1.

Blockchain :
a) Definition :
i. Blockchain : Decentralized computation and information sharing platform
that enables multiple authoritative domains to cooperate, coordinate and
collaborate in a rational decision making process.
ii. Decentralized Database.
iii. Computation and Information sharing platform.
iv. Distributed Database or Ledger that is shared among the nodes of a computer
network.
v. Stores information electronically in digital format.
vi. Plays crucial role in cryptocurrency systems, for maintaining a secure and
decentralized record of transactions.
vii. Blockchain technology first got its recognition when Satoshi Nakamoto
published a research paper in 2008.
viii. The title of the research paper was ” A peer-to-peer electronic cash system”.
b) Advantages :
i. Open for all.
ii. Distributed Ledger.
iii. Transparent (Transactions are transparent to all nodes).
iv. Immutable (Data cannot be tampered).
v. No single central control.
vi. No single point failure.
vii. Valid and Accurate data.
viii. Efficient (Removes third party intervention).
ix. Reduced transaction cost (No middle man).
x. Verifiable records of all transactions.
xi. Permanent Records.
xii. Tighter Security.
xiii. Low double spending risk.
c) Disadvantages :
i. Scalability (Fixed size of blocks for storing information).
ii. Immaturity (Low confidence because it is a couple-year-old technology).
iii. Energy Consumption.
iv. Time-Consuming.
v. Legal Formalities (Blockchain technologies/ Cryptocurrency being blocked in
some countries).
d) Types :
i. Public Blockchain :
1. Definition :
a) Permission-less distributed ledger technology.
b) Individuals can join and perform transactions.
c) Non-restrictive network.
d) Each and every peer has a copy of the ledger.
e) Transaction verification takes place through consensus (proof-of-work
POW) and proof-of-stake (POS).
2. Example : Bitcoin, Ethereum, etc.
3. Advantages :
 a) Anyone can join.
b) Everyone feels motivated to work towards the betterment of a public
network.
c) Transparent to the entire network.
d) No intermediaries required (No middle men require).
4. Disadvantages :
a) Transaction takes time.
b) Scalability issues.
c) Consumes a lot of energy.
ii. Private Blockchain :
1. Definition :
a) Permissioned blockchain that is under control of an entity.
b) Only selected participants get access.
c) Restrictive network.
d) Only selected participants get offered transparency, trust and
security.
2. Example : Hyperledger Fabric, Corda, etc.
3. Advantages :
a) Relatively fast.
b) Relatively scalable.
4. Disadvantage :
a) Not decentralized in the true sense.
b) Trust issues because centralized nodes make the last call.
c) Security issues.
iii. Consortium/ Federated Blockchain :
1. Definition :
a) Both public and private blockchain.
b) Preferred by organizations who require both public as well as private
blockchain networks.
c) Certain aspects are made public while others are private.
d) Managed by more than one organization.
e) Validator node exists that validates transactions and also initiates or
receives transactions.
f) Member nodes can only receive or initiate transactions.
g) Provides transparency, privacy and efficiency without a single party
having the entire power.
2. Example : Marco Polo, IBM Food Trust, etc.
3. Advantages :
a) Better customizability and control over resources.
b) More secure and efficient.
4. Disadvantages :
a) Less transparent.
b) Less anonymous compared to public and private blockchain.
2. Difference - Centralized, Decentralized, Distributed Architecture :

Parameters Centralized Decentralized Distributed

Definition Every node is Nodes are connected There is no-centralized
connected to the to a few coordinators coordinator and all nodes
central coordination rather than a single are interconnected.
system. coordinator.
Failure If the central If one or more Failure of nodes won’t
coordinator fails, all coordinator nodes cause any harm to the
the individual nodes fail, then the individual network communications.
will disconnect. nodes can get
connected to other
coordinators.
Sharing All the information All the information is All the information is
shall be shared by the shared through the shared through the
central coordinator multiple coordinator individual nodes and
node. nodes. every node participates
equally in the process.
Risk Failure of Failure of some Failure of multiple nodes
coordinator nodes can coordinator nodes can won’t cause any harm
disconnect the whole be tolerated since since all the individual
network. individual nodes can nodes are interconnected.
connect to other
coordinator nodes.
Diagram

3. Consensus Protocol :
a) Definition :
i. A procedure to reach a common agreement in a distributed or decentralized
multi-agent platform.
ii. In the consensus algorithm, all individual nodes make their opinion and the
majority of the decision is taken as an appropriate decision.
iii. Applied to ensure reliability and fault tolerance.
4. Historical Perspective of Blockchain :
a) Definition :
i. Hash Function : Function that maps any size of data to a fixed size.
ii. First use of the concept of cryptographically secured chain of blocks came in
1991 in a paper by Harber and Stornetta.
iii. They developed a mechanism for time stamping a digital document.
iv. Digital document that is edited by multiple people from time to time.
v. To solve the problem of data tampering, the concept of chain of blocks was
introduced.
vi. Parameters like Sequence number of access, client ID, time-stamp, a hash
value from the previous request and the entire thing is hashed to connect to the
previous blocks.
vii. This is how Individual hash values are helping to connect the blocks one after
the other and making the blocks as tamer-proof.
viii. Hence, if any changes are made to the values then changes would be needed in
other blocks and people will be able to observe that values have been changed.
b) Example :

i. 0 is the sequence number of access,

ii. C1 is the client ID,
iii. TS1 is the time stamp,
iv. H0 is the hash value from the previous request.
v. 0, C1, TS1 and H0 are hashed and stored in H1.
vi. H1 is one of the components that is hashed to obtain H2.
5. Merkle Trees :
a) Definition :
i. Merkle Tree : It is a Tree Structure where the leaf nodes will contain the hash
of the document and every individual node or the intermediate node will
contain the hash of the combination of the left child and the right child.
ii. Type of data structure commonly used in Computer Science.
iii. Used to encrypt Blockchain data more efficiently and securely in bitcoin and
other cryptocurrencies.
iv. It is a mathematical data structure or a method of organizing data, made up of the
hash number of various data blocks of transactions performed on the Blockchain
network.
v. Acts as a summary of all the transactions.
vi. Merkle Root : Simple mathematical method for confirming the facts on a Merkle
tree.
vii. They are used in cryptocurrency to ensure that data blocks sent through
peer-to-peer networks are secure.
b) Example :

i. The Leaf Nodes (L2) contains the hash of the contents of the documents D1, D2,
D3, and D4.
ii. The intermediate node contains the hash value of H00 and H01 and their combined
hash value H0.
iii. The other intermediate node contains the hash value of H10 and H11 and their
combined hash value H1.
iv. Root node contains the combined hash Hroot of its left child and right child.
v. Any change in the documents will get reflected in their respective hash
values.
vi. Concept of Merkle tree was used in 1992 extending the concept of Blockchain.
vii. Efficiency was improved by combining time stamping of several documents
into a single block
6. Components of Blockchain :
a) Definition :
i. Elements used in or during the functionality of Blockchain.
b) Components :
i. Node :
1. Computer, Mobile or a Hardware Device which is connected to a blockchain
network.
2. Two Types :
a) Full Node :
i. Maintains full copy of transactions.
ii. Able to validate, accept & reject transactions.
b) Partial Node :
i. Maintains partial copy of transactions.
ii. Does not have enough space for full blockchain.
iii. It connects to full nodes and uses bloom filters to receive only
required data.
ii. Ledger :
1. Record book or Database where transactions are kept.
2. Every node will maintain a ledger of all transactions and the transactions
will maintain the state of the data that is being stored on the blockchain
network.
3. The ledger is replicated amongst all the nodes in the network.
iii. Wallet :
1. Digital wallet which allows users to store cryptocurrencies.
2. Every node in blockchain has a wallet.
3. Privacy of wallets is maintained using public/ private key pairs.
4. Two Types :
a) Hot Wallet.
b) Cold Wallet.
iv. Nonce :
1. Number only used ONCE.
2. It is a random number which is generated randomly.
3. Used while adding a new block to the blockchain.
4. Important element for creating a block in a blockchain.
v. Hash :
1. A hash function can process data of any size and return a fixed size hash.
2. Features :
a) Data is generated with a special hash.
b) A tiny change in the data results in a completely different hash.
c) Keeps the database small.
vi. Mining :
1. Process by which miners verify new transactions and add them.
2. To verify blocks of transactions, complex cryptographic hash puzzles must
be solved.
3. These puzzles require sophisticated tools and powerful computing power
to solve.
 4. In return, miners are rewarded for the same.
vii. Consensus Protocol :
1. Process by which the network peers come to an understanding regarding
the current state of the data.
2. Example : PoW, PoS, etc.
viii. Smart Contract :
1. A computer program or a transaction protocol that is intended to
automatically execute, control or document legally relevant events and
actions according to the terms of a contract or an agreement.
2. Simply put, programs stored on a blockchain that run when predetermined
conditions are met.

7. Double Spending :
a) Definition :
i. Double Spending : Using the same cryptocurrency for more than one
transaction.
b) Example :
i. Person A has a total of 50 bitcoins and he transfers the same amount to Person B
and Person C.
ii. Both these transactions cannot be valid simultaneously.
iii. It is easy to validate this kind of double spending in the banking system and not in
a decentralized network.
c) Handling of Double Spending :
i. In blockchain networks, many nodes form peer-to-peer networks.
ii. All the transactional information is sent to all the individual nodes.
iii. Every node saves the transactional information.
iv. So, in case of double spending the nodes already have the transaction
information, so the transaction is rejected immediately.
v. This is how double spending is avoided using blockchain networks in
cryptocurrencies.
8. Block in Blockchain (Block header with transaction) :
a) Definition :
i. Blocks are like records that store valid transactions and are hashed and
encrypted into a hash tree or Merkle tree.
ii. Block contains digitally signed and encrypted transactions that are already
verified by the peers.
iii. Inside a block, there could be multiple transactions.
iv. Transactions are there in an encrypted format or they are digitally signed.
v. A block is very secure and is impossible to hack virtually.
vi. Block is a container data structure that contains a series of transactions.
vii. In the case of bitcoin, a block may contain more than 500 transactions on an
average.
viii. Average block size is approximately 1 MB as proposed by Satoshi Nakamoto.
ix. The size may grow up to 8 MB or sometimes higher.
x. Larger blocks help in processing large numbers of transactions in one go.
b) Two major components in a block :
i. Block Header :
1. The portion of a block that contains information about the block itself,
including a Timestamp, a Hash representation, the Hash of the previous
block's header, and a cryptographic Nonce (if needed).
ii. List of Transactions :
c) Types :
i. Genesis Block :
1. First Block of a blockchain network.
2. Genesis means ‘Origin’.
3. This block enables the newly formed blocks to be linked to a previous
state.
ii. Valid Block :
1. Blocks that have been mined and added to the blockchain.
2. To get a valid block, each mined block must get network permission and
report as a block that has solved the given cryptographic puzzle.
3. When the network reaches consensus, the block is added to the
blockchain and distributed to all nodes.
iii. Orphan Block :
1. Blocks not part of the blockchain network.
d) Example :
9. Blockchain layers :
a) Definition :
i. There are four layers in Blockchain :
1. Presentation Layer :
a) Provides access to the entire network.
b) User Experience (UX) and User Interface (UI) begins from the
presentation layer.
c) UX enhances customer gratification and trustworthiness and also
improves product usability and interaction between a user and the
blockchain ecosystem.
d) UI offers blockchain visuals.
2. Application Layer :
a) Combines business logic with user interactions.
b) Consists of decentralized applications running on a P2P network.
c) Sets communication between the presentation and blockchain layers.
d) Application programming interfaces are used to connect a website to a
database.
e) Decentralized applications connect to a blockchain via smart contracts.
3. Blockchain Layer :
a) Consists of Consensus algorithms, the medium and interface for P2P
network that decides how data is placed in several packets and then
transmitted between peers.
b) Handles the mining layer, protocols that decide consensus methods and
participation, nodes that execute protocols, and the distributed ledger.
4. Internet Layer :
a) Connects all networks together (Smartphones, IoT devices, etc).
ii. Diagram :
[Link] Ledger :
a) Definition :
i. Decentralized ledger of all the information that is recorded on the blockchain
by consensus.
ii. Decentralized database that can securely record and share financial, physical
or electronic access across a geographical network through transparent updates
of information.
iii. Can be considered similar to an account ledger.
iv. Databases can be distributed to all locations and can be accessed by every
single member present in the blockchain network.
v. Malicious changes cannot be made when each node has simultaneous access to
all records.
vi. Decentralized system is not supposed to be a completely distributed one.
vii. Database is independent of a central authority and any changes to the ledger
have to be agreed by all the nodes.
viii. Such a mechanism is called the Consensus Mechanism.
ix. Once consensus is attained, the database is updated to all nodes in the network.
x. Information is synchronized across all the nodes, so it is referred to as
Distributed Consensus.
b) Benefits :
i. Transparent and Secure.
ii. Decentralized.
iii. Efficient.
iv. Cost Saving.

[Link] - Public, Private & Consortium Blockchain :

Parameters Public Private Consortium/ Federated

Definition Open to everyone and Controlled by owners Combination of public
anyone can participate. and access is limited and private blockchain,
to certain users. which means some
processes are kept private
and others public.
Cost of Costly. Not so costly. Not so costly.
transactions
KYC Needed No. Yes. Yes.
Incentive Incentivizes No similar incentives Can opt to incentivize
(to encourage) participants to grow as that of a public users if they wish.
the network. blockchain.
Transparency Entirely transparent. Transparent to only Transparency depends on
users granted access. how owners set rules.
Transaction Slow. Faster than public Fast.
Speed blockchain.