M1 Blockchain Technology
M1 Blockchain Technology
M1 Blockchain Technology
Scheme
Objectives/Outcomes
Syllabus
Syllabus
Practicals
Books
Online References
Blockchain
job profiles
Concept
Distributed
Ledger A blockchain is essentially a digital ledger of transactions that is duplicated and
distributed across the entire network of computer systems on the blockchain.
Technology
(DLT). 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.
• There have been many attempts to create digital money in the past, but they have
always failed.
• The prevailing issue is trust. If someone creates a new currency called the X dollar,
how can we trust that they won't give themselves a million X dollars, or steal your
X dollars for themselves?
• Bitcoin was designed to solve this problem by using a specific type of database
called a blockchain.
• Most normal databases, such as an SQL database, have someone in charge who
can change the entries (e.g. giving themselves a million X dollars). Blockchain is
different because nobody is in charge;
• it’s run by the people who use it. What’s more, bitcoins can’t be faked, hacked or
double spent – so people that own this money can trust that it has some value.
History of 2008
• Satoshi Nakamoto, a pseudonym for a person or group,
Blockchain publishes “Bitcoin: A Peer to Peer Electronic Cash System."
2009
• The first successful Bitcoin (BTC) transaction occurs between
computer scientist Hal Finney and the mysterious Satoshi
Nakamoto.
2010
• Florida-based programmer Laszlo Hanycez completes the first
ever purchase using Bitcoin — two Papa John’s
pizzas. Hanycez transferred 10,000 BTC’s, worth about $60 at
the time. Today it's worth $80 million.
• The market cap of Bitcoin officially exceeds $1 million.
2011
• 1 BTC = $1USD, giving the cryptocurrency parity with the US dollar.
• Electronic Frontier Foundation, Wikileaks and other organizations start accepting Bitcoin as
donations.
2012
• Blockchain and cryptocurrency are mentioned in popular television shows like The Good
Wife, injecting blockchain into pop culture.
• Bitcoin Magazine launched by early Bitcoin developer Vitalik Buterin.
2013
• BTC market cap surpassed $1 billion.
• Bitcoin reached $100/BTC for the first time.
• Buterin publishes “Ethereum Project" paper suggesting that blockchain has other possibilities besides
Bitcoin (e.g., smart contracts).
2014
• Gaming company Zynga, The D Las Vegas Hotel and Overstock.com all start accepting Bitcoin as
payment.
• Buterin’s Ethereum Project is crowdfunded via an Initial Coin Offering (ICO) raising over $18 million in
BTC and opening up new avenues for blockchain.
• R3, a group of over 200 blockchain firms, is formed to discover new ways blockchain can be
implemented in technology.
• PayPal announces Bitcoin integration.
2015
• Number of merchants accepting BTC exceeds 100,000.
• NASDAQ and San-Francisco blockchain company Chain team up to test the technology for trading
shares in private companies.
2016
• Tech giant IBM announces a blockchain strategy for cloud-based business solutions.
• The government of Japan recognizes the legitimacy of blockchain and cryptocurrencies.
• 2017
• Bitcoin reaches $1,000/BTC for the first time.
• Cryptocurrency market cap reaches $150 billion.
• JP Morgan CEO Jamie Dimon says he believes in blockchain as a future
technology, giving the ledger system a vote-of-confidence from Wall
Street.
• Bitcoin reaches its all-time high at $19,783.21/BTC.
• Dubai announces its government will be blockchain-powered by 2020.
2018
• Facebook commits to starting a blockchain group and also hints at the possibility of creating its own
cryptocurrency.
• IBM develops a blockchain-based banking platform with large banks like Citi and Barclays signing on.
2019
• China’s President Ji Xinping publicly embraces blockchain as China’s central bank announces it is
working on its own cryptocurrency
• Twitter & Square CEO Jack Dorsey announces that Square will be hiring blockchain engineers to work
on the company’s future crypto plans
• The New York Stock Exchange (NYSE) announces the creation of Bakkt - a digital wallet company that
includes crypto trading
2020
• Bitcoin almost reaches $30,000 by the end of 2020
• PayPal announces it will allow users to buy, sell and hold cryptocurrencies
• The Bahamas becomes the world’s first country to launch its central bank digital currency, fittingly
known as the “Sand Dollar”
• Blockchain becomes a key player in the fight against COVID-19, mainly for securely storing medical
research data and patient information
Module 1:
Basics of
Blockchain
Blockchain Version
Blockchain The fixed bit length can vary (like 32-bit or 64-bit or 128-bit or
256-bit) depending on the hash function which is being used.
Hash
Function The fixed-length output is called a hash.
•https://anders.com/blockcha
in/hash.html
• the blockchain uses this cryptographic hash function's properties in its
consensus mechanism.
• A cryptographic hash is a digest or digital fingerprints of a certain
amount of data.
• In cryptographic hash functions, the transactions are taken as an input
and run through a hashing algorithm which gives an output of a fixed
size.
Basic
Components
of Bitcoin
Bitcoin
• is basically a software at the core that defines what a
bitcoin is, as well as how a bitcoin gets transferred.
• It identifies what the rules of a valid bitcoin, who can be
inside bitcoin, who cannot be inside bitcoin, what is valid,
what is not, etc. Everything is based on software, which is
the bitcoin software.
• The bitcoin software is always operated in 24*7.
Cryptography
• The software, at its core, uses cryptography and bitcoin as a
cryptocurrency. Bitcoin uses cryptography to regulate the
transfer of bitcoin between parties, as well as the creation
of new units of bitcoin. Without cryptography, Bitcoin
would simply not be possible. So, we've got that this
software uses cryptography to control the transfer of
bitcoin over the internet.
• Cryptography is a mathematical approach which is solvable
by computers and not by humans. So all the stuff that
protects your data is served by the cryptography.
Hardware
• Bitcoin software creates a challenge. Now, there is a game begins, and there is a race that goes off.
The race involves all these miners competing against each other to solve the challenges.
• This task or challenge will take approximately 10 minutes to be completed.
• Every single miner starts trying to find the solution to that one Nonce that will satisfy the hash for the
block.
• At some specific point, one of those miners in the global community with higher speed and great
hardware specs will solve the cryptography challenge and be the winner of that race.
• Now, the rest of the community will start verifying that block which is mined by the winner. This
makes Bitcoin so strong, because in one stage of this cycle, the miners are competing against each
other, and in the next stage of the cycle, the rest of the community rallies together to ensure that
that solution is correct.
• If the Nonce is correct, it will end up with the new block which will be added to the blockchain.
• For this task or challenge, the winner will earn a reward. That reward is currently 12.5 bitcoins.
• Proof of Work(PoW) is the original consensus algorithm in
a blockchain network.
• The algorithm is used to confirm the transaction and
creates a new block to the chain. In this
algorithm, minors (a group of people) compete against
Blockchain each other to complete the transaction on the network.
• A coinbase transaction is
the first transaction in a block.
• It is a unique type of bitcoin
transaction that can be created by a
miner.
• The miners use it to collect the block
reward for their work and any other
transaction fees collected by the miner
are also sent in this transaction.
• Each transaction executed on the bitcoin
• network are combined together to form a block. When a block is
formed, immediately, it will be added in the blockchain.
• Now, these blocks are immutable and tamper-proof for all transactions
that are made on the bitcoin network.
• Each block must contain one or more transactions, and the first
transaction in the block is called the coinbase transaction.
•The miners are always responsible for creating a
block. When a block is successfully created, he
will be rewarded from bitcoin for their work. The
bitcoin block reward is always dependent on the
number of blocks from the genesis block and the
number of fees included in the transactions of
the block. The total amount of rewards that a
miner will collect is the sum of the block reward
and the transaction fees taken from all the
transactions that have been included in the
block.
• In the start of the bitcoin, the block reward is 50 bitcoin per block. The block reward is reduced by
half after every 210, 000 blocks, i.e. approximately in every four years.
• The current reward for successfully creating a block is 12.5 bitcoin.
• It will be going to get reduced 6.25 bitcoin per block in the year 2020.
• There is one important feature of a coinbase transaction is that bitcoins involved in the transaction
cannot be spent until they have received at least 100 block confirmations in the blockchain.
Distributed
Database • Distributed Database Systems is a kind of DBMS
where databases are present at different locations
System and connected via a network.
• Each site in a Distributed Database is capable of
accessing and processing local data as well as
remote data.
disadvantages
• Complex nature :
Distributed Databases are a network of many computers present at different locations
and they provide an outstanding level of performance, availability and of course
reliability. Therefore, the nature of Distributed DBMS is comparatively more complex
than a centralized DBMS. Complex software are required for Distributed DBMS . Also,
It ensures no data replication, which adds even more complexity in its nature.
• Overall Cost :
Various costs such as maintenance cost, procurement cost, hardware cost,
network/communication costs, labor costs, etc, adds up to the overall cost and make it
costlier than normal DBMS.
• Security issues:
In a Distributed Database, along with maintaining no data redundancy,
the security of data as well as network is a prime concern. A network
can be easily attacked for data theft and misuse.
• Integrity Control:
In a vast Distributed database system, maintaining data consistency is
important. All changes made to data at one site must be reflected to all
the sites. The communication and processing cost is high in Distributed
DBMS in order to enforce the integrity of data.
• Term coined by Nick Szabo,cryptographer in 1966
Smart • Szabo claimed that smart contracts can be realized
with the help of public ledger
Contracts • Blockchain can be a pioneering technology to
realize smart contracts
Contracts in a centralized
platform-Crowdfunding
• Both the product team and the supporters need to
trust the crowdfunding platform
The • The product team expects the money to be get
paid based on the project progress
crowdfunding • The supporters expect money to go to the project
platform • However, the crowdfunding platform, the
middleman takes significant charge to manage
entire process
Crowfunding Platform
using Smart Contracts
• The contract is written in a code
which is available to all the
stakeholders- the supporters and
the product team
• Immutable: No party will be able to change once it
is fixed and written to public ledger
• Distributed: All the steps of the contract can be
Smart validated by every participating part-no one can
claim later that the contract was not validated
Contracts -The
Advantage • Why blockchain
• The blocks are immutable
• The information is open-everyone can check
and validate
Smart contracts platforms
The Block in a Blockchain-Securing Data Crypptographically
• The headers of
subsequesnt blocks are
connected in a chain: the
entire blockchain needs
to be updated if you
want to make any
change anywhere
• Every peer in a
The Blockchain network
maintains a local copy of
Blockchain the Blockchain
• Requirements
replicas • All the replicas need
to be updated with
the last mined block
• All the replicas need
to be consistent the
copies of the
blockchain at
different peers need
to be exactly similar
The notion of
distributed • Ensure that different nodes in the network see the same
data at nearly the same point of time
Consensus • All nodes in the network need to agree or consent on a
regular basis that the data stored by them is the same
• No single point of failure : the data is decentralized
• The system can provide service even in the presence of
failures
Flowchart of the Mining Process
to Construct a Block Header
• Can we achieve consensus even when the network is
arbitrarily large and no participants in the network really
knew all other participants?
• An open network scenario the permission less protocol you
do not record your identity while participating in the
Consensus consensus system
• A challenge response based system the network would
pose a challenge and each node in the network would
attempt to solve the challenge
• the basic philosophy is based on message passing inform
your state to others so that everyone can match their
current state with others in the network
Challenge
Response to • Challenge response protocol
Permission • The nodes in the network tries to solve the challenge
posed by the network
less Consensus • the nodes or the participants do not need to revel their
identity
• The node that is able to solve the challenge first ,would get
to dictate what the next set of data or state elements
• This will continue at different rounds
Challenge
Response to • Design of a good challenge
Permission • Ensures that different nodes will run the challenge at
different runs
less Consensus
• This ensures that no node would be able to control
network
• Bitcoin network algorithm ensures consensus over
permission less based on challenge response
The
Economics
Behind • The mining ensures that no node has the power to
Blockchain sabotage the network and gain control