of the
Internet infrastructure such as DNS and identities.
• Namecoin is a key/value pair registration and transfer system based on the
Bitcoin technology.
 Ripple
• Ripple is seen as one of the most advanced distributed ledger technology
(DLT) companies in the industry.
• It focuses on the using of blockchain-like technology for payments.
• The Ripple protocol has been adopted by an increasing number of financial
institutions to offer alternative remittance options to consumers.
• The Ripple protocol, described as “basic (settlement) infrastructure
technology for interbank transactions.”
 Ethereum
• Today the most popular implementation of smart contracts is probably Ethereum, a public
Blockchain-based platform.
• Functions as a platform through which people can use tokens to create and run applications and
create smart contracts.
• Ethereum allows people to connect directly through powerful decentralized supercomputer.
Blockchain collaborative
implementations
 Hyperledger
• Hyperledger is an open-source collaborative effort created to advance cross-industry blockchain
technologies.
• It is a consortium of companies working together to develop standardized blockchain protocols.
• The project aims to develop open protocols and standards by providing a modular framework that
supports different components for different uses.
• This would include a variety of blockchains with their own consensus and storage models, and
services for identity, access control, and contracts.
• It is a global collaboration hosted by the Linux Foundation.
 Corda
• Corda is a distributed ledger platform designed to record, manage, and
automate legal agreements between business partners.
• It is a collaborative effort by R3, a group of more than 100 financial
companies.
• It would also allow for greater levels of code sharing than presently used in
the financial industry, reducing the cost of financial services for everyone.
• Corda follows a general philosophy of reusing existing proven software
systems and infrastructure where possible.
 Blockchain in practical use
• Blockchain technology is being used in various sectors, including:
– Finance: Cryptocurrency, cross-border payments, supply chain finance
– Healthcare: Secure data sharing, clinical trials, pharmaceutical supply
chain
– Supply Chain: Tracking products, reducing fraud, improving efficiency
– Government: Voting systems, land registry, identity management
– Real Estate: Property ownership, smart contracts, tokenization