Blockchain Technology

Blockchain Technology
Giuseppe Andreetti

Master in Innovation and Research in InformaticsMaster in Innovation and Research in Informatics
● Introduction
● Distributed Ledger
● Blockchain
● How Blockchain works
● Bitcoin
● Blockchain 2.0
Outline
Fall Semester 2017 Computer Networks Architecture and Network Management (CNANM-MIRI) 2

On the Internet if we want to exchange informations
or money we need a third-part that sign,certify and
validate these data.
Obviously, the third-part offers us a service that
most of the time we have to pay.
● Blockchain is born in order to eliminate this third-
part.
Why is Blockchain born?

● The blockchain technology is the technology on
which Bitcoin is based, this type of
implementation was described the ﬁrst time by
Satoshi Nakamoto (it is a ﬁctitious name used by
the unknown person or persons who designed
bitcoin and created its original standard) in 2008
by a white paper: “Bitcoin: A Peer-to-Peer
Electronic Cash System”.
Introduction

● What is a ledger?
A ledger, is defined as a central repository of the
accounting information of an organization in which
the summaries of all financial transactions during an
accounting period are recorded.
The transaction are registered in chronological
order.
Ledger

A digital ledger is stored in a central server:
● control mechanism that authenticates users, enables secure access, and
enforces access restrictions (for example, read-only)
A distributed ledger:
● list of cryptographically signed, irrevocable records of transactions that is
shared by a distributed network of computers
● every participant has the same copy of the ledger. Each participant may
propose a new transaction to be added to the ledger and when consensus
that the transaction is valid is reached, it is added to the register
Distributed Ledgers
● A consensus mechanism is used in which
computers on the network check each other to
ensure records are consistent. This mechanism is
implemented by systems called miners.

Architecture Comparison

● It is a growing list of records, blocks, which are linked to
each other and made safe by the use of cryptography.
● Each block in the chain contains a hash pointer as a link
to the previous block, a timestamp and the transaction
data.
● Blockchain, is basically an open and distributed register
that can record transactions in an efficient, verificable and
permanent way. For this use, this database exploits a
peer-to-peer network that connects to a protocol for the
validation of new blocks. Once registered, the data in a
block can not be retroactively changed.
What is Blockchain?

● A blockchain is a linear sequence of blocks used
to store transactions.
● Each block contains one or more related
transactions, and the blocks are ordered in
increasing time sequence.
Blockchain concepts

Chain
It is computationally feasible to add a new block to the end of the chain
but computationally infeasible to replace a block interior to the chain or
to insert a new block between two existing blocks in the chain.

● A unique identifier for the blockchain; remains constant
for all subsequent blocks.
● Blocksize field that specifies the total number of bytes in
the block.
● Block format version.
● Backward Link consists of the hash of all of the headers
of the preceding block.
● Transaction Hash. This hash value is computed from the
set of data blocks that comprise the list of transactions.
● Timestamp, which indicates the relative time that this
block was created.
● Mining Difficulty, is a measure of how difficult it is to find
a new block.
● Nonce, casual number used for the proof-of-work (varying
this number changes the PoW difficulty)
● Transaction Counter, number of transactions in this
block.
● Transaction, the (nonempty) list of transactions.
Structure of the blocks

Linkage Between Blocks

Merkle Tree
● The transaction blocks are
processed in pairs; if there is an
odd number of transactions, the
last transaction on the list is
duplicated.
● Each pair of blocks is
concatenated to form a binary
block that is input to a hash
function, typically SHA-256.
● This process continues until a
single hash value results, known
as the Merkle Root.

● Each user has a copy of the blockchain.
● Each user running the blockchain client is part of the
network.
● New blocks are broadcast to the network.
● Each user updates its local copy of the blockchain.
● If a user is behind the current height of the chain, it can
ask other nodes for copies of the blocks needed to catch
up.
● If every user has a copy of the blockchain, when the
blockchain is queried, every user gets the same answer.
Characteristics of the blockchain
environment

● Mining: linking a new block to the end of the chain.
● Proof-of- Work: sacrifice of time and energy dedicated to
that particular block.
● Miners: who provide to mine the blocks. In distributed
blockchain application, there are no designated miner
(generally there is a reward for the miners, for example, in
the Bitcoin environment they gain cryptovalues).
In the case there are two equal block mined to different
miners, the clients choose the block with the highest Proof-
of- Work.
Blockchain Mining

● Users broadcast transactions onto the network to be added to
a new block.
● A miner collects these transactions to form a pool of
transactions that are not yet part of a block.
● The miner constructs a new block with the pool of the actions
it currently has.
● The miner then invests considerable computational effort to
construct a new block (Bitcoin: The cryptographic hash value
of the block header is calculated to form the backward link used
by the next block in the chain.
● This block is then broadcast to all the miners on the network
and tentatively added to the end of the blockchain.
How is constructed a block

An adversary who wishes to successfully alter the
transaction list is faced with two alternative challenges:
1. modify the transaction list in such a way that the
transaction hash is unchanged, also leaving the header
hash unchanged; this modification is computationally
infeasible for a secure hash function (such as SHA-256);
2. allow the transaction hash to change but modify the
nonce so that the header hash is unchanged; again, this
modification is computationally infeasible;
The nonce, transaction hash, and header hash protect the
blockchain.
Attack the block

Building the chain
Some miners works to add a
block on 0.
In the same time differents
miners attach 2 differents block
to 0.
Some miners will work on 1B,
other on 1A.
A miners attach a block on 1B,
so 1A is discarded and all the
miners follow to work on the
longest chain.

It is not necessary for all users to perform all the blockchain tasks.
There are 5 categories of configuration:
1. Basic client: key management operations, no P2P comunications.
2. Thin Client: key management operations. It performs some P2P
tasks (network communication and blockchain verification). It does
not keep a copy of the full blockchain.
3. Thick Client: key management operations and P2P tasks. It mantain
a copy of the full blockchain.
4. Fully Functional Basic Client: as a thick client, but also executes
the mining algorithm.
5. Hosted Client: webclient, it does not run on a user-controlled
device.
Type of Clients

● Public: nodes participating in a public blockchain
network do not have to obtain permission to
access the ledger or add transactions.
● Consortium: The right to read the blockchain
may be public or restricted to the participants. The
validation of blocks is made by authorized nodes.
● Fully private: read and write permissions are
managed by a central authority.
Blockchain Types

● Digital currency or digital money is an Internet-based medium
of exchange distinct from physical (such as banknotes and
coins) that exhibits properties similar to physical currencies, but
allows for instantaneous transactions and borderless transfer-
of-ownership.
● Cryptocurrency: a digital currency in which encryption
techniques (cryptography) are used to regulate the generation
of units of currency and verify the transfer of funds, operating
independently of a central bank.
● The first cryptocurrency to be created was Bitcoin back in
2009. Today there are hundreds of other cryptocurrencies,
often referred to as Altcoins.
What is Cryptocurrency ?

● Bitcoin is protocol. The unit digital currency is “bitcoin”.
● First “decentralized” digital currency. They are digital coins you can send
through the internet.
● Based on blockchain: a growing general public ledger of cryptographically-
signed transactions.
● All transactions are public, but are not by default tied to anyone's real identity.
● Bitcoin protocol provide to the privacy of the users.
● Secured by collective compute power of miners. It is very difﬁcult to create a
new valid block, but very easy for every client, miner or not, to check the
validity of a new block.
Bitcoin
In simple words, bitcoin is an open source
software to transfer money over the internet.

Bitcoin relies on a network of volunteers, to
collectively implement a replicated ledger. The
ledger tracks the balance of all accounts in the
system. Each node keeps a complete replica of the
ledger.
Bitcoin: The Ledger

Bitcoins contain the public key of their owner (i.e.
the address). When a user A transfers money to
user B, renounces his property by adding the public
key of B (his address) to the coins in question and
signing them with his private key. Then it transmits
these coins into a message through the peer-to-
peer network (“transaction”).
Bitcoin: The transactions

● Bitcoin miner nodes are responsible for validating
transactions and the state transitions that update the
ledger. Transactions are grouped in blocks by miners.
Miners are responsible for validating the transaction block
and performing a hard mathematical computation or proof
of work (PoW) which goes along used to validate the
block of transactions.
Bitcoin: Miners
● Miners that validate Bitcoin transactions get paid in
Bitcoin.

The ledger replicas have to be consistent among all
the nodes of the network and respect the same
temporal order. Bitcoin do this by tentatively
committing transactions and then synchronizing
at regular intervals by broadcasting a block created
by one of the nodes.
Bitcoin: The Blocks

Have to be a chronological order over the blocks
and therefore about the transactions contained
within them. The blocks are organized in a directed
tree. Each block contains a reference to a
previously found block. The block b referenced by
a block b’ is called its parent.
Bitcoin: Blockchain

The Blockchain 2.0 is an evolution of the
blockchain protocol enabling not only to exchange
transaction but rather code and programs in the
form of Smart Contracts.
Now developers are allowed to build programs and
API's on the Blockchain Protocol.
Blockchain 2.0

The objective of this type of implementation is to allow
peopleto easily write Dapp (decentralized application) trough
the use of the blockchain technology. Dapp is a tool for
people and organizations on different sides of an interaction
use to come together without any centralized intermediary.
These apps consists in 2 part: a frontend part written in
HTML (an interface) and a backend part. The backend
operations are validated by all nodes on the network.
(Ex: in Ethereum it is implemented a scripting language.)
Programming language and Dapp

● Smart contracts are softwares “written“ on a shared secure
database, traceable and immutable, and they verify
automatically at a certain date or event some stipulation pre-
established between 2 or more host in the network.
Smart Contracts
● There are often hundred
condition in a single smart
contractor there are many
smart contract
interconnected.

[1] William Stallings, “A Blockchain Tutorial”, The
Internet Protocol Journal, Volume 20, Number 3,
November 2017.
[2] Satoshi Nakamoto, “Bitcoin: A Peer-to-Peer
Electronic Cash System”, 2008.
[3] Stuart Haber, W. Scott Stornetta, “How to Time-
Stamp a Digital Document”, Journal of Cryptology,
Vol. 3, No. 2, pp. 99-111, 1991.
References

Blockchain Technology

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