1% OF EVERYTHING ABOUT BLOCKCHAIN

1% OF EVERYTHING ABOUT BLOCKCHAIN
Created by Ravi Choudhary
Note: There may be some mistakes, I am not a Blockchain expert .
Disclaimer:The Contentof the Document have been taken
from over 30 websites. I have tried to acknowledgethe work
of all people. But due to the sheer number of sources, few
might have been missed.
The document is only for easy reference of students. A
detailed reading of any topic can be found over the net.

DISTRIBUTED LEDGER TECHNOLOGY
 Distributed ledger technology (DLT) refers to a range of technologies that, while similar in
structure, may be implemented in different ways and following different rules
 DLT is a digital system for recording the transaction of assets in which the transactions and their
details are recorded in multiple places(Ledgers- a book or other collection of financial accounts) at
the same time.
 Unlike traditional databases, distributed ledgers have no central data store or administration
functionality.
Example: Recording a transaction across various locations.
DLT’S CAN BE BROADLY CATEGORISEDAS:
1. Public: Anyone on the network can access the ledgers.
2. Private: The ledgers can be accessed by the devices (Nodes) participating in the network.
3. Permissioned: the participants in the network need permission from a specific entity to be able to
make changes to the ledger.
4. Permissionless: The participants in the network don’t need permission from a specific entity to be
able to make changes to the ledger.
.
Reference: 1, 2, 3

WHY WE NEED DLT?
CURRENT BUSINESSLEDGERS
 A single system administrator maintains a master copy of the ledger, which is periodically updated
and shared with all network participants.
ISSUES WITH CURRENT BUSINESSLEDGERS
 They are inefficient, costly, and subject to misuse and tampering.
 They are susceptible to corruption and fraud, which lead to disputes. Having to resolve disputes
and possibly reverse transactions or provide insurance for transactions is costly. These risks and
uncertainties contribute to missed business opportunities.
 Out-of-sync copies of business ledgers on each network participant’s systems lead to faulty
business decisions made on temporary, incorrect data. At best, the ability to make a fully informed
decision is delayed while differing copies of the ledgers are reconciled.
HOW DLT RESOLVE THE ISSUES
 The new systems based on DLT are designed to function without a trusted authority.
 In such systems, transactions are conducted in a peer-to-peer fashion and at the same time broadcast
to the entire set of participants.
References: 1, 2

WHAT IS BLOCK?
 Block can be thought of like a link in a chain.
 Each block can be thought of as a page in a ledger that has been added to the Blockchain.
 It is a permanent store of records which, once written, cannot be altered or removed.
 It stores information about who is participating in transactions by using a unique “digital signature”,
instead of the real name
 Each block stores a unique code called a “hash” that allows us to tell it apart from every other block.
 Hashes are cryptographic codes created by special algorithms
 Each time a block is ‘completed’, it gives way to the next block in the Blockchain
MAJOR COMPONENTS OF A BLOCK
BLOCKHEADER
It connects all blocks and is divided into 6 Parts.
1. Version Number: Mentions the version number used in the Block (Like software version). Refers to which
block validation rule the block follows.
2. Previous hash: Every block in the blockchain data structure, is linked with its predecessors. This feature
contributes to its immutability.
As a change in the arrangement of blocks warrants a change in the whole Blockchain leading to a whole lot
of computation, which is not a feasible option.
3. Merkel Root: Contains the hash of the Blockchain’s Merkle Root(derived from the hashes of all
transactions included in this block).
Hashing makes sure that that none of those transactions can be modified without modifying the entire
header.
4. Timestamp: Stores the time details of when the block was created. The time is given in seconds since
01.Jan.1970.
5. Difficulty Target: It controls how difficult the hash value should be based on the network’s total hash rate.
Helps in controlling the speed of mining.
6. Nonce: Another security Function. It is a Field containing an arbitrary number, changed by miners to
modify the header hash to produce a hash less than or equal to the target threshold.
BLOCKBODY
It contains all transactions that are confirmed with the block (Transaction list).
Reference: 1, 2, 3

A BRIEF HISTORY OF BLOCKCHAIN
1991
A cryptographically secured chain of blocks is described for the first time by Stuart Haber and W
Scott Stornetta
1998
Computer scientist Nick Szabo works on ‘bit gold’, a decentralised digital currency
2000
Stefan Konst publishes his theory of cryptographically secured chains, plus ideas for
implementation
2008
Developer(s) working under the pseudonym Satoshi Nakamoto released a white paper
establishing the model for a blockchain
2009
Nakamoto implements the first Blockchain as the public ledger for transactions made using bitcoin
2014
Blockchain technology is separated from the currency, and its potential for other financial, inter-
organisational transactions is explored. Blockchain 2.0 is born, referring to applications beyond
currency.
The Ethereum blockchain system introduces computer programs into the blocks, representing
financial instruments such as bonds. These become known as smart contracts.
Reference: https://www.icaew.com/technical/technology/blockchain/blockchain-articles/what-is-
blockchain/history

WHAT IS BLOCKCHAIN?
In its simplest definition: A blockchain is a timestamped series of immutable records of data that is
managed by a cluster of computers(Nodes) not owned by any single entity.
It is a simple yet ingenious way of passing information from A to B in a fully automated and safe manner.
The fascinating angle is that anybody can see the data, but they can’t corrupt it.
Larger the network grows and becomes increasingly decentralised, the more secure it becomes.
Falsifying a single record would mean falsifying the entire chain in millions of instances.
A simple analogy for understanding blockchain technology is a Google Doc:
When we create a document and share it with a group of people, the document is distributed instead of
copied or transferred. This creates a decentralised distribution chain that gives everyone access to the
document at the same time. No one is locked out awaiting changes from another party, while all
modifications to the doc are being recorded in real-time, making changes completely transparent.
DIFFERENCE BETWEEN BLOCKCHAIN AND DLT
On the surface, distributed ledger sounds exactly how you probably envision a blockchain. However,
all blockchains are distributed ledgers, but not all distributed ledgers are blockchains.
 The most important difference to remember is that Blockchain is just one type of distributed ledger.
 Blockchain requires proof of work, whereas distributed ledgers do not need proof of work and offer
– theoretically – better scaling options.
 Data on a blockchain is grouped and organised in blocks. The blocks are then linked to one another
and secured using cryptography, whereas no such chain is required in a DLT.
Example: The Michael Jordan collaboration sneakers with Nike are just sneakers, but they are so popular
that people now know them as Jordan’s with their separate identity. That is the case with Blockchain exactly
as it has gained its own identity.
Reference: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10

TYPE OF BLOCKCHAIN

HOW BLOCKCHAIN TECHNOLOGY WORKS & WHY IT IS TAMPER
PROOF?
 Let’s imagine that ten people in one room decided to make a separate currency. They have to
follow the flow of funds, and one person – let’s call him Deep– decided to keepa list of all
actions in a diary.
 One man – let’s call him Ravi – decided to steal money. To hide this, he changed the entries in the
diary.
 Deep noticed that someone had interfered with his diary. He decided to stop this from happening.
 He found a program called a Hash function that turns text into a set of numbers and letters as in the
table below.
(A hash is a string of numbers and letters, produced by hash functions. A hash function is a
mathematical function that takes a variable number of characters and converts it into a string
with a fixed number of characters. Even a small change in a string creates a completely new
hash)
 After each record, Deep inserted a hash. The new entry would something like:
 Ravi decided to change entries again. At night, he got to the diary, changed the record and generated
a new hash.
 Deep noticed that somebody had sifted through the diary again. He decided to complicate the record
of each transaction. After each record, he inserted a hash generated from the record+last hash. So
each entry depends on the previous.
 Now if Ravi tries to change the record, he will have to change the hash in all previous entries. But
Ravi wanted more money, and he spent the whole night counting all the hashes.

 But also Deep did not want to give up. He decided to add a number after each record. This number is
called “Nonce”. Nonce should be chosen so that the generated hash ends in two zeros.
 Now, to forge records, Ravi would have to spend hours and hours choosing Nonce for each line.
More importantly, not only people but computers can’t figure out the Nonce quickly.
 Later, Deep realised that there were too many records and that he couldn’t keep the diary-like this
forever. So when he wrote 5,000 transactions, he converted them to a one-page spreadsheet.
 Shivani checked that all transactions were right.
 Deep spread his spreadsheet diary over 5,000 computers, which were all over the world. These
computers are called nodes. Each node has a copy of the digital ledger or Blockchain
 Every time a transaction occurs, it has to be approved by the nodes, each of whom checks its
validity.
 Once every node has checked a transaction, there is a sort of electronic vote, as some nodes may
think the transaction is valid and others think it is a fraud.
 Now, if Ravi changes one entry, all the other computers will have the original hash. They would not
allow the change to occur.
This one spreadsheet is called a block. The whole family of blocks is the Blockchain. Every node has a
copy of the Blockchain. Once a block reaches a certain number of approved transactions, then a new
block is formed.
The Blockchain updates itself every ten minutes. It does so automatically. No master or central
computer instructs the computers to do this.
As soon as the spreadsheet or ledger or registry is updated, it can no longer be changed. Thus, it’s
impossible to forge it. You can only add new entries to it. The registry is updated on all computers on
the network at the same time.
 Now Deep gathered the ten people together. He needed to explain the new coin to them.
 Ravi had confessed his sins to the group and genuinely apologised. To prove his sincerity, he gave
Paridhi and Aniket their coins back.
 With all that sorted, Deep explained why this could never happen again. He decided to implement
something called a digital signature to confirm every transaction. But first, he gave everyone a
wallet.

WHAT IS A WALLET?
 A wallet is a string of numbers and letters, such as 18c177926650e5550973303c300e136f22673b74.
 This is an address that will appear in various blocks within the Blockchain as transactions take place.
 No visible records of who did what transaction with who, only the number of a wallet.
 The address of each particular wallet is also a public key.
— Now, to carry out a transaction, you need two things: a wallet, which is basically an address, and a
private key.
— The private key is a string of random numbers, but unlike the address, the private key must be kept
secret.
— When someone decides to send coins to anyone else, they must sign the message containing the
transaction with their private key.
— The system of two keys is at the heart of encryption and cryptography, and its use long predates the
existence of Blockchain. It was first proposed in the 1970s.
— Once the message is sent, it is broadcast to the Blockchain network.
— The network of nodes then works on the message to make sure that the transaction it contains is
valid.
— If it confirms the validity, the transaction is placed in a block, and after that, no information about it
can be changed.
NOTE: For a block to be valid it must hash to a value less than the current target; this means that
each block indicates that work has been done generating it. Each block contains the hash of the
preceding block, thus each block has a chain of blocks that together contain a large amount of work.
Changing a block (which can only be done by making a new block containing the same predecessor)
requires regenerating all successors and redoing the work they contain. This protects the block chain
from tampering.
Reference: 1,2

PILLARS OF BLOCKCHAIN TECHNOLOGY
Pillar #1: Decentralisation
 In a decentralised system, the information is not stored by one single entity. In fact, everyone in the
network owns the information.
Why it is better than the Centralised System
 In centralised, all the data is stored in one spot. This makes it easy to target spots for potential hackers.
 If the centralised system were to go through a software upgrade, it would halt the entire system.
 In case a centralised entity somehow shuts down for whatever reason? In this condition, nobody will
be able to access the information that it possesses.
 Worst case scenario, what if this entity gets corrupted and malicious? If that happens then, all the data
that is inside the Blockchain will be compromised.
Pillar #2: Transparency
One of the most interesting and misunderstood concepts in Blockchain is “transparency”.
Some people say that Blockchain gives you privacy, while some say that it is transparent.
Why do you think that happens?
Well…in a Blockchain a person’s identity is hidden via complex cryptography and represented only by their
public address.
So, if you were to look up a person’s transaction history, you will not see “Bob sent 1 BTC” instead you will
see “1MF1bhsFLkBzzz9vpFYEmvwT2TbyCt7NZJ sent 1 BTC”.
So, while the person’s real identity is secure, you will still see all the transactions that were done by their
public address.
This level of transparency has never existed before within a financial system. It adds that extra, and much
needed, level of accountability which is required by some of these biggest institutions.
Pillar #3: Immutability
Immutability, in the context of the Blockchain, means that once something has been entered into the
Blockchain, it cannot be tampered with.
The integrity of the chain can be validated at any time by simply re-calculating the block hashes — if a
discrepancy exists between block data and its corresponding hash, that means the transactions are not valid.
Note: Blockchain doesn’t inherently, automatically, or magically make data truthful — its
implementation merely cryptographicallysecures it so thatit will never be altered or deleted without
consequence.

WHY USE BLOCKCHAIN?
Great question. So glad you asked. Let’s sit back and do a small thought experiment.
What happens if Ujwala and Aashish independently and separately conduct the same petition campaign?
Let’s say it’s for the “Exam free PGPX”.
Let’s say you conduct it in an identical sequence across IIM Ahmedabad, but come up with different sets of
signatures on the petition.
Which version of the signed petition is the “source of truth”?
You would need to trace back your separate trails, one signature at a time, to locate the last discrepancy.
And then you’d have to work further back to identify the first result that diverged between your signature
sheets.
Prior to that root divergence, all other signatures on the two lists should match up.
You then know that prior to that divergence.
Both lists are in accord, so those signatures represent the minimum number of people who signed to support
“Exam free PGPX”.
While that may work well for small surveys, it doesn’t work so well in the digital world. Or voting, banking,
financial transactions, transferring land title, discharging contractual obligations etc.
You need independent, and “trusted third parties” to verify a chain of events, and solemnly reassure you that
the “chain of custody” was unbroken.
That’s where Blockchain Comes: the biggest advantages of using Blockchain
1. You get a history of activity, not just a snapshot in time. When you look at a regular database, you’re
getting a snapshot of data that’s up to date at that moment in time.
Blockchains do this too, but they also maintain a record of all the information that existed before. It’s a
database with history.
2. There’s no one, central point of attack. The fact that Blockchain is a decentralised way of storing and
accessing data makes the whole system incredibly secure – because, unlike a centralised database, there’s no
one single point of entry for hackers.
This makes it particularly useful for recording transactions in a secure manner.
3. And no centralised control. Because the system of record is decentralised and replicated in its entirety in
multiple places, there’s no need for a central administrator and all the costs and infrastructure that comes
with it.
Reference: 1, 2

WHEN MIGHT YOU USE BLOCKCHAIN?
Blockchain is undoubtedly exciting and has the potential to transform how many
businesses operate, but that doesn’t mean it’s the right solution for every scenario.
Here’s why you might choose Blockchainover, say, a standard database:
A. When you want to manage and secure digital relationships or keep a decentralised, shared system of
record.
B. Anywhere you want to keep a long-term, transparent record of assets (for example, to record
property or land rights), Blockchain could be the ideal solution.
‘Smart contracts’, in particular, are great for facilitating digital relationships and transactions. With a
smart contract, automated payments can be released when parties in a transaction agree that their
conditions have been met.
C. Anywhere a middleman or gatekeeper function is expensive or time-consuming.
For example, most accommodation providers currently have to interact with guests via a centralised
aggregator platform, like Airbnb or Expedia (who, in turn, take a cut on each booking). Blockchain
could change all that.
For example, travel company TUI is so convinced of the power of Blockchain; it’s pioneering ways
to connect hoteliers and customers directly, so that they can transact via Blockchain in an easy, safe
and consistent way, rather than via a central booking platform.
D. When you want to record secure transactions, especially between multiple partners, a traditional
database may be suitable for recording simple transactions between two parties. Still, when things
get more complicated, Blockchain can reduce bottlenecks and simplify relationships.
For example, shipping conglomerate Maersk is working with IBM to develop a private blockchain
platform to connect its various partners and customers across the shipping industry.
What’s more, the added security of a decentralised system makes blockchain ideal for transactions in
general.
E. Where the data is in constant flux, but you want to keep a record of past actions. Blockchain is a
better, safer way to record the activity and keep data fresh while maintaining a record of its history.
The data can’t be corrupted by anyone or accidentally deleted, and you benefit from both a historical
trail of data, plus an instantly up-to-date record.

WHEN SHOULDN’T YOU USE BLOCKCHAIN?
A. For one thing, while blockchains make great transaction platforms, they’re not the ideal solution
for super-fast digital transactions that take place in milliseconds. Fastest Blockchain system can
only do around 1000 TPS as of today.
B. Blockchains are, by their very nature, open chains of information. So anytime confidentiality is
a key consideration, a private database is (at least for now) the better option.
C. Aren’t ready to pay the environmental cost, Blockchain consumes a lot of energy.
According to the Diginomist’s BitCoin Energy Consumption reached recently as much as 92% of
Czech Republic energy consumption, which is a country with a 10+ million population.
D. Storage Cost. To comprehend how much storage on the Blockchain will cost, one must keep
certain things in mind.
Firstly, the Blockchain is an ever-growing database which will only grow bulkier with time.
Secondly, each node in the network maintains the Blockchain by downloading all the data
continuously to their computer.
This is why the storage costs may be manageable in the beginning, but it can get exponentially
high over time
Reference: 1,2, 3

SOME FUNCTION WHERE BLOCKCHAIN IS IMPLEMENTED
SUPPLY CHAIN MANAGEMENT
Current Issue with Supply Chain Management:
Nearly all of the world’s leading companies run computerised enterprise resource planning (ERP) and
supply chain management software.
From connected manufacturing equipment to digital shipping notices and RFID scanning, products are
tracked on computerised systems from their earliest origins, often all the way to the recycling bin.
Yet despite this considerable investment in digital infrastructure, most companies have only limited
visibility and insight into where all their products are at any given moment.
The culprit, in most cases, is the analogue gaps that exist between systems within enterprises and across
enterprise boundaries.
Production may be recorded digitally, but the moment it moves to shipping, a PDF document is created for
the shipping label that is little more than a software copy of a printout.
The shipment may have its digital number, but that number tells you where the box is and who signed for it,
not what is actually in the box.
And so on down the road: oceans of digital data but only islands of useful information.
This is not a new problem, and companies using systems like electronic data interchange (EDI) and XML
messaging try to maintain information continuity across system and enterprise boundaries.
But point-to-point messaging systems have their own issues, as they are often out of sync and move data
only one stop down the supply chain.
The result: inventory that seems to be in two places at once.
Examples signifying traceability issues with Current Supply Chain System:
1) Mica, which is present in makeup, electronics, and automobile paint is often sourced from
illegal mines by child labourers.
2) A nationwide study conducted in the U.S. from 2010 to 2012 by the international ocean
advocacy organisation Oceana revealed that seafood is mislabelled up to 87% of the time.
3) Furthermore, consumer goods, especially electronics, pharmaceuticals, and luxury brands, are
susceptible to counterfeiting and fraud.
A report from PwC claims that more than 2% of global economic output results from
counterfeiting revenues.

Benefits of Blockchainin Supply Chain Management
a) Transparency into the provenance of consumer goods, from the source point to end consumption.
Blockchain has no intermediary (e.g., a bank).
It results in faster and more transparent settlements, as the ledger is updated automatically.
b) Preapproved transaction fees, When making cross-border payments with Swift, the commission for
the transaction is deducted only after the transaction completion — or, to be more exact, upon running
through a whole number of the intermediary banks, which have been executing this transaction.
In the case of Blockchain, you know the fees beforehand.
c) Shared I.T. infrastructure, provide auditors with greater visibility into participants’ activities along
the value chain.
It would streamline workflows for all parties, no matter the size of the business network.
Managers can realise significant benefits from Blockchain, ranging from cost-savings and increased
efficiencies to new operational models.
Few areas of supply chain management where Blockchain can be implemented:
1. Procurement: Blockchain can act as a “single source of truth” for all the entities (subsidiaries, partners,
etc.) making purchases on your behalf and negotiating different terms with suppliers.
A blockchain-based database can store relevant data from all your partners, giving your company a 360-view
of the total volume of purchases, regardless of who managed the purchase activity.
There will be no need for individual users to share operational data and someone else to crosscheck it
continually — the audits will be conducted automatically, eliminating the resource-heavy processes such as
extra price verification.
2. Provenance(Origin) and Improved Traceability: Nowadays Consumers, are putting pressure on
businesses to provide more insights about the goods’ provenance, authenticity and “life before reaching the
shelves”.
According to Nielsen, 49% of shoppers will pay extra for products that have top high quality/safety standards
E.g. OriginTrail in partnership with TagItSmart has recently tested the IoT and blockchain combo to prevent
wine fraud
The companies’ blockchain-based protocol allows tracking every wine bottle from the vineyard to the stores.
Integrating Blockchaininto your supply chain doesn’tneed to be complex

Better visibility into procurement, more accurate and reliable data for analytics, and increased trust among
all participants in your supply chain network are some of the benefits of adding Blockchain to your
infrastructure.
But how much will it disrupt your current way of doing business? Managers may be understandably wary
about the costs and potential turmoil behind yet another piece of technology.
The Blockchain essentially functions as a layer supplementing your existing enterprise resource planning
(ERP) software.
You can still see your existing user interface and business process.
But now, when you look at inventory, you see everyone else’s alongside your own.
And instead of a placeholder of a price, the actual price based on the consumption of your supply chain
network is available.
Done correctly, a blockchain installation slot into your workflow without disruption, so it can feel like
you’re not really leaving your existing infrastructure.
The installation will likely not be as simple as a “one-size-fits-all” approach; it’s more like three sizes,
depending on your current infrastructure and the smaller partners you may need to set up.
Issues with Blockchainin Supply Chain Management
Bitcoin pays people to validate each block or transaction and requires people who propose a new block to
include a fee in their proposal.
A) Such a cost would likely be prohibitive in supply chains because their scale can be staggering.
For example, in a 90-day period, a single auto manufacturer would typically issue approximately 10 billion
call-offs just to its tier-one suppliers.
B) Also, together all of those transactions would significantly raise demand for data storage, an essential
component of Blockchain’s distributed-ledger approach.
C) Besides, creating and maintaining numerous copies of data sets would be impractical in the supply-chain
environment, especially in permissionless blockchains.
Conversely, in most supply chains, the parties are known and trusted.
D) Moreover, the supply-chain world is unlikely to accept open access because its users don’t want to reveal
proprietary details, such as demand, capacities, orders, prices, margins, at all points of the value chain to
unknown participants.
This means most supply-chain blockchains would need to be permissioned, with access governed
centrally and restricted to known parties who may be limited to specific segments of data.

DETAILED EXAMPLE OF BLOCKCHAIN IN SUPPLY CHAIN
TRADELENS (Digitising global supply chains)
(Jointly developed by Maersk and IBM)
More than half of the world’s ocean container cargo is under the scope of TRADELENS (five of the world’s
six largest carriers committed to the platform)
The goals were at once simple yet ambitious: to reduce the cost of global shipping, improve visibility across
supply chains and eliminate inefficiencies stemming from paper-based processes
Many of the processes for transporting and trading goods are costly, in part, due to manual and paper-based
systems.
In the container industry, paperwork can account for half the cost of transport.
Paper-based trade and manual document-handling slow logistics and facilitation, reducing the potential by
up to 15%.
Replacing these peer-to-peer and often unreliable information exchanges, the platform enables participants
to digitally connect, share information and collaborate across the shipping supply chain ecosystem.
How “TRADELENS”canhelp the stakeholders
1. With TRADELENS, you can have a single line of sight across all supply chain activities.
This means more reliability in getting goods to market, more agility in responding to changes in customer
demand, and more collaboration in cross-organisational automation.
2. A study found that a single shipment of avocados from Kenya to the Netherlands involved 30 different
organisations, over 100 people, and 200 individual information exchanges. Each information exchange risks
the introduction of data inconsistencies.
TRADELENS reduces these uncertainties and inconsistencies by providing authorised parties with access to
the original data.
3. In many countries, it is still difficult for a trader to find a consolidated cross-agency view of the release
status of a shipment.
By publishing key events and information to TRADELENS, Customs and other government agencies can
improve the visibility that traders have about the status of their shipments.
This helps the private sector to better plan its activities, saving both time and money.
4. Access to earlier, more complete, immutable data improves the effectiveness of targeting processes,
facilitating legitimate trade, increasing compliance and improving Customs’ efficiency.

More Examples of Blockchain Utilization in Supply Chain
1) IBM has ongoing collaborations with several gold and diamond industry leaders (Asahi
Refining, Helzberg Diamonds, and others), helping them create new solutions for tracking
and authenticating their products with Blockchain throughout the supply
chain. Everledger start-up is attempting to do the same.
2) LVMH conglomerate plans to release a cryptographic provenance platform for their portfolio
of 60+ luxury brands.
3) UPS has a pending patent application, describing a blockchain-based solution for planning
package routes and tracking them globally, through multiple carriers.
4) DORÆ calls itself a “global blockchain-enabled physical commodities cloud.” They have
built a blockchain-based distributed ledger platform that helps with the provenance of raw
materials, giving users a more complete and transparent view of where materials involved in
production come from. By placing the journey of raw materials on the Blockchain, DORÆ
hopes to increase the fidelity of supply chain data for the building blocks of most products.
5) NextPakk is a “Concierge Delivery” and community-sourced service that
allows customers to schedule delivery within a one-hour window, ensuring
the customeris home when the package arrives. NextPakk utilises blockchain
technology to track packages while protecting customers’ identity and
ensuring timely delivery. Their token was launched on the Stellar platform
6) ShipChain is building a track-and-trace platform that will use Blockchain to
improve provenance and supply chain efficiency through the use of smart
contracts. They record every step of the supply chain process on either their
main Blockchain or their sidechain to improve both transparency and ease of
communication.
7) Project Provenance works to enable businesses to build consumertrust in
their goods and supply chain. They leverage Blockchain to create a more
transparent digital record of a physical product’s journey through the supply
chain. Their goal is to give consumers better product information while
rewarding responsible retailers and manufacturers.
8) Eximchain’s public blockchain network enables privacy, scalability, and
security for the supply chain. Eximchain-powered supply chain solutions help
enterprises to connect, transact, and share information more efficiently and
securely. Their current applications of blockchain technology include supply
chain financing, sourcing, and inventory management.
9) OriginTrail is a protocol for supply chains that are built on blockchain
technology. They designed the protocol to increase the integrity and honesty
of supply chain data. They are working toward helping I.T. providers and
supply chain leaders with blockchain-powered data insights that are
beneficial in multi-organisational environments.
10) eerLedger has a blockchain application called MIMOSI that is designed to
provide records for all supply chain track-and-trace transactions. Having
started with blockchain provenance and supply chain solutions for the
minerals industry, they are now expanding into new verticals and building
APIs to increase the interoperability of their platform.
Reference: 1, 2, 3,4, 5, 6, 7

BLOCKCHAIN IN FINANCIAL SECTOR
The Blockchain could potentially save banks billions in cash by dramatically reducing processing
costs.
90% of members of the European Payments Council believe blockchain technology will
fundamentally change the industry by 2025.
The blockchain application changes the paper-intensive international trade finance process to a decentralised
electronic ledger that gives all the participating entities, including banks, the ability to access a single source
of information. It also allows them to track all documentation and validate ownership of assets digitally, as
an unalterable ledger in real-time.
Let’s look at how the financial and banking industry could benefit from Blockchain
1. Fraud Reduction: Blockchain is being recognised as the new technology that would reduce fraud in the
financial world, where 45% of financial intermediaries like stock exchanges and money transfer services are
prone to financial crimes routinely.
Most banking systems in the world, built on a centralised database, are more vulnerable to cyberattack
because once hackers attack the one system, they get full access.
By using Blockchain, there would be not only real-time execution of payments but also complete
transparency which would enable real-time fraud analysis and prevention.
2. Know your Customer (KYC): Financial institutions spend anywhere from $60 million up to $500
million per year to keep up with Know your Customer (KYC) and customer due diligence regulations
according to a Thomson Reuters Survey.
These regulations are meant to help reduce money laundering and terrorism activities by having
requirements for businesses to verify and identify their clients.
Blockchain would allow an organisation to access the verification details of a client by another organisation,
thus avoiding repetition of the KYC process.
The reduction in administrative costs for compliance departments would be significant.
Once a bank has KYC’d, a new customer they can then put that statement, including a summary of the KYC
documents, on Blockchain which can then be used by other banks and other accredited organisations (such
as insurers, car rental firms, loan providers etc.) without the need to ask the customer to start the KYC
process all over again.
These organisations will know that the customer’s I.D. documents have been independently checked and
verified so they will not need to carry out their own KYC checks, reducing their administrative burdens and
costs. As data stored on Blockchain is irreversible, it would provide a single source of truth, thereby
minimising the risk of duplication or error.
There is also the advantage for the customer that they only have to supply KYC documents once (until
they need to be updated) and that they are not then disclosed to any other party (except for their own bank)
as the other organisations will not need to see and check the I.D. documents but will just rely on the
Blockchain verification.

3. Smart Contracts: Blockchains facilitate smart contracts as they facilitate storage of any kind of digital
information, including computer code that can be executed once, two or more parties enter their keys.
Contracts could be created and financial transactions executed when this code is programmed, according to
the set criteria.
4. Clearing and Settlement: The fact that an average bank transfer takes three days to settle has a lot to do
with the way our financial infrastructure was built.
It’s not just a pain for the consumer. Moving money around the world is a logistical nightmare for the banks
themselves.
Today, a simple bank transfer — from one account to another — has to bypass a complicated system of
intermediaries, from correspondent banks to custodial services, before it ever reaches any kind of
destination.
The two bank balances have to be reconciled across a global financial system, comprised of a vast network
of traders, funds, asset managers and more.
Example:
If you want to send money from a UnicaCredit Banca account in Italy to a Wells Fargo account in the U.S.,
the transfer will be executed through the Society for Worldwide Interbank Financial Communication
(SWIFT), which send 24 million messages a day for 10,000 financial institutions.
Because UnicaCredit Banka and Wells Fargo don’t have an established financial relationship, they have to
search the SWIFT network for a correspondent bank that has a relationship with both banks and can settle
the transaction — for a fee. Each correspondent bank maintains different ledgers, at the originating bank and
the receiving bank, which means that these different ledgers have to be reconciled at the end of the day.
The centralised SWIFT protocol doesn’t actually send the funds; it simply sends the payment orders. The
actual money is then processed through a system of intermediaries. Each intermediary adds additional cost
to the transaction and creates a potential point of failure — 60% of B2B payments require manual
intervention, each taking between 15-20 minutes.
Blockchain technology, which serves as a decentralised “ledger” of transactions, could disrupt this
state of play. Rather than using SWIFT to reconcile each financial institution’s ledger, an interbank
blockchain could keep track of all transactions publicly and transparently.
That means that instead of having to rely on a network of custodial services and correspondent banks,
transactions could be settled directly on a public blockchain.
Further, blockchain technology allows for “atomic” transactions or transactions that clear and settle when a
payment is made. This stands in contrast to current banking systems, which clear and settles a transaction
days after payment.
5. Payments: Blockchain disruption could be profoundly transformative in the payments process. It would
allow banks higher security with minimal lower costs to process payment between organisations and their
clients and even between banks themselves. Blockchain would get rid of all the intermediaries in the
payment processing system.
Example:
If you work in San Francisco and want to send part of your paycheck back to your family in London, you
might have to pay a $25 flat fee for a wire transfer, and additional fees adding up to 7%. Your bank gets a
cut, the receiving bank gets a cut, and you’re charged exchange rate fees. Your family’s bank might not even
register the transaction until a week later. This can change with Blockchain.

6. Securities: Financial markets today accomplish this through a complex chain of brokers, exchanges,
central security depositories, clearinghouses, and custodian banks. These different parties have been built
around an outdated system of paper ownership that is not only slow but can be inaccurate and prone to
deception.
Not only is this system inefficient, but it’s also imprecise. Securities transactions take between 1 to 3 days to
settle because everyone’s books have to be updated and reconciled at the end of the day. Because there are
so many different parties involved, transactions often have to be manually validated. Each party charges a
fee.
Blockchain technology promises to revolutionise financial markets by creating a decentralised database of
unique, digital assets. With a distributed ledger, it’s possible to transfer the rights to an asset through
cryptographic tokens, representing assets “off-chain.
NASDAQ and the Australian Securities Exchange are some of the entities looking at blockchain solutions to
cut costs and improve efficiencies.
A suggested approach to implement Blockchain for Financial
Institutions
The recommended approach for financial institutions would be to craft their strategic responses. While
financial institutions can tactically sponsor attempts which can be termed as “Get Comfortable” approaches
suggested approach is as below:
The core of this recommendation lies in getting the right level of sponsorship and team within the bank to
create scenarios on how DLT capability can fundamentally reimagine the customer needs that can be serviced.
The possibilities that emerge from this scenario planning exercise can help the financial services industry to
develop both shapings as well as mitigating strategies.
Blockchain provides an opportunity to redraw processes and call into question orthodoxies that exist in today’s
business model. Blockchain will significantly increase transparency between the market players levelling the
playing field. It questions the existing competitive advantage models that leverage existing risk models and
information
Reference: 1,2, 3, 4, 5

BLOCKCHAIN USE IN GOVERNMENT AND PUBLIC RECORDS
The distributed ledger format can be leveraged to support an array of government and public sector
applications, including digital currency/payments, land registration, identity management, supply
chain traceability, health care, corporate registration, taxation, voting (elections and proxy), and legal
entities management.
Where can Government Apply Blockchain
1. Citizens’ I.D. management: Blockchain technology is well known for its tamper-proof nature.
Since there is no central repository from which hackers can steal data, information stored on the Blockchain
is safe from data breaches that centralised databases frequently suffer from.
Moreover, all transactions that happen between the identity holders and the companies are recorded on the
Blockchain, ensuring complete transparency.
Decentralised digital ledger technology also allows people the flexibility to create encrypted digital
identities, which can be easily accessed through mobile applications, and be used to verify identity as and
when required.
This is a much more secure way as compared to carrying around traditional identity documents in wallets
and bags
2. Taxation reporting: While Blockchain is not the cure all for the tax system, it could be applied in a
number of areas to reduce the administrative burden and collect tax at a lower cost, helping to narrow the tax
gap
Blockchain makes fraud and errors far easier to detect because the system provides clear and transparent
information about transactions and items in the network.
This could be particularly useful in tracking if and where GST has been paid, and in doing so, reduce GST
fraud.
3. eVoting: The idea in blockchain-enabled e-voting (BEV) is simple.
To use a digital-currency analogy, BEV issues each voter a “wallet” containing a user credential.
Each voter gets a single “coin” representing one opportunity to vote. Casting a vote transfers the voter’s coin
to a candidate’s wallet. A voter can spend his or her coin only once. However, voters can change their vote
before a pre-set deadline.
Here, we argue that blockchains might address two of the most prevalent concerns in voting today: voter
access and voter fraud.
4. Land Records Management: The Blockchain-enabled system created immutable records for land
ownership, which are then digitised and stored permanently on the system, with the ability to track any
change in ownership of these titles.
Any new transaction (such as further sale or mutation of the title) gets recorded on the Blockchain
immutably while remaining available to other stakeholders (utilities, insurance, etc.).

Benefits for States:
 Reduced economic costs, time and complexity in inter-governmental and public-private information
exchanges that enhance the administrative function of governments.
 Reduction of bureaucracy, discretionary power and corruption, induced by the use of distributed
ledgers and programmable smart contracts.
 Increased automation, transparency, auditability and accountability of information in governmental
registries for the benefit of citizens.
 The increased trust of citizens and companies in governmental processes and recordkeeping driven
by the use of algorithms which are no longer under the sole control of the government.
Reference: 1,2,3,4,5

BEYOND THE HYPE
Disruption doesn’t happen overnight. Blockchain technology is still in its infancy, and a lot of the actual
technology has yet to be perfected.
Die-hard believers in cryptocurrency believe that it will replace banks altogether.
Others think that blockchain technology will supplement traditional financial infrastructure, making it more
efficient. One thing is clear; however: blockchain technology will indeed transform many industries.
Reference: 1
ISSUES IN IMPLEMENTING BLOCKCHAIN
1. Scalability: Blockchain Tech is now the centre of attraction in the financial industry. The Blockchain
tech isn’t capable of handling the scale of financial transactions that occur each day since multiple
nodes are necessary to validate each transaction.
Even the leading blockchain networks have encountered a decrease in transaction speed and an
increased fee per transaction. Hence, it remains crucial to research before the Blockchain is adopted
on a wide scale.
2. Security: As Blockchain has no central authority, it has its security benefits. Nobody can make
modifications to the ledger secretly since the ledger is public. On the event of a change to the ledger,
each node validates the entry into the record.
Although security issues might occur in case of a 51 percent attack, according to Satoshi Nakamoto,
when an individual or a group has more than 50% of the mining power, it is 51 percent attack. This
attack prevents other miners from creating blocks or making any transactions altogether.
To avoid this, the mining pool needs monitoring at all times.
3. Culture: Blockchain tech is a non-traditional concept of asset transaction. It is a ‘new world’
experience one can have.
Anybody is bound to have culture shock when introduced to a whole new world. It isn’t as easy to
adapt even for the institutes that are now digitised.
It takes time, effort, and outstanding knowledge transfer to accomplish it.
4. Regulations and Governance: Governance relies on a set of policies and regulations. But
Blockchain doesn’t have standard rules and regulations. The regulations vary with country.
Example:
 The European Union strictly believes in data privacy. The GDPR, which is in effect since May 25th,
2018; it allows the European citizens to have ‘right to be forgotten’ online.

 Japan was first of all countries to use Bitcoin as a currency and to issue cryptocurrency transaction
licenses to businesses. The Japanese strictly stuck to using only the Bitcoin and no other
cryptocurrency.
 The U.S. government agencies believe in “regulation first, business later” approach.
5. Cost and efficiency: The Blockchain tech is quite competent in cost reduction. But it still faces
specific challenges while implementing the legacy systems.
Setting up the initial blockchain infrastructure is expensive. Small financial companies or Banks
wouldn’t prefer investing in something that doesn’t hold a promising future.
As we discussed, like scalability, many other factors contribute to high maintenance cost.
These will need to be addressed to assure any company to make the future proceedings.
Though the Blockchain future holds significant potential, very little can happen if challenges
mentioned above aren’t improved. With an uncertain future ahead, a united front among all the
countries and a standard set of regulations will be crucial to implementing these technologies to their
most capacity.
FURTHER READ
Blockchain India Strategy By Niti Aayog: https://niti.gov.in/sites/default/files/2020-
01/Blockchain_The_India_Strategy_Part_I.pdf
PROOF OF WORK/MINING
Proof-of-Work, or PoW, is the original consensus algorithm in a Blockchain network.
A proof of work is a piece of data which is difficult (costly, time-consuming) to produce but easy for others
to verify and which satisfies certain requirements. Producing a proof of work can be a random process with
low probability so that a lot of trial and error is required on average before a valid proof of work is
generated.
Proof of work makes it extremely difficult to alter any aspect of the blockchain, since such an alteration
would require re-mining all subsequent blocks. It also makes it difficult for a user or pool of users to
monopolise the network’s computing power, since the machinery and power required to complete the hash
functions are expensive.

IT SERVES TWO PURPOSES:
1. To verify the legitimacy of a transaction, or avoiding the so-called double-spending
2. To create new digital currencies by rewarding miners for performing the previous task
MINERS
Miners validate new transactions and record them on the global ledger ( blockchain ). On average,
a block is mined every 10 minutes. Miners compete to solve a difficult mathematical problem based
on a cryptographic hash algorithm.
In order for bitcoin miners to actually earn bitcoin from verifying transactions, two things
have to occur. First, they must verify 1 megabyte (MB) worth of transactions, which can
theoretically be as small as 1 transaction but are more often several thousand, depending
on how much data each transaction stores. This is the easy part.
Second, in order to add a block of transactions to the blockchain, miners must solve a
complex computational math problem, also called a "proof of work." What they're actually
doing is trying to come up with a 64-digit hexadecimal number, called a "hash," that is less
than or equal to the target hash. Basically, a miner's computer spits out hashes at a rate of
megahashes per second (MH/s), gigahashes per second (GH/s), or even terahashes per
second (TH/s) depending on the unit, guessing all possible 64-digit numbers until they
arrive at a solution. In other words, it's a gamble.
The difficulty level of the most recent block for Bitcoin at the time of writing is more
than 13 trillion.
Here's a helpful analogy to consider:
"Say I tell Aniket, Anindya & Ankit that I'm thinking of a number between 1 and 100, and I
write that number on a piece of paper and seal it in an envelope. Aniket, Anindya & Ankit
don't have to guess the exact number, they just have to be the first person to guess any
number that is less than or equal to the number I am thinking of. And there is no limit to
how many guesses they get.
"Let's say I'm thinking of the number 19. If Aniket guesses 21, he lose because 21>19. If
Anindya guesses 16 and Ankit guesses 12, then they've both theoretically arrived at viable
answers, because 16<19 and 12<19. There is no 'extra credit' for Anindya, even though
his answer was closer to the target answer of 19.
"Now imagine that I pose the 'guess what number I'm thinking of' question, but I'm not
asking just three people, and I'm not thinking of a number between 1 and 100. Rather, I'm
asking millions of would-be miners and I'm thinking of a 64-digit hexadecimal number. Now
you see that it's going to be extremely hard to guess the right answer."
The one who comes at answer first will receive the reward.
Miners receive a reward when they solve the complex mathematical problem. Miners receive rewards
in the form of transaction fees or in case of digital currency, let’s say a Bitcoin, he will receive new
Bitcoins.

WHEN YOU WANT TO SET A TRANSACTION, THIS IS WHAT
HAPPENS BEHIND THE SCENES
1. Transactions are bundled together into what we call a block;
2. Miners verify that transactions within each block are legitimate;
3. To do so, miners should solve a mathematical puzzle known as proof-of-work problem;
4. A reward is given to the first miner who solves each blocks problem;
5. Verified transactions are stored in the public blockchain
WHY SO MUCH POWER IS REQUIRED
Single Bitcoin transaction using Blockchain technology results in roughly 223,250 grams of
carbon dioxide per kilowatt-hour consumed, or the equivalent of burning through 53 litres of
gasoline in an average American car.
The Reward for adding one Block to a Bitcoin is 6.25 Bitcoin ( Rs 45,72,997.76).
Even though bitcoin solely exists in digital zeroes and ones, the computers that run the
network are huge energy hogs.
The bitcoin network creates an incentive for people to contribute computing power to verify
transactions by awarding bitcoins to a miner who verifies a block.
But mining is competitive, with only one miner winning the award per block.
So to get the huge sum of money, there are millions of miners working on a single Block, resulting in
huge energy consumption by them and in turn by the Blockchain network.
Note: Newer technologies are evolving which are reducing the environmental cost of adding new
Block to a Blockchain.
The Energy consumption of Private Blockchains is less than Public Blockchain.
Reference: 1,2,3,4,5,6,7

WHY YOU CAN’T CHEAT
Reference: 1,2

1% OF EVERYTHING ABOUT BLOCKCHAIN

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