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BLOCK CHAIN TECHNOLOGIES

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Blockchain technology is a software; a

protocol for the secure transfer of unique
instances of value (e.g. money, property,
contracts, and identity credentials) via the
internet without requiring a third-party
intermediary such as a bank or government

BLOCK CHAIN IS
Email over IP, Voice over IP, Money over IP
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Issues with Current Banking

System:
Any existing system will have some
issues.

1. High Transaction Fees

As per a report from by Makensy:
JPMorgan Chase, Bank of America
and Wells Fargo earned more tha
n $6 billion from ATM and overdra
ft fees 3
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RS
RS.22

Rs.100
RS.98
RS

Here, A is sending Rs 1000 to B but it must pass through a

trusted third party like a Bank or Financial service company
before B can receive it. A transaction fees of 2% is
deducted from this amount and Bonly receives Rs. 98 at
the end of the transaction. Now this may not seem a big
amount but imagine if you were sending Rs. 100,000
instead of Rs1000 then the transaction fees also increases
to higher like 2,000 which is a big amount.
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[Link] Spending

Double-spending is an error in
digital cash scheme in which the
same single digital token is spent
twice or more.

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RS. 400
RS.500

RS. 500

B
Here Ahas only RS. 500 in his account. He initiates 2
transactions simultaneously to B for RS. 400 and C for
RS. 500. Normally this transaction would not go
through as he doesn’t have sufficient balance of RS,
900 in his account. However, by duplicating or
falsifying the digital token associated with every
digital transaction, he can complete these
transactions without the needed balance. This
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operation is known as Double Spending.
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3. Net fraud and hacking
In India, the number of fraud cases related to
credit/debit cards and Internet banking was 28,824
for the year 2019. The net amount involved in
these frauds was Rs 77.79 crore, of which Rs 21
crore

was from internet frauds and Rs 41.64

crore was from ATM/debit card-related
frauds. 7
 Financial Crisis and Crashes
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Imagine giving all your saving to someone you

trust only to know that they have gone and lost
it somewhere else.
That’s what happened in the 2007-08 when
Banks and Investment Organizations had
borrowed heavily and lent it as subprime
mortgages to people who could not even pay
back these loans.

This in turn lead to one of the greatest financial

crisis ever seen and was estimated to have
caused losses close to $11 Trillion
($11,000,000,000,000) worldwide. 8
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How does Blockchain solve these

issues?
Below are some of the ways through which
the Blockchain technology tackles the above
mentioned issues:
• Decentralized System
The Blockchain system follows a
decentralized approach when compared to
banks and financial organisations which are
controlled and governed by Central or
Federal Authorities. Here, everyone who is
part of the system becomes equally
responsible for the growth and downfall
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A ledger is like a database, a Google or

Excel spreadsheet
 Add new records by appending rows
Each row contains information
Account balances, who owns certain
assets
 Memory and execution state of a
computer program
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A DISTRIBUTED LEDGER TECHNOLOGY

“A DISTRIBUTED LEDGER IS A TYPE OF DATA

STRUCTURE WHICH RESIDES ACROSS
MULTIPLE COMPUTER DEVICES,GENERALLY
SPREAD ACROSS LOCATIONS OR REGIONS”

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Distributed network
Many nodes or peers that are connected in
a network with no single point of failure or
centralized control
Security and resiliency: design the network
so that if some peers crash or attack the
network maliciously, the network can still
operate

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• Public Ledgers

The ledger which holds the details of all transactions

which happen on the Blockchain, is open and
completely accessible to everyone who is associated
with the system.

Once you join the Blockchain network, then you can

download the complete list of transaction since its
initiation. Even though the complete ledger is publicly
accessible, the details of the people involved in the
transactions remains completely anonymous.

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To use the network, need a Cryptographic

Identity
(sort of like an email address)

If want to access your email, you need the

password, which functions similarly to a private
key and your public key is like your address
(more complicated)

Authentication: peers sign transactions with

their cryptographic identity, this enables account
“ownership” and can attribute blame 17
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• Verification of Every Individual

Transaction

Every single transaction is verified by

cross-checking the ledger and the
validation signal of the transaction is
sent after a few minutes. Through the
usage of several complex encryption
and hashing algorithm, the issue of
double spending is eliminated.
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• Low or No Transaction Fees

The transaction fees are usually not
applicable but certain variants of Blockchain
do implement certain minimal transactions
fees. These transaction fees are however
relatively quite less when compared to the
fees implied by banks and other financial
organisations. If a transaction needs to be
completed on priority then an additional
transaction fees can be added by the user so
as to have the transaction verified on priority.

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Blockchain is a continuously growing list of records

called blocks, which are linked and secured using
cryptographic techniques.

A Blockchain can serve as “an open and distributed

ledger, that can record transactions between two
parties in a verifiable and permanent way.”

This ledger that is shared among everyone in the

network is public for all to [Link] brings in
transparency and trust into the system. A block is the
‘current’ part of a Blockchain which records some or all
of the recent transactions, and once completed goes
into the Blockchain as permanent database. Each time
a block gets completed, a new block is generated.
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The Blockchain is typically managed by a peer-to-

peer network, collectively adhering to a protocol for
validating new blocks.

Once recorded, the data in any given block cannot be

altered retroactively without the alteration of all
subsequent blocks and a collusion of the network
majority.

Transactions once stored in the Blockchain are

permanent. They cannot be hacked or manipulated.

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How Blockchain Transaction Works?

Step 1) Some person requests a transaction. The transaction could be

involved cryptocurrency ,contracts, records or other information.

Step 2) The requested transaction is broadcasted to a P2P network with

the help of nodes.

Step 3) The network of nodes validates the transaction and the user's
status with the help ofknown algorithms.

Step 4) Once the transaction is complete the new block is then added to the
existingblockchain. In such a way that is permanent and unalterable.
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Blockchain versions

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Blockchain 2.0: Smart Contracts

The new key concepts are Smart Contracts, small computer

programs that "live" in the blockchain. They are free computer
programs that execute automatically, and check conditions
defined earlier like facilitation, verification or enforcement. It is
used as a replacement for traditional contracts.

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Blockchain 3.0: D Apps:

D Apps is an abbreviation of decentralized

application.
It has their backend code running on a
decentralized peer-to-peer network.

A DApp can have frontend code and user

interfaces written in any language that can
make a call to its backend, like a traditional
Apps.
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A BLOCK CHAIN IS A SPECIFIC FORM OF SUBSET OF DISTRIBUTED LEDGER

TECHNOLOGIES WHICH CONSTRUCTS A CHRONOLOGICAL CHAIN OF

BLOCKS , SO THE NAME BLOCK CHAIN IS GIVEN

A BLOCK IS A SET OF TRANSACTIONS WHICH ARE BUNDLED TOGETHER AND

ADDED TO THE CHAIN AT SAME TIME

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A BLOCK CHAIN IS A PEER TO PEER DISTRIBUTED

LEDGER FORGED BY CONSENSUS COMBINED

WITH A SYSTEM FOR “SMART CONTRACTS” AND

OTHER ASSISTIVE TECHNOLOGIES

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SMART CONTRACTS ARE SIMPLY COMPUTER PROGRAMS THAT

EXECUTE PREDEFINED ACTIONS WHEN CERTAIN CONDITIONS WITHIN

THE SYSTEM ARE MET

CONSENSUS: REFER TO THE SYSTEM OF ENSURING THAT PARTIES AGREE

TO A CERTAIN STATE OF THE SYSTEM AS THE TRUE STATE

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In order to update the ledger, the

network needs to come to consensus
using an algorithm

Consensus:

Everyone agrees on the current state

(e.g. how much money does each
account have) and making sure that no
one is double-spending money 30
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Blockchain is not Bitcoin, but it is the technology behind

Bitcoin

Bitcoin is the digital token and blockchain is the ledger to

keep track of who owns the digitaltokens’

You can't have Bitcoin without blockchain, but you can

have blockchain without Bitcoin.

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Features of Blockchain
Below are the most important features of Blockchain
technology that has made it a revolutionary technology:

• SHA256 Hash Function

• Public Key Cryptography
• Distributed Ledger & Peer to Peer
Network
• Proof of Work
• Incentives for Validation
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Understanding SHA256 - Hash

A block also has a hash.

A hash can be understood as a fingerprint

which is unique to each block. Itidentifies a
block and all of its contents, and it's always
unique, just like a fingerprint. So once a
block is created, any change inside the
block will cause the hash to change.33
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Assume an attacker is able to change the data

present in the Block 2.

Correspondingly, theHash of the Block also

changes.
But, Block 3 still contains the old Hash of the
Block 2. This makes Block 3, and all succeeding
blocks invalid as they do not have correct hash
the previous block.

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Assume an attacker is able to change the

data present in the Block 2.
Correspondingly, theHash of the Block also
changes. But, Block 3 still contains the old
Hash of the Block 2. Thismakes Block 3,
and all succeeding blocks invalid as they
do not have correct hash the
previousblock.

Therefore, changing a single block can quickly make all following blocks invalid.

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Lets try to understand each one of them one by one.

SHA256 Hash Function

The core hash alogorithm used in blockchain

technology is the SHA256. The purpose of using a
hash is because the output is not ‘encryption’ i.e it
cannot be decrypted back to the original text. It is a
‘one-way’ cryptographic function, and is a fixed size
for any size of source text.

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Hash Encryption

Blockchain uses cryptography to ensure that all the data in the

blocks is kept secure from unauthorized access and is not
altered.

Blockchain uses SHA-256 for encryption. SHA-256 is one of

the strongest hash functions available. This cryptographic hash
algorithm generates an almost unique 256-bit signature for a
text. Blockchain also uses digital signatures to validate users.

Each user has a public and private key. The public key is used
to identify the user uniquely, and the private key gives the user
access to everything in the account
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To successfully tamper with a blockchain

1. One will need to tamper with all blocks on the
chain
2. Redo the proof-of-work for each block
3. Take control of greater than 50% of the peer-to-
peer network

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Public Key Cryptography

This cryptographic technique helps the user by creating a set

of keys referred as Public key and Private key. Here the Public

key is shared with others whereas the Private key is kept as a

secret by the user.

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If A sends some bitcoins to B that transaction

will have three pieces of information:

1 A’s bitcoin address.(A’s Public key)

The amount of bitcoins that A is sending to B
B’s bitcoin address.(B’s Public key)

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. In the process from the sender's side, the sender's

message is passed through a hash function; then,
the output is passed through a signature algorithm
with the user's private key, then the user's digital
signature is obtained. In the transmission, the user's
message, digital signature, and public key are
transmitted.

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Now all this data along with an encrypted digital

signature is sent through the network for
verification.
The Digital signature is again a hash value
achieved by the combination of the B’s bitcoin
address and the amount he is sending to B.
This digital signature is encrypted by the private
key. Once this data is received by a miner who
has to verify this transaction, there are 2 process
he does simultaneously:
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He takes all the un-encrypted data like transaction amount

and public keys of both A and B, and feeds it to a hash
algorithm to get a hash value which we shall call

Hash1

He takes the digital signature and decrypts it using BOTH

public key to get a hash value which we will call as

Hash2
If both Hash1 and Hash2 are the same then it means that
this a valid transaction.

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THANKYOU

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