HASHING
Blockchain technology:
Blockchain technology is an intricate web of several technological innovations
working together. Among the most important pieces of the blockchain puzzle is
hashing.
Hashing is a cryptographic function that converts a string of characters of any
length into a unique output, or hash, of fixed length. This means that no matter
what combination of symbols are used as the input, they will always produce a
one-of-a-kind string of digits and characters.
A Bitcoin hash looks like this:
00000000000000000025e2ba026a8ad462b9a693d80fd0887def167f5f888a11
(hash of block 540807)
HASHING ESSENTIALS:
• Hashing is a method for cryptographically encoding data.
• It produces a fixed-length output from any input.
• The same input always produces the same hash.
• The input cannot be reconstructed from the hash.
• Modern hash functions make it virtually impossible to produce the same
output from two different inputs.
Hashing in cryptocurrencies
Hashing is an integral part of all blockchain-based transactions, including the
trading of cryptocurrency. Hash functions are necessary in everything from
mining blocks to signing transactions to generating private keys.
Bitcoin Bitcoin Cash Ethereum Litecoin Ripple
SHA-256 SHA-256 keccak256 Scrypt SHA-
512
A hash function is a mathematical algorithm used to calculate the hash.
Different cryptocurrencies use different hash functions but all of them follow
the same basic principles of hashing.
Main properties of hashing:
Hashing produces outputs of fixed length-
Hashing will always produce a unique, fixed-length output from any input. Let
us take a look at what that means with a couple of examples.
Input Output
hello 2CF24DBA5FB0A30E26E83B2AC5B9E29E1B161E5C1FA7425E73043362938B9824
It’s a good 6B89D5D4AD6A3364410DD9BAB95FD250EF4A663D9D3C47CBD7388535A5912E
day to HODL.
The entire 4F144CC612CA27E2DD6DFD6663F68BABC3B758D602B5102BF14E717E823EB741
novel Bleak
House by
Charles
Dickens
In the table above, the SHA-256 hash function is used to generate the hashes of
three different inputs. In all three cases, the hash is completely unique, but its
length remains the same. SHA-256 generates hashes that are 256 bits long,
usually represented as 64 symbols comprised of numbers 0–9 and letters A–F.
No matter how short or how long the input is – be it a single word (hello) or
even a whole novel (Bleak House by Charles Dickens) – the hash is fixed at 64
characters.
Hashing is deterministic
The same input will always produce the same output. If you use SHA-256 to
generate a hash from “fun”, you will always get the output seen in the table
below. Even changing one letter, however, will produce a completely different
hash.
Inpu Output
t
fun 00C4285274FCC5D6FBA2EE58DAF0D8C2B9B825B68D35D65D0E90A9BB333A51B
5
sun 27756F050E14A1CB1C1EE867F0EACE9EA4D9FCB81B8BEE089469F1EBD5FD7B17
Hashing is a one-way function
It is infeasible to determine what the input was from any given output. That is to
say, it is virtually impossible to reverse the hash function with contemporary
technology. The only way to determine what the input was is trying out random
strings until you find the right one. This method is known as brute force.
Using brute force to reverse the hash back to the original string is easier said
than done. No computer in existence is powerful enough to find the solution in
any reasonable amount of time, nor are we ever likely to build one that will.
Even IBM Summit, currently the fastest computer in the world, capable of
making several trillion calculations per second, would need many years and an
astounding amount of electricity to find the answer for a single hash
Hashing is resistant to collisions
A collision occurs when a hashing mechanism produces the same output for two
different inputs. This is possible in theory for hashing, as the number of unique
hashes is limited but the number of inputs is not. However, the probability of
collisions is extremely small. Hashing is thus said to be resistant, but not
immune, to collisions.
SHA-256, the algorithm used by Bitcoin, outputs hashes that are 256 bits long
(a 256 digit long string of 1s and 0s). This means there are a total of 2256
unique hashes that it can produce. As soon as the number of inputs is larger than
the number of all possible outputs, let us say 2256+1, at least two of the inputs
will have the same output – that’s a collision.
So does that mean hashing is exploitable? No, not at all. 2256 is an enormous
number. In fact, enormous does not even begin to do it justice. Think about it
this way: 2256 is very roughly equal to the number of atoms in the entire
observable universe. The sheer size of this number means the likelihood of a
collision occurring is utterly miniscule.
Hashing is fundamental for blockchain
Blockchain technology combines a range of important solutions from various
fields of science. The cryptographic hash function serves as the basis for
building a blockchain and harnessing those solutions. It is difficult to imagine a
decentralized network that forgoes hashing entirely.
PUBLIC KEY CRYPTO SYSTEM:-
Blockchain technology is one of the greatest innovations of the 21st century. In
this article, we will focus on the concept of cryptography i.e. public-key
cryptography or Asymmetric key cryptography
Introduction to Public-Key Cryptography
Most of the time blockchain uses public-key cryptography, also known as
asymmetric-key cryptography. Public key cryptography uses both public key
and private key in order to encrypt and decrypt data. The public key can be
distributed commonly but the private key cannot be shared with anyone. It is
commonly used for two users or two servers in a secure way.
Public Key: Public keys are designed to be public. They can be freely given to
everyone or posted on the internet. By using the public key, one can encrypt the
plain text message into the cipher text. It is also used to verify the sender
authentication. In simple words, one can say that a public key is used for closing
the lock.
Private Key: The private key is totally opposite of the public key. The
private key is always kept secret and never shared.
Using this key we decrypt cipher text messages into plain text. In simple
words, one can say that the private key is used for
opening the lock.
Why Do We Need Public-Key Cryptography?
• In symmetric-key cryptography, a single key is used to encrypt and
decrypt the message. Here, the possibility of data loss or unauthorized
access to data is high. To overcome the unauthorized access of data and
data sent securely without any loss, we use public-key cryptography.
• Public-key cryptography is more secure than symmetric-key cryptography
because the public key uses two keys to encrypt and decrypt the data
• Public-key cryptography allows users to hide the data that they want to
send. The sender encrypts the data and the receiver decrypts the data. The
encrypted message is not understood by unauthorized users.
Working On Public-Key Cryptography
Suppose, the sender wants to send some important message to the receiver.
• The sender first creates a message in the form of plain text which is in a
readable format.
• The sender knows the public key of the receiver but doesn’t know the
private key of the receiver because the receiver keeps secret his private
key. With the help of the public key of the receiver and the private key of
the sender, the sender generates the encrypted message i.e. called cipher
text.
• Now, cipher text reaches the receiver end. The receiver knows its own
private key, and with the help of the private key receiver converts the
cipher text into readable format i.e. plain text
The below example shows the working of public-key cryptography.
Let us try to under the working of public-key cryptography with an example.
Suppose Sachin is the sender who wants to send a message to Anurag. Here
Anurag is the receiver.
• Sachin uses Anurag’s public key to encrypt the message and Anurag uses
his own private key to decrypt the message.
• First Sachin creates plain text. Sachin has access to Anurag’s private key
and cipher text. Using Anurag’s public key and his own public key.
• Sachin will generate an encrypted message i.e. cipher text which is in an
unreadable format. After applying the encryption process plain text
converts into cipher text.
• Now, Anurag receives a cipher text. First Anurag will decrypt the cipher
text message into a readable format. For decrypting Anurag will use the
private key. Now cipher text converts into plain text and is readable by
the receiver. Because Sachin keeps his private key, Anurag knows that
this message couldn’t have come from anyone else. This is also called a
digital signature.
Benefits of Public-key Cryptography:
• Authentication: It ensures to the receiver that the data received has been
sent by the only verified sender.
• Data integrity: It ensures that the information and program are changed
only in a specific and authorized manner.
• Data confidentiality: It ensures that private message is not made
available to an unauthorized user. It is referred to as privacy or secrecy.
• Non-repudiation: It is an assurance that the original creator of the data
cannot deny the transmission of the said data to a third party.
• Key management: Public-key cryptography allows for secure key
management, as the private keys are never transmitted or shared. This
eliminates the need for a secure channel to transmit the private key, as is
required in symmetric key cryptography.
• Digital signatures: Public-key cryptography allows for the creation of
digital signatures, which provide non-repudiation and can be used to
verify the authenticity and integrity of data.
• Key exchange: Public-key cryptography enables secure key exchange
between two parties, without the need for a pre-shared secret key. This
allows for secure communication even if the parties have never
communicated before
• Secure communication: Public-key cryptography enables secure
communication over an insecure channel, such as the internet, by
encrypting the data with the public key of the recipient, which can only
be decrypted by the recipient’s private key.
• Versatility: Public-key cryptography can be used for a variety of
purposes, such as secure communication, digital signatures, and
authentication, making it a versatile tool for securing data and
communications
Limitation of Public-Key Cryptography:
• One can encrypt and decrypt the fixed size of messages or data. If there is
an attempt to encrypt or decrypt a large size of the message then the
algorithm demands high computational power.
• The main disadvantage of this algorithm is that if the receiver losses its
private key then data/message will be lost forever.
• If someone has access private key then all data will be in the wrong hand.
• There are many secret-key which is faster than public-key cryptography.
• Key distribution: The process of securely distributing public keys to all
authorized parties can be difficult and time-consuming, especially in
large networks.
• Performance: Public-key cryptography is generally slower than
symmetric-key cryptography due to its more complex algorithms, making
it less suitable for applications that require fast processing speeds.
• Security assumptions: Public-key cryptography relies on mathematical
assumptions about the difficulty of certain problems, such as factoring
large numbers, which may not hold true in the future. As a result, public-
key cryptography is vulnerable to future advancements in computing
power and algorithmic breakthroughs.
• Susceptibility to man-in-the-middle attacks: Public-key cryptography
is vulnerable to man-in-the-middle attacks where an attacker intercepts
and alters the public key before it reaches the intended recipient. This can
result in the attacker being able to decrypt the message or impersonate the
sender.
• Complexity: Public-key cryptography can be more complex to
understand and implement than symmetric-key cryptography, requiring
specialized knowledge and expertise.
Difference between Public and Private Blockchain:
[Link] Basis of Comparison Public BlockChain Private BlockChain
1. Access-- In this type of blockchain In this type of
anyone can read, write and blockchain read and
participate in a blockchain. write is done upon
Hence, it is permissionless invitation, hence it is
blockchain. It is public to a permissioned
everyone. blockchain.
2. Network Actors – Don’t know each other Know each other
3. Decentralized Vs A public blockchain is A private blockchain
Centralized decentralized. is more centralized.
4. Order Of Magnitude The order of magnitude of a The order of
public blockchain is lesser than magnitude is more as
that of a private blockchain as it compared to the
is lighter and provides public blockchain.
transactional throughput.
5. Native Token Yes Not necessary
6. Speed Slow Fast
7. Transactions per Transactions per second are Transaction per
second lesser in a public blockchain. second is more as
compared to public
blockchain.
8. Security A public network is more secure A private blockchain
due to decentralization and is more prone to
active participation. Due to the hacks, risks, and
higher number of nodes in the data breaches/
network, it is nearly impossible manipulation. It is
for ‘bad actors’ to attack the easy for bad actors
system and gain control over the to endanger the
consensus network. entire network.
Hence, it is less
secure.
9. Energy Consumption A public blockchain consumes Private blockchains
more energy than a private consume a lot less
blockchain as it requires a energy and power.
significant amount of electrical
resources to function and
achieve network consensus.
10. Consensus algorithms Some are proof of work, proof Proof of Elapsed
of stake, proof of burn, proof of Time (PoET), Raft,
space etc. and Istanbul BFT
can be used only in
case of private
blockchains.
11. Attacks In a public blockchain, no one In a private
knows who each validator is and blockchain, there is
this increases the risk of no chance of minor
potential collision or a 51% collision. Each
attack (a group of miners which validator is known
control more than 50% of the and they have the
network’s computing power.) suitable credentials
to be a part of the
network.
12. Effects Potential to disrupt current Reduces transaction
business models through cost and data
disintermediation. There is redundancies and
lower infrastructure cost. No replace legacy
need to maintain servers or systems, simplifying
system admins radically. Hence documents handling
reducing the cost of creating and getting rid of
and running decentralized semi manual
application (dApps). compliance
mechanisms.
13. Examples Bitcoin, Ethereum, Monero, R3 (Banks), EWF
Zcash, Dash, Litecoin, Stellar, (Energy), B3i
Steemit etc. (Insurance), Corda.
HASH PUZZLES:
An algorithm that transforms a given amount of data (the "message") into a
fixed number of digits, known as the "hash," "digest" or "digital fingerprint."
Hash functions are a fundamental component in digital signatures, password
security, random number generation, message authentication and blockchains.
A hash can also be used to avoid the risk of storing passwords on servers that
could be compromised (see zero proof example). See RSA and hashing.
One-Way Processing:
Also called a "one-way hash function" because it is nearly impossible to turn the
digest back into the original data. It is also exceedingly rare that two different
inputs can result in the same output.
Blockchain Integrity:
This one-way processing guarantees that existing blockchain crypto balances
and smart contract program code cannot be altered. All transactions in a block
are hashed into the subsequent block creating a chained linkage, and any
alteration to an existing block breaks the chain (for details, see blockchain). See
Merkle tree, HMAC, digital signature, MD5 and hash.
Solve the Bitcoin Puzzle by Hashing
As transactions are combined in a block by Bitcoin miners, they must solve a
mathematical puzzle to prove they did work (see illustration below). The first to
do so earns the right to add the new block to the blockchain and collect the fees
and new coins. This proof-of-work (PoW) system is also used by Ethereum (see
Ethash); however, that is changing (see Ethereum 2.0)
With specialized hardware executing trillions of hash computations per second,
it can take a single machine years to come up with the required hash, which is
why mining pools use hundreds of machines (see miner hardware). So much
hash processing takes place mining Bitcoin worldwide that the electricity used
could power a small country (see proof-of-work algorithm and hash rate). See
crypto mining.
Hashes Are Fixed in Size
The hash value guarantees only that it is mathematically equal to the data it has
hashed. If the data are changed in any way, that same hash cannot be generated.
No matter how large or small the input, the hash output is fixed; for example,
Bitcoin hashes are 256 bits long. See SHA.
Solving the Bitcoin Puzzle
The puzzle is finding the random number that, when added to the block's
header, generates a hash with some number of leading zeros. Trying a new
number trillions of times per second, the miner algorithm attempts to find the
one that generates the desired results.
AntPool Wins Block 753673
The Bitaps website shows new Bitcoin blocks in real time. Notice the 19
leading zeros, which was the difficulty level at 17:38 UTC on 9-11-2022. The
number of zeros is adjusted every
2,016 blocks to keep transactions flowing at one new block approximately every
10 minutes
EXTENSIBILITY OF BLOCK CHAIN CONCEPTS:
Extensibility refers to the ability of a system to adapt and evolve over time.
The extensibility of blockchain technology allows for the development of new
use cases beyond its original intent. Extensibility is a critical factor in the
ongoing success of blockchain technology.
Blockchain technology has a vast range of potential use cases, from supply
chain management to identity verification to voting systems. The extensibility
of blockchain technology allows for the creation of new use cases that were
previously impossible. The potential use cases for blockchain technology
continue to expand as the technology evolves. It is necessary to understand the
new ideas separately and together.
Blockchain Technology concepts include public-key and private-key
cryptography, peer-to peer file sharing, distributed computing, network models,
pseudonymity, blockchain ledgers, cryptocurrency protocols, and
cryptocurrency.
It is a required to understand these concepts in order to operate in the
blockchain technology environment. When you understand the concepts
involved, it is not only possible to innovate blockchain-related solutions, but
further, the concepts are portable to other contexts.
This extensibility of blockchain-related concepts may be the source of the
greatest impact of blockchain technology as human agents understand these
concepts and deploy them in every venue they can imagine.
One broad way of thinking about the use of blockchain concepts is applying
them beyond the original context. The extensibility of blockchain technology
allows for the creation of new use cases and the evolution of existing ones.
However, there are significant challenges to be addressed, including scalability,
privacy, governance, and sustainability
As blockchain technology continues to evolve, its potential use cases will
continue to expand.
Some of the challenges to be addressed are
1. Smart Contracts
2. Interoperability
3. Scalability
4. Privacy
5. Governance
6. Sustainability.
Smart Contracts:
Smart contracts are self-executing contracts with the terms of the agreement
between buyer and seller being directly written into lines of code.
Smart contracts are a key innovation in blockchain technology, enabling the
automation of complex processes.
Smart contracts have the potential to transform many industries, including
financial services, real estate, and supply chain management .
Scalability:
Scalability refers to the ability of a system to handle increasing amounts of work
without impacting performance
Scalability is a significant challenge for blockchain technology, which currently
struggles with slow transaction processing and high fees.
Several solutions are being developed to address scalability, including sharding,
layer 2 solutions, and blockchain interoperability.
Interoperability:
Interoperability refers to the ability of different blockchain networks to
communicate and work together seamlessly.
Interoperability is critical for the widespread adoption of blockchain
technology. Several projects are underway to develop interoperability solutions,
including Polkadot, Cosmos, and Ark.
Privacy:
Privacy is a critical concern for many blockchain use cases, particularly those
involving sensitive data.
Several privacy-focused blockchain projects, such as Monero and Zcash, have
emerged to address this issue
Privacy-enhancing technologies, such as zero-knowledge proofs, are also being
developed to improve privacy on public blockchains.
Governance:
Governance refers to the systems and processes in place to manage and regulate
a blockchain network.
Effective governance is essential for the ongoing success of blockchain projects.
Several governance models exist, including on-chain governance, off-chain
governance, and hybrid models.
Sustainability:
Sustainability refers to the ability of a blockchain network to operate over the
long term.
Blockchain networks require significant computing power and energy
consumption, which can be a barrier to sustainability.
Several projects are exploring alternative consensus mechanisms, such as proof
of stake, to improve sustainability.
Some of the use cases are
1. Financial Services
2. Supply chain Management
3. Health Care
4. Identity Management
5. Voting Systems
Financial Services:
Blockchain technology has the potential to transform the financial services
industry by enabling faster, more secure, and more efficient transactions.
Use cases for blockchain in financial services include cross-border payments,
trade finance, and digital identity
Several blockchain projects are focused on financial services, including Ripple,
Stellar, and Corda.
Supply Chain Management:
Blockchain technology can improve supply chain management by increasing
transparency and traceability, reducing fraud and counterfeiting, and improving
efficiency. Use cases for blockchain in supply chain management include
tracking the origin and movement of goods, verifying product authenticity, and
reducing waste.
Several blockchain projects are focused on supply chain management, including
VeChain, Waltonchain, and Ambrosus.
DIGTIAL IDENTITY VERIFICATION:-
At Dock, we built our own digital identity blockchain because it was:
• Faster: Other blockchain options were congested and took a long time to
finalize transactions
• Most cost-effective: There weren’t many good solutions at the time for
making transactions
• Customization: Our public, permissionless blockchain is built
specifically for decentralized identity use cases to better accommodate
customers
• Precedence: We're a first class application on our own chain in contrast
to other chains where we would run the risk of being preempted by other
work.
The Dock blockchain serves as a foundation of trust by keeping an authentic
record of all verifiable DIDs, public cryptography keys, and invalidation
registries.
Verifiable Credentials that are issued are stored outside of the chain, usually in a
holder's digital wallet app, along with its corresponding cryptographic key pairs.
To ensure data privacy, the only data entered on the Dock chain are the issuer's
and holder's DIDs, Credential Schema (its "template"), and Revocation
Registries.
Digital Identity Blockchain Examples
These are just a few of many examples of how Dock’s digital identity
blockchain can be leveraged in various industries:
• Secure identity verification: Digital identity systems leveraging
blockchain can instantly and securely verify the identity and credentials
of individuals for various purposes, such as opening bank accounts, or
accessing government services. Blockchain-based identity verification
provides enhanced security as it eliminates the need for centralized third-
party verification services and prevents identity fraud and theft.
• Healthcare Records: Patients can create and manage their own digital
identity while healthcare providers can securely verify patient records and
medical histories. This can result in providing better care while also
ensuring data privacy and security.
• Supply Chain Management: Blockchain-based digital identities can be
used to track and manage supply chain information, providing greater
transparency and [Link] creating digital identities for products,
supply chain managers can track the movement of goods across the
supply chain, ensuring product authenticity and preventing counterfeiting
and fraud.
Digital Identity Blockchain Projects
These are just a few of a growing number of organizations using Dock’s
technology for digital identity blockchain projects:
• Gravity eliminates Health & Safety certificate fraud with Dock (South
Africa)
• SEVEN mile issues fraud-proof verifiable certificates using Dock
(Australia)
• BurstIQ Makes Health Data Verifiable, Secure, and Portable With Dock
(USA)
BLOCK CHAIN NEUTRALITY:
Blockchain technology is transforming how markets work. Blockchains
eliminate the need for trusted gatekeepers like banks to execute, verify, and
record transactions. In the financial markets, their disruptive potential threatens
both Wall Street banks and Silicon Valley venture capitalists.
How blockchain technology is regulated will determine whether it encourages
or inhibits competition. Some blockchain applications present serious fraud and
systemic risks, complicating regulation.
This Article explores the antitrust and competition policy challenges blockchain
presents and proposes a regulatory strategy, modeled on Internet regulation and
net neutrality principles, to unlock blockchain’s competitive potential.
It contends that financial regulators should promote blockchain competition—
and the resulting market decentralization—except in cases where specific
applications are shown to harm consumers or threaten systemic safety.
Regulators also should ensure open access and non- discrimination on dominant
blockchain networks. This approach will not only serve traditional antitrust
goals of lowering prices and promoting innovation, but it also might achieve
broader economic and social reform by reducing the power and influence of the
biggest financial institutions.
DIGITAL ART:-
When talking about digital environments and art, the issue of authenticity and
uniqueness of each work can arise. Creators and buyers of art and collectors of
all kinds of digital assets have the same concerns: is this work authentic, is it
unique, are there copies of a given digital work.
Digital art and millionaire collecting
And the sum of money that this new artistic current moves is not small. In 2021
the news broke: Beeple, a digital artist, became world famous when his work
‘Everydays – The First 5000 Days’ sold for 57 million euros. At the time, it
became the third most expensive work of art ever auctioned by Christie’s by a
living artist. Not all digital works have such an impact, but this milestone put
this field on the map. The buyers of these pieces are consumers who are very
familiar with cryptocurrencies and can start to get their hands on a collection of
interesting pieces for much less than what Beeple’s work cost. From around
€600 it is possible to find interesting works, without the need to join more
conventional and perhaps more elitist art and collecting circuits.
Precisely following this alliance of crypto-art and blockchain, in 2022,
Telefónica launched a collection of 114 NFTs associated with a series of 114
unique drawings in digital format made by the chef Ferran Adrià, depicting the
history of culinary evolution.
BLOCK CHAIN ENVIRONMENT:-
Blockchain technology has scaled rapidly in the last several years and is
projected to expand to an even larger market across industries and countries. It
is shaking up the global financial system, but environmental concerns risk
stifling innovation.
Potential regulatory action by governments concerned with the energy impact of
blockchain activity is another reason to focus on sustainability. In response,
blockchain participants are considering environmental, social and governance
(ESG) issues in their efforts to innovate.
For example, Ethereum, the blockchain platform and the second largest
cryptocurrency by market capitalization, Ether (ETH), is transitioning its
consensus mechanism from proof-of-work to proof-of-stake in an effort known
as "The Merge".
One of the main drivers behind The Merge is the ability to measurably reduce
energy consumption, indicating the urgency with which developers are factoring
in their environmental impact.
To help navigate this complex landscape, PwC has developed a first-of-its-kind
assessment framework that allows organizations to evaluate their environmental
footprint as they look to take advantage of this emerging technology.
Breaking down blockchain technology
Blockchain is a distributed ledger technology that maintains data through a
peer-to-peer network of computers. Although it was originally developed to
facilitate cryptocurrency transactions, blockchain has expanded to other
capabilities. From verifying ownership of digital assets like NFTs to tracking
items in a supply chain, its versatility can drive innovation and support
business transformation. Blockchain provides an opportunity for organizations
to build trust through its decentralized, secure and transparent features, but its
reputation as a threat to climate goals remains an obstacle
The E in ESG: Blockchain’s environmental impact
A closer look reveals that not all blockchain protocols are the same and may
have different purposes and varying levels of environmental impact.
A key component of these protocols is the consensus mechanism, which is the
defined approach to validate transactions and prevent malicious activity. Each
consensus mechanism has advantages and disadvantages regarding
decentralization, security and scalability, and adjustments to these trade-offs can
unlock opportunities to make the respective blockchain more sustainable.
A thorough analysis of blockchain protocols can inform the decisions of
regulators, users and the market as this technology continues to grow.
Blockchain has significant potential to, and it may prove to be a valuable tool to
help companies advance environmental aspects of their ESG goals.