Blockchain Technologies

IT5044
 Name of the Course: Blockchain Technologies

• Course Code: IT5044 Teaching Scheme

• Semester: VI Theory:3 hrs./week
• Duration: 4 months
• Maximum Marks: 100
 Syllabus
• Unit-1: Introduction to Blockchain
• Unit-2: Business Use Cases
• Unit-3: Technology Use Cases
• Unit-4: Legal and Governance Use Cases
• Unit-5: Blockchain Challenges
• Unit-6: Recent Trends in the field of Blockchain

Textbook: Joseph J. Bambara and Paul R. Allen, “Blockchain: A Practical Guide to

Developing Business, Law, and Technology Solutions”, McGraw-Hill Education.
Introduction to Blockchain
 Introduction to Blockchain
A blockchain is a digital, decentralized, distributed public ledger database where
blocks are linked cryptographically, and transactions are digitally signed and managed
using consensus model.
Each block contains a timestamp and a link to the previous block, forming a chain of
blocks that cannot be altered once they are added to the blockchain.
 Key vocabulary while discussing Blockchain
Blockchain: a decentralized, distributed ledger that records transactions on multiple
computers so that the record cannot be altered retroactively without the alteration
of all subsequent blocks and the consensus of the network.
Cryptocurrency: a digital or virtual currency that uses cryptography for secure
financial transactions.
Bitcoin: a decentralized cryptocurrency that uses peer-to-peer technology to
facilitate instant payments. It is the first and most widely used cryptocurrency.
Distributed ledger: a ledger of digital transactions that is stored and maintained by a
network of computers rather than a central authority.
Mining: the process of adding transaction records to a blockchain public ledger. In
the case of Bitcoin, mining involves solving complex mathematical problems in
exchange for a reward in the form of cryptocurrency.
 Key vocabulary while discussing Blockchain
Node: a computer that participates in the operation of a blockchain network.
Smart contract: a self-executing contract with the terms of the agreement between
buyer and seller being directly written into lines of code. The code and the
agreements contained therein are stored and replicated on the blockchain network.
Consensus: the agreement of the majority of nodes on a blockchain network to the
validity of a transaction or block of transactions.
Hash: a unique fixed-size alphanumeric string that represents the contents of a block
in a blockchain.
Private key: a secret piece of data that is used to access the cryptocurrency stored in
a wallet. It should be kept secret and secure, as it allows the owner to spend or
transfer their cryptocurrency.
 Key vocabulary while discussing Blockchain
Miners: Burns energy to create blocks, get rewarded by Block Reward + transaction
fees.
Block Reward: New coins created with each block, goes to miner.
Transaction Fees: Small percentage of transaction value, which goes to the miner.
 History of Blockchain
In 1982, David Chaum proposed the first-ever blockchain-like protocol in his
dissertation, Computer Systems Established, Maintained, and Trusted by Mutually
Suspicious Groups.
In 1991,researcher scientists named Stuart Haber and W. Scott Stornetta introduce
Blockchain Technology. In this System, the time-stamped documents are stored in a
Chain of Blocks.
After that in 1992, Merkle Trees formed a legal corporation by using a system
developed by Stuart Haber and W. Scott Stornetta with some more features. Merkle
used a Secured Chain of Block which stores multiple data records in a sequence.
In the year 2004, Cryptographic activist Hal Finney introduced a system for digital
cash known as "Reusable Proof of Work". This System helps others to solve the
Double Spending Problem by keeping the ownership of tokens registered on a trusted
server.
 History of Blockchain
After that in 2008, Satoshi Nakamoto conceptualized the concept of "Distributed
Blockchain" under his white paper: "A Peer to Peer Electronic Cash System".
He modified the model of Merkle Tree and created a system that is more secure and
contains the secure history of data exchange.
His System follows a peer-to-peer network of time stamping. His system became so
useful that Blockchain become the backbone of Cryptography.
Blockchain transaction flow
 Blockchain transaction flow
• Blockchains ideal for recording events, medical records and other records
management activities, identity management, transaction processing, and a host
of emerging applications.
• Blockchain is a revolutionary technology that has the potential to transform
various industries.
• It is a decentralized, distributed ledger that records transactions across many
computers, making it difficult or impossible to alter, hack, or cheat the system.
Types of Blockchain
 Types of Blockchain
There are majorly four types of Blockchain
• Public Blockchain
• Private Blockchain
• Hybrid Blockchain
• Consortium Blockchain
 Public Blockchain
• It is a permissionless distributed ledger on which anybody can join and conduct
transactions.
• It is a non-restrictive form of the ledger in which each peer has a copy.
• This also means that anyone with an internet connection can access the public
Blockchain.
• This user has access to historical and contemporary records and the ability to
perform mining operations.
• These complex computations must be performed to verify transactions and add
them to the ledger.
• On the blockchain network, no valid record or transaction may be altered.
Because the source code is usually open, anybody can check the transactions,
uncover problems, and suggest fixes.
 Advantages of Public Blockchain
• Trustable: Public Blockchain nodes do not need to know or trust each other
because the proof-of-work procedure ensures no fraudulent transactions.
• Secure: A public network can have as many participants or nodes as it wants,
making it a secure network. The higher the network's size, the more records are
distributed, and the more difficult it is for hackers to hack the entire network.
• Open and Transparent: The data on a public blockchain is transparent to all
member nodes. Every authorized node has a copy of the blockchain records or
digital ledger.
 Disadvantages of Public Blockchain
• Lower TPS: The number of transactions per second in a public blockchain is
extremely low. This is because it is a large network with many nodes which take
time to verify a transaction and do proof-of-work.
• Scalability Issues: Its transactions are processed and completed slowly. This
harms scalability. Because the more we try to expand the network's size, the
slower it will become.
• High Energy Consumption: The proof-of-work device is expensive and requires
lots of energy. Technology will undoubtedly need to develop energy-efficient
consensus methods.
 Use of Public Blockchain
• Voting: Governments can use a public blockchain to vote, ensuring openness and
trust.
• Fundraising: Businesses or initiatives can use the public Blockchain to improve
transparency and trust.
 Private Blockchain
• A blockchain network operates in a private context, such as a restricted network,
or is controlled by a single identity.
• While it has a similar peer-to-peer connection and decentralization to a public
blockchain network, this Blockchain is far smaller.
• They are often run on a small network within a firm or organization rather than
open to anybody who wants to contribute processing power.
• Permissioned blockchains and business blockchains are two more terms for
them.
 Advantages of Private Blockchain
• Speed: Private Blockchain transactions are faster. This is because a private
network has a smaller number of nodes, which shortens the time it takes to verify
a transaction.
• Scalability: You can tailor the size of your private Blockchain to meet your specific
requirements. This makes private blockchains particularly scalable since they
allow companies to easily raise or decrease their network size.
 Disadvantages of Private Blockchain
• Trust Building: In a private network, there are fewer participants than in a private
network.
• Lower Security: A private blockchain network has fewer nodes or members, so it
is more vulnerable to a security compromise.
• Centralization: Private blockchains are limited in that they require a central
Identity and Access Management (IAM) system to function. This system provides
full administrative and monitoring capabilities.
 Use of Private Blockchain
• Supply Chain Management: A private blockchain can be used to manage a
company's supply chain.
• Asset Ownership: A private blockchain can be used to track and verify assets.
• Internal Voting: Internal voting is also possible with a private blockchain.
 Hybrid Blockchain
• Organizations who expect the best of both worlds use a hybrid blockchain, which
combines the features of both private and public blockchains.
• It enables enterprises to construct a private, permission-based system alongside
a public, permissionless system, allowing them to choose who has access to
certain Blockchain data and what data is made public.
• In a hybrid blockchain, transactions and records are typically not made public,
but they can be validated if necessary by granting access via a smart contract.
 Advantages of Hybrid Blockchain
• Secure: Hybrid Blockchain operates within a closed environment, preventing
outside hackers from launching a 51 percent attack on the network.
• Cost-Effective: It also safeguards privacy while allowing third-party contact.
Transactions are inexpensive and quick and scale better than a public blockchain
network.
 Disadvantages of Hybrid Blockchain
• Lack of Transparency: Because information can be hidden, this type of blockchain
isn't completely transparent.
• Less Incentive: Upgrading can be difficult, and users have no incentive to
participate in or contribute to the network.
 Use of Hybrid Blockchain
• Real Estate: Real-estate companies can use hybrid networks to run their systems
and offer information to the public.
• Retail: The hybrid network can also help retailers streamline their processes.
• Highly Regulated Markets: Hybrid blockchains are also well-suited to highly
regulated areas like the banking sector.
 Consortium Blockchain
• In the same way that a hybrid blockchain has both private and public blockchain
features, a Consortium blockchain, also known as a federated blockchain, does.
• However, it differs because it involves various organizational members working
together on a decentralized network.
• Predetermined nodes control the consensus methods in a consortium blockchain.
• It has a validator node responsible for initiating, receiving, and validating
transactions. Transactions can be initiated or received by member nodes.
 Advantages of Consortium Blockchain
• Secure: A consortium blockchain is more secure, scalable, and efficient than a
public blockchain network. It, like private and mixed blockchains, has access
controls.
 Disadvantages of Consortium Blockchain
• Lack of Transparency: The consortium blockchain has a lower degree of
transparency. If a member node is infiltrated, it can still be hacked, and the
Blockchain's rules can render the network inoperable.
 Use of Consortium Blockchain
• Banking and Payments: A consortium can be formed by a group of banks working
together. They have control over which nodes will validate transactions.
• Research: A consortium blockchain can be employed to share research data and
outcomes.
• Food Tracking: It is also apt for food tracking.
Blockchain implementations
 Bitcoin
• Bitcoin can be seen as the original Blockchain.
• This Blockchain was used to implement a cryptocurrency to create the first
purely peer-to-peer version of electronic cash without central authority.
• Bitcoin was created by an unknown (group of) person(s) who invented the
Blockchain.
• Its development is driven by a core group of Open Source developers.
 Namecoin
• Namecoin is a decentralized name registration database.
• In decentralized protocols like Tor, Bitcoin, and Bitmessage, there needs to
be some way of identifying accounts so that other people can interact with
them.
• Namecoin is the oldest and most successful implementation of a name
registration system using such an idea.
• It is open-source technology which improves decentralization, security,
censorship resistance, privacy, and speed of certain components of the
Internet infrastructure such as DNS and identities.
• Namecoin is a key/value pair registration and transfer system based on the
Bitcoin technology.
 Ripple
• Ripple is seen as one of the most advanced distributed ledger technology
(DLT) companies in the industry.
• It focuses on the using of blockchain-like technology for payments.
• The Ripple protocol has been adopted by an increasing number of financial
institutions to offer alternative remittance options to consumers.
• The Ripple protocol, described as “basic (settlement) infrastructure
technology for interbank transactions.”
 Ethereum
• Today the most popular implementation of smart contracts is probably Ethereum, a public
Blockchain-based platform.
• Functions as a platform through which people can use tokens to create and run applications and
create smart contracts.
• Ethereum allows people to connect directly through powerful decentralized supercomputer.
Blockchain collaborative
implementations
 Hyperledger
• Hyperledger is an open-source collaborative effort created to advance cross-industry blockchain
technologies.
• It is a consortium of companies working together to develop standardized blockchain protocols.
• The project aims to develop open protocols and standards by providing a modular framework that
supports different components for different uses.
• This would include a variety of blockchains with their own consensus and storage models, and
services for identity, access control, and contracts.
• It is a global collaboration hosted by the Linux Foundation.
 Corda
• Corda is a distributed ledger platform designed to record, manage, and
automate legal agreements between business partners.
• It is a collaborative effort by R3, a group of more than 100 financial
companies.
• It would also allow for greater levels of code sharing than presently used in
the financial industry, reducing the cost of financial services for everyone.
• Corda follows a general philosophy of reusing existing proven software
systems and infrastructure where possible.
 Blockchain in practical use
• Blockchain technology is being used in various sectors, including:
– Finance: Cryptocurrency, cross-border payments, supply chain finance
– Healthcare: Secure data sharing, clinical trials, pharmaceutical supply
chain
– Supply Chain: Tracking products, reducing fraud, improving efficiency
– Government: Voting systems, land registry, identity management
– Real Estate: Property ownership, smart contracts, tokenization
 Syllabus
• Unit-1: Introduction to Blockchain
• Unit-2: Business Use Cases
• Unit-3: Technology Use Cases
• Unit-4: Legal and Governance Use Cases
• Unit-5: Blockchain Challenges
• Unit-6: Recent Trends in the field of Blockchain

Textbook: Joseph J. Bambara and Paul R. Allen, “Blockchain: A Practical Guide to

Developing Business, Law, and Technology Solutions”, McGraw-Hill Education.
 Business Use Cases
• In marketing, blockchain can be used to increase the security and transparency
around the sharing of customer data, either between a customer and a
company or between two companies.
• Nowadays, blockchain is one of the key technologies driving business
transformation.
• Whenever they hear about any blockchain development companies, they consider
them cryptocurrency companies.
• On the other hand, cryptocurrency is only one of the many applications of blockchain
technology.
• It is built on a peer-to-peer topology that improves transaction transparency, data
resilience, and security while lowering operational costs.
 Currency and Tokens
let’s review the essence of blockchain and why it works for cryptocurrencies and tokens:
• It contains proof of all transactions on the network.
• The truth/facts are permanent; they cannot be changed after they are committed.
• It can be likened to a linked list; this helps to prove integrity as each verified block
points back to a prior block.
• The mining process (for Bitcoin) validates, verifies, and commits the block.
• Automatic replication and therefore high availability and resiliency help to overcome
failure of any participating node.
• It is simple to reconstruct local copy if it becomes corrupt or lost.
 Cryptocurrency
• A cryptocurrency is not a type of currency that can be used in the real world.
• It can be used to perform transactions only in the digital world. So in order to buy/sell using a
cryptocurrency, it has to be converted from a digital form to some existing currency that is
used in the real world. For example, Dollars, Rupees, etc. When Bitcoin—the first and most
well-known digital currency.
• Cryptocurrency is a digital payment system that does not rely on banks to verify transactions.
• Cryptocurrency payments exist purely as digital entries to an online database. When
cryptocurrency funds are transferred, the transactions are recorded in a public ledger.
• In cryptocurrency, “coins” are generated or produced by “miners”. These miners are people
who run programs on ASIC (Application Specific Integrated Circuit) devices made specifically
to solve proof-of-work puzzles.
• Cryptocurrencies can be used for buying goods just like fiat currency.
• Cryptocurrencies use encryption to verify and protect transactions. It does not exist in
physical form and is not typically issued by any central authority.
• They use decentralized control in contrast to central bank digital currency.
 Digital tokens
• Crypto Tokens are digital assets created and managed on existing blockchain platforms,
such as Ethereum.
• Tokens are built on top of an existing blockchain and can represent a wide range of assets,
utilities, or rights.
• They are typically created using smart contracts, which are self-executing contracts with the
terms written directly into code.
• These represent a digital asset or utility. Tokens can be used to represent ownership of
physical or digital assets, or even serve as units of exchange within a specific
blockchain-based system.
 Financial services use cases
• Blockchain technology can significantly improve the efficiency and security of
various financial services.
• Blockchain will continue to transform the financial services industry because of the
benefits and features.
• It can provide, some of these being faster throughput, reduced costs, less room for
error, transparency, and a multitude of “ities”—quality, reliability, simplicity, and
traceability.
• The financial institutions that find ways to adopt and apply blockchain technology will
gain the competitive advantages of delivering solutions with a faster time-to-market
at a reduced cost.
Know Your Customer (KYC) use case
• KYC is a process in which financial institutions verify the identity of their clients to prevent fraud,
money laundering, and other illegal activities.
• Blockchain can streamline this process by storing verified customer information in a secure,
immutable ledger, making it easier for different institutions to access and share verified data with
the customer's consent.
Asset management settlement use case
• This involves using blockchain to record
transactions related to asset
management, such as stock trading or
fund management. Blockchain can
enable quicker and more secure
settlement of trades by ensuring that
records are transparent, accurate, and
cannot be altered retroactively. This
reduces counterparty risk and enhances
efficiency.
A blockchain solution will remove the need for intermediaries and
provides a trusted and shared (with permission) view of data:
• Increase availability—no downtime
• Reduce costs because there are fewer reconciliation issues
• Speed up settlement because validation is fast
• Improve transparency and ability to monitor
 Insurance claims processing use case
• In the insurance industry,
blockchain can automate claims
processing by storing all policy
and claims data in a transparent,
immutable ledger.
• Smart contracts can be used to
automatically execute claims
when certain conditions are met,
reducing fraud, speeding up
processing times, and improving
customer satisfaction.
Trade finance (supply chain) use case
• Blockchain can enhance supply
chain operations and trade
finance by providing a secure,
transparent way to track the
movement of goods, verify
ownership, and confirm
payments.
• Blockchain enables faster, more
secure cross-border payments,
and reduces the reliance on
paper-based documentation,
lowering the risk of fraud or
errors.
 Global payments use case
• Blockchain offers an alternative to traditional cross-border payment systems (like SWIFT) by
enabling faster, cheaper, and more secure international transactions.
• Blockchain can remove intermediaries, reduce fees, and ensure that payments are processed
efficiently, making global payments faster and more cost-effective.
 Smart property
• Smart property is all about ownership,
access, and control of things using the
blockchain network.
• Smart property can be in the physical world,
such as a vehicle, tablet, or even real estate.
• In the virtual (non-physical) world, smart
property can be a financial instrument,
trademark, copyright, or patent.
• The real advantage to making property
smart is that it can be traded, accessed, and
controlled in a near trustless way, reducing
cost as well as fraud.
• This will open up and expand commerce,
making everything more competitive and at
the same time less expensive.
Transferring ownership of smart
property
Using smart property as collateral
Smart contracts on the
Blockchain
 The trust problem
• The trust problem has been around since the dawn of time.
• In order to progress, a society or group of people has to cooperate with each other. When
people cooperate they can do more collectively that they could individually.
• However, in doing so they are also opening themselves up to being deceived, misled, and
subsequently disappointed. To attempt to address this issue,societies have instituted
rituals, passed laws, and even installed governance processes.
• All of these elaborate techniques are in place to address the trust problem.
 Trusted Third Party
• One way to solve the trust problem is to use a
trusted third party.
• The bank and credit card example given above is
this exactly.
• The transactions between the customer, the
merchant, and the shopper are passed through
and logged by a bank (credit card issuer). The
bank facilitates the transaction; see Figure for a
diagram depicting a trusted third party.
• The bank can also step in and resolve a dispute
in the event that a customer finds a transaction
on their monthly statement that they didn’t
make.
 Blockchain details
• Blockchain leverages and combines the networking capabilities of computers with
cryptographic technology to store and process data.
• Any computer on the network (known as a node) can be located anywhere with Internet
connectivity. It’s really outsourcing of intelligent computing resources to the cloud.
• These resources provide a platform for developers to build applications. It can be likened to
other Platform as a Service (PaaS) offerings that exist today.
• The blockchain platform logs, processes, saves, and verifies transactions. Because it is based
on the shared ledger concept, each and every node on the network stores the same copy of
the ledger and therefore all of the transactions taking place on the platform.
• It is this decentralized (shared) aspect of the ledger that makes blockchain the public,
comprehensive, permanent, and verifiable authority for administering and storing records
of transactions.
 Syllabus
• Unit-1: Introduction to Blockchain
• Unit-2: Business Use Cases
• Unit-3: Technology Use Cases
• Unit-4: Legal and Governance Use Cases
• Unit-5: Blockchain Challenges
• Unit-6: Recent Trends in the field of Blockchain

Textbook: Joseph J. Bambara and Paul R. Allen, “Blockchain: A Practical Guide to

Developing Business, Law, and Technology Solutions”, McGraw-Hill Education.
Technology Use Cases
 Web Versions 1 and 2
• Web 1.0, an extension of DARPA’s ARPANET, was the first iteration of a new idea—a return to
centralization after the distributed client server idea failed.
• Just before the Web came into use in the Wall Street business center, personal computers used by
businesses had a “fat client” distributed setup, in which each user had all the application code and
data on their individual machine.
• The “fat client” became expensive and impractical to synchronize all these machines and data.
• This necessity was behind the innovation that led to the first generation of the World Wide Web.
The Netscape browser was the tool used to search, find, and render the response data.
• Web 2.0 furthered the use of this global resource. The pool of knowledge and content began
growing at an extreme pace. Surface net data has grown fourfold since 2012.
• Programs could connect and use the Web to store information and communicate with each other.
• Centralized intermediates, such as Google, created large databases and messaging, offering scalable
resources and routing traffic.
 Web 3.0
• Web 3.0 proposes a change in the way content and programs interact.
• If central intermediaries like Google are removed from the picture, many of the issues we
have today are removed with them.
• Blockchain technologies like Bitcoin and Ethereum use public key cryptography to secure the
connection and communication between programs and data.
• This is an alternative to the centrally issued SSL certificates used today.
• There is no central intermediary routing traffic, so connections can dynamically find the most
efficient pathway through the Internet and route around congestion or damage.
The evolution of the Web
 Distributed Storage Systems
• One of the fundamental open challenges for Web 3.0 is effective data storage.
• The socio-economic value and scale of information increases day by day, and Web
3.0 developers have been working to identify ways to ensure not only that digitally
stored data endures but also that it is readily available, reliable, secure, and
consistent.
• In recent years, the massive generation of data coupled with frequent storage
failures has increased the popularity of distributed storage systems, which allow
data to be replicated in different, geographically dispersed, storage devices.
• Due to the dissemination of data in multiple hosts, one of the major problems that
distributed storage systems face is maintaining the consistency of data when they
are accessed concurrently by multiple operations.
 InterPlanetary File System
• The InterPlanetary File System (IPFS) is a protocol, hypermedia and file
sharing peer-to-peer network for storing and sharing data in a distributed
hash table.
• By using content addressing, IPFS uniquely identifies each file in a global
namespace that connects IPFS hosts, creating a resilient system of file
storage and sharing.
• IPFS allows users to host and receive content in a manner similar to
BitTorrent.
 InterPlanetary File System (Cont…)
• As opposed to a centrally located server, IPFS is built around a
decentralized system of user-operators who hold a portion of the overall
data.
• Any user in the network can serve a file by its content address, and other
peers in the network can find and request that content from any node
who has it using a distributed hash table (DHT).
• In contrast to traditional location-based protocols like HTTP and HTTPS,
IPFS uses content-based addressing to provide a decentralized alternative
for distributing the World Wide Web.
 InterPlanetary File System (Cont…)
•
 HTTP vs IPFS
HyperText Transfer Protocol (HTTP):
• HTTP is an application layer protocol created by Tim Berners Lee at Cern in
1989, it is currently used for most of the data transfer on the web. It is the
foundation of data communication using hypertext files on the World Wide
Web.
InterPlanetary File System (IPFS):
• IPFS is a relatively new protocol that can change the way we use the Internet.
It is an ambitious project created by Juan Benet in 2015, with an aim to create
a completely decentralized web and it makes use of a lot of revolutionary
ideas in computer science to do it.
 HTTP vs IPFS
HTTP IPFS
• HTTP stands for HyperText Transfer • IPFS stands for InterPlanetary File
Protocol. System.
• Data is not persistent in HTTP. • Data persistent in IPFS.
• HTTP is not efficient. • IPFS efficient compare to HTTP.
• It uses a centralised client server • It uses a decentralised peer to peer
approach. approach.
• Data is requested using the address on • Data is requested using the
which data is hosted. cryptographic hash of that data.
• Data cannot be accessed if the server is • Data is copied to multiple nodes, hence
down or fails or any link gets broken. it can be accessed whenever needed.
• The bandwidth provided is low, as • Bandwidth is high, as data is requested
multiple clients request from a single from the closest peer who has the copy
server at the same time. of that data.
 HTTP vs IPFS (Cont…)
HTTP IPFS
• One has to set up a hosting server or pay • Uploading content on the IPFS network
for one, inorder to make content publicly does not require a host server, every
available. node hosts the data on the network.
• HTTP is well established as an industry • IPFS is relatively newer and is not yet as
standard, this is where HTTP has an popular as HTTP.
upper hand. • To run IPFS you need to access it using
• HTTP support is inbuilt on almost all the HTTP to IPFS portal or manually
machines. setup up an IPFS node on your machine.
• HTTP is used by almost everyone to • Currently, there is a shortage of IPFS
access the web. nodes due to it’s low popularity among
the laymen.
 Swarm
• Swarm is a distributed storage platform and content distribution service, a
native base layer service of the Ethereum web3 stack.
• The primary objective of Swarm is to provide a decentralized and redundant
store of Ethereum’s public record, in particular to store and distributed
application code (dapp) and data as well as blockchain data.
• Swarm and IPFS both offer comprehensive solutions for efficient
decentralized storage layers for the next-generation Internet.
• Both have high-level goals and the technology used are very similar. As a
result both are well suited for replacing the data layer of the current Web 2.0.
 Swarm (Cont..)
• They both serve as storage layers for the Web 3.0 vision with all the required
properties of distributed document storage:
– Low-latency retrieval
– Efficient auto-scaling (content caching)
– Reliable, fault-tolerant operation, resistant to node disconnections,
intermittent availability
– Zero downtime
– Censorship resistant
– Potentially permanent versioned archive of content
 Storj
• Storj allows any computer running its software to rent unused hard drive space to users looking to store files.
• Storj is a protocol that creates a distributed network for the formation and execution of storage contracts between
peers.
• The Storj protocol enables peers on the network to negotiate contracts, transfer data, verify the integrity and
availability of remote data, retrieve data, and pay other nodes.
• Each peer is an autonomous agent, capable of performing these actions without significant human interaction.
• In Storj, files are stored as encrypted shards. Sharding is a type of database partitioning that separates very large
databases into smaller, faster, more easily managed parts called data shards. The word shard means a small part of a
whole.
 Distributed computation
• Distributed computing is the science that studies and seeks to evolve the distributed systems
model.

• In this growing paradigm, components located on networked computers/nodes

communicate and coordinate their actions. These components interact with each other to
achieve a common goal.

• A new model for decentralized clouds is a classic example of shared economy: the idea is
about gathering users in a global peer-to-peer network where every machine acts as a
provider of computation services by offering a part of its idling capacities.

• This distributed systems model promises a breakthrough for the industry coupled with profit
for each user. Most of us do not even use half of our computers’ capacities.
 Golem
• Golem is touted as the first truly decentralized
supercomputer, creating a global market for
computing power.

• Combined with flexible tools to aid developers

in securely distributing and monetizing their
software, Golem hopes to change the way
computer tasks are organized and executed.

• By powering decentralized microservices and

asynchronous task execution, Golem is set to
become a key building block for future Internet
service providers and software development.
 The Working Principle of Golem
• Golem provides a platform where providers, software developers, and others share computing
power and network resources.

• The transaction initiates when a requestor (a user who accesses Golem Network to ask for
resources) demands computational resources from a provider (a user who sells computing power)
through the task template.

• For instance, instead of paying a centralized cloud-based platform such as Google Cloud for
artificial intelligence, which is a computer-intensive process and slow on some occasions, the user
can request computation power from a provider in the Golem’s peer-to-peer network.
 Golem
Steps involved in carrying out a task through the Golem Network include the following:

• The requesters visit the Golem Network

• They submit a task on the network

• The task is broadcasted on the network with the demand and necessary information such as the
specs of required resources

• The providers publish an offer for their computational resources

• The demand and the published offer is matched to check if they agree with each other

• The requestors meet these potential providers and “terms of business” are negotiated
 Golem
• Once an agreement is reached on the business terms, input files get transferred to the provider node

• The provider starts the task

• Once the task is complete, the output files get transferred to the requestor from the provider

• A payment note is issued, so the providers get rewarded for their services

• Payment is through the Golem token (GNT)

 Zennet
• Comparable to the Golem project is Zennet (zennet.sc), According to its founder, software engineer
Ohad Asor.

• Zennet is a distributed supercomputing project that will use blockchain technology to remove the
central administrators from the problem.

• Computation power is traded on Zennet’s open market platform. Anyone can rent computation
power and use it to run arbitrary tasks.

• Anyone can monetize their hardware by offering unused computation power for sale.

• Zennet allows “publishers” (those who need computation power) to run arbitrary computational
tasks.

• Computation power is supplied by “providers” for a negotiated fee. A free-market infrastructure

brings publishers and providers together.
 Decentralized communications
• The decentralized communications model enables natively interoperable communications
services that can trustfully use peer-to-peer connections without having to use central
authorities or services.

• A wide range of distributed applications require confidential communication between users.

• The messages exchanged between the users and the identity of group members should not
be visible to external observers.

• Computer networks typically use centralized solutions for supporting private group
communication, such as by relying on dedicated servers.

• Virtual private networks (VPNs) allow nodes to create private communication channels with
encrypted traffic.
 Existing decentralized communications
• Bitmessage is a peer-to-peer communications protocol used to send encrypted messages
to another person or to many subscribers.

• It is decentralized and trustless, meaning that you need not inherently trust any entities
such as root certificate authorities.

• It uses strong authentication, which means that the sender of a message cannot be
spoofed, and it aims to hide “non-content” data, like the sender and receiver of messages,
from passive eavesdroppers such as those running warrantless wiretapping programs.

• Bitmessage works by encrypting all the incoming and outgoing messages using public-key
cryptography so that only the receiver of the message is capable of decrypting it.
 Whisper
• Whisper is fully decentralized middleware
that supports confidential communications
within groups of nodes in large-scale
systems.

• Whisper builds upon a peer sampling service

that takes into account network limitations
such as network address translation (NAT)
and firewalls.

• Whisper is a part of the Ethereum P2P

protocol suite that allows for messaging
between users via the same network on
which the blockchain runs.
 Syllabus
• Unit-1: Introduction to Blockchain
• Unit-2: Business Use Cases
• Unit-3: Technology Use Cases
• Unit-4: Legal and Governance Use Cases
• Unit-5: Blockchain Challenges
• Unit-6: Recent Trends in the field of Blockchain

Textbook: Joseph J. Bambara and Paul R. Allen, “Blockchain: A Practical Guide to

Developing Business, Law, and Technology Solutions”, McGraw-Hill Education.
 Legal and Governance Use Cases
• Blockchain is revolutionizing legal and governance frameworks by
introducing new ways to enforce agreements, manage organizations, and
automate compliance.
• As we have seen, this technology is already affecting the banking,
financial services, and payments industries.
• For example, e-discovery software is now a standard used to search
email, documents, and other artifacts in the litigation discovery process.
This process as well as other legal procedures would be facilitated with
blockchain, which is an immutable and virtually infinite log.
• Blockchain technology has the potential to significantly impact legal and
governance systems by providing more secure, transparent, and efficient
processes.
 Smart Contracts
• A feature of blockchain is smart contracts, which automate and
enforce legal agreements.
• These self-executing contracts run on blockchain, ensuring that all
parties adhere to the terms agreed upon.
• The legal industry will also be transformed and disrupted by
blockchain technology and the associated scripting language and
protocols known as smart contracts.
 Blockchain changes the legal landscape
• “Code is law”, refers to the idea that computer code has progressively
established itself as a predominant way to regulate behavior to the same
degree as legal code.
• With the advent of blockchain technology, code is assuming an even
stronger role in regulating people’s interactions.
• However, while computer code can enforce rules more efficiently than legal
code, it also comes with a series of limitations.
• Blockchain keeps records that cannot be changed, making it useful for
contracts, property records, and legal documents.
• It helps with automatic compliance—governments and businesses can track
transactions in real time.
• Digital identities on blockchain make ID verification safer and faster.
 Cryptocurrencies as Legal Tender
• Bitcoin, the world’s most recognizable digital currency, uses
encryption techniques to regulate the generation of units of currency
and verify the transfer of funds, operating independently of a central
bank.
• This means that this money has not passed through a bank or other
financial institution, it has been screened by any government agency.
 Blockchain and Privacy Laws
• Blockchain, like any formal ledger, will become the official record
for tracking the history and validity of transactions and other
information.
• That record will effectively be visible to all, even though individual
elements of the transactions are encrypted and not publicly
visible.
• For example, your passport or other identity information might be
securely encrypted, but the proof of the validation could be used
publicly on a blockchain to prove that you are you for purposes of
that transaction, without revealing the underlying private data.
 The beginning of autonomous law – smart contract
• Computer scientist Nick Szabo introduced the concept of "smart
contracts."
• He imagined contracts that could self-execute based on conditions, like
a vending machine giving a drink when money is inserted.
• At that time, technology wasn’t advanced enough to make this a
reality.
• A smart contract is like a digital agreement that follows rules written in
code.
• It runs automatically—no need for a middleman like a lawyer or bank.
• Example: If you rent an apartment, a smart contract can release the
key once payment is made, without a landlord needing to be involved.
 Smart Contract Evolution
• Bitcoin allowed simple smart contracts, but they were very basic (like
sending money when certain rules were met).
• There was no flexibility for complex agreements.
• Ethereum introduced a programmable blockchain, allowing
developers to create advanced smart contracts.
• This led to new applications like Decentralized Finance (DeFi),
NFTs(non-fungible token), and DAOs(Decentralized autonomous
organizations).
 Smart Contract Components
• Smart contract code, for
example, Ethereum
Solidity code that is
stored, verified, and
executed on a blockchain.
• Smart legal contracts
written as a specification
for using smart contract
code as a complement or
complete substitute for
legal contracts.
 Smart contract design example
• A buyer deposits
money into a smart
contract.
• Once the property
ownership is
confirmed, the smart
contract sends the
money to the seller.
• If something goes
wrong, the buyer gets a
refund automatically.
Decentralized autonomous organizations (DAO)
• A DAO’s financial transaction record and program rules are
maintained on a blockchain.
• The concept of a DAO entity is initially introduced in a document.
• A DAO is a company or group managed by smart contracts instead of
bosses.
• Members vote on decisions using blockchain.
• Example: A DAO could manage a charity where donations and
spending are automatically recorded and transparent.
 Syllabus
• Unit-1: Introduction to Blockchain
• Unit-2: Business Use Cases
• Unit-3: Technology Use Cases
• Unit-4: Legal and Governance Use Cases
• Unit-5: Blockchain Challenges
• Unit-6: Recent Trends in the field of Blockchain

Textbook: Joseph J. Bambara and Paul R. Allen, “Blockchain: A Practical Guide to

Developing Business, Law, and Technology Solutions”, McGraw-Hill Education.
 Unit-5 Blockchain Challenges
• A key challenge associated with blockchain is a lack of awareness and
technical skills needed to implement the technology, especially in sectors
other than banking.
• Blockchain technology, while revolutionary, faces several governance and
technical challenges that impact its adoption and scalability.
 Blockchain Governance Challenges
• Governance challenges encompass the philosophical, economic, and social
issues that come from those already supporting a given blockchain or
cryptocurrency, but disagree on how to move the technology forward.
• These are challenges that will consistently arise and be different every time.
• They all revolve around how to upgrade the code to deal with some issue
but cannot agree on how to do.
• In other words, it’s an issue of how to achieve consensus on the community
level, of how protocol upgrades are managed.
 Bitcoin Block Size Debate
• The Bitcoin block size debate has been a long-standing, growing rift in the
Bitcoin space.
• Bitcoin's block size was originally limited to 1MB to prevent spam and ensure
security.
• As Bitcoin gained popularity, this limit led to network congestion, slow
transaction processing, and high fees.
• Some developers and miners proposed increasing the block size (e.g., 2MB or
more) to allow more transactions per block.
• Others opposed this, arguing that larger blocks would increase centralization, as
only large miners with expensive infrastructure could handle the growing
storage and processing requirements.
• This debate led to a hard fork in 2017, creating Bitcoin Cash (BCH), which
has a larger block size than Bitcoin (BTC).
 Technical Challenges
• Beyond governance, blockchains face technical limitations that impact
their performance, security, and usability.
• Scalability: Blockchain networks, especially public ones like Bitcoin and
Ethereum, struggle to handle a large volume of transactions quickly.
• Energy Consumption: Proof-of-Work (PoW) consensus mechanisms, used
by some blockchains, require significant computational power, leading to
high energy consumption.
• Blockchain technology is complex, requiring specialized knowledge to
develop and implement.
• This complexity can be a barrier to entry for businesses and developers.
 Bugs in the Core Code
• Blockchain software is complex, and bugs in the core code can lead to
network failures, security vulnerabilities, and financial losses.
• Example:
– Bitcoin's Value Overflow Incident (2010): A bug allowed an attacker
to create 184 billion bitcoins, violating Bitcoin’s 21 million cap. It was
quickly fixed with an emergency update.
– Parity Wallet Bug (2017): A flaw in Ethereum’s Parity multi-signature
wallet led to $150 million worth of ETH being permanently locked.
 Denial-of-Service (DoS) Attacks
• DoS attacks flood a network with excessive transactions, slowing down
processing and increasing fees.
• Example:
– Ethereum (2016-2017): Several DoS attacks targeted Ethereum by
sending computationally expensive smart contract transactions,
clogging the network.
– Bitcoin (2023): A surge of “inscription transactions” overwhelmed the
network, leading to high fees and transaction delays.
 Security in Smart Contracts
• Smart contracts are self-executing programs on the blockchain, but coding
errors and exploits can lead to security breaches.
• Example:
– Ethereum (2016-2017): Several DoS attacks targeted Ethereum by
sending computationally expensive smart contract transactions,
clogging the network.
– Bitcoin (2023): A surge of “inscription transactions” overwhelmed the
network, leading to high fees and transaction delays.
 Scaling
• For public blockchains, the biggest challenge is scalability.
• The Bitcoin network can process 4 to 7 transactions per
second, the Ethereum network around 15. This is minuscule
for a global platform.
• When you think about it, if every transaction, every
computation, is performed by every node in the network,
then the processing capability of the entire network is
limited by the processing capability of a single node.
 Sharding
• We can view shards as mostly
independent blockchains that
are designed to communicate
well with each other.
• Validators are assigned some
shards to keep track of, which
may vary hour by hour, and
users maintain a light client to
all the shards.
 Syllabus
• Unit-1: Introduction to Blockchain
• Unit-2: Business Use Cases
• Unit-3: Technology Use Cases
• Unit-4: Legal and Governance Use Cases
• Unit-5: Blockchain Challenges
• Unit-6: Recent Trends in the field of Blockchain

Textbook: Joseph J. Bambara and Paul R. Allen, “Blockchain: A Practical Guide to

Developing Business, Law, and Technology Solutions”, McGraw-Hill Education.
 How Does IoT Work With Blockchain?
IoT with Blockchain is transforming business operations, improving security and
transparency, and increasing efficiency.
• Transforming Business Processes
• Securing IoT Data with Blockchain
• Compatibility Challenges
• Increase in Efficiency
• Smart Contracts: Automating Secure IoT Transactions
 Transforming Business Processes
• The Internet of Things (IoT) is transforming the business work process, which runs
through sensors, the latest devices and infrastructure.
• Enterprises are facing a notable challenge to safeguarding the data all over the IoT
platform.
• Here Blockchain helps secure data breaches in an IoT system.

• It is a circulated ledger technology that combines IoT and enables server-to-server

dealing.
 Securing IoT Data with Blockchain
• A collection of activities or events is recorded in a database and verified by the
various sources, then entered into a shared ledger and circulated among all the
servers.
• IoT and blockchain work together to give several advantages, including the ability
for smart devices to work freely without any centralized authority.

• Also, it can save the tracks of how devices connect to each other.
 Compatibility Challenges
• In spite of being an architectural asset, the distributed nature of the blockchain is a
big challenge for the Internet of Things platforms.
• IoT depends on the centralized client-server architecture and creates an
independent IoT platform to ensure compatibility with the blockchain network.
• Yet, it can be difficult to configure IoT sensors to manage the processing and
storage of the data.
 Increase in Efficiency
• Although IoT has numerous practical uses, the banking sector, financial services,
the automotive industry, and agriculture have integrated blockchain technology
with the Internet of Things (IoT).
• It is also applied to supply chain management, logistics, smart devices, and a
moderately new application called a smart contract.Smart contracts are
speculative, and technology rules and policies are coded in the blockchain
framework to govern transactional agreements hosted on a blockchain network.
 Smart Contracts: Automating Secure IoT
Transactions
• Smart contracts employ blockchains to manage contracts when the specific
requirements are fulfilled.
• Blockchain technology permits businesses to regulate the data on smart objects in
IoT systems.
• Also, it reduces the data transmission and device management costs, and
minimizes the risks of data management from the cyberattacks.
– IoT and blockchain can be integrated into the supply chain to improve quality control.

– Blockchain holds high security by using independent, distributed ledgers to prove and
authorize protected device-generated data.
Use Case of IoT-Enabled Blockchain Technology
IoT enhances the security and transparency of the whole IoT ecosystem. Here
are some popular IoT blockchain use cases that have a significant impact
across multiple industries:
• Operational Maintenance
• Freight Transportation
• Healthcare
• Smart Homes
• Automotive
Use Case of IoT-Enabled Blockchain Technology
Operational Maintenance: IoT devices monitor the conditions of various
machines, such as elevators and engines, to ensure safety and proper
maintenance. Also, they provide secure and unchangeable records of
operational data.

Freight Transportation: Freight transportation is a complex process that

involves the support of different departments, and transportation businesses.
With the assistance of IoT-enabled blockchain technology, it is possible to track
arrival times and the live status of shipping containers in the transits.
Use Case of IoT-Enabled Blockchain Technology
Healthcare: The combination of blockchain and IoT is transforming the
healthcare sector. Wearable devices and sensors can collect patient data and
store it securely on a blockchain. Also, the use of smart contracts streamlines
insurance claims and automates billing, reducing organization expenses.

Smart Homes: Blockchain brings the concept of a smart home to another level
by fixing the major security challenges and eliminating centralized
infrastructure. For example, you can deploy security procedures such as
biometric authentication and facial/voice recognition to prevent the data
captured from smart devices getting into the wrong or irrelevant hands.
Use Case of IoT-Enabled Blockchain Technology
Automotive: Automation in the automobile industry is a key application of
blockchain and IoT. The automotive industry depends on these two disruption
technologies to access various benefits, such as finding a vacant parking space
and making payments with crypto wallets.
Another notable application of blockchain and IoT is the use of RFID tags. Car
manufacturers can easily identify spare auto parts and track the exact location
of any vehicle in IoT-connected devices using RFID tags.
 Benefits of Using Blockchain Technology in IoT
Every transaction is recorded in a digital ledger- organized into data blocks,
linked in a secure, unchangeable chain. This blockchain technology is a great
choice for propping IoT security.
Here are some of the benefits of blockchain in IoT.
• Lower Cost
• Improved Security
• Quick Data Change
• Streamline Finances
• Efficient Supply Chain
 Benefits of Using Blockchain Technology in IoT
• Lower Cost: Blockchain enables data to be shared on a peer-to-peer
basis without the need for centralized control. This decentralized structure
reduces business costs, as scaling a highly scalable centralized
infrastructure becomes expensive over time.

• Improved Security: Blockchain verifies data and ensures it comes from a

reliable source, which improves secure transmission and improves privacy
agreements. A trusted digital ledger exhibits who can access IoT data and
who has permission to handle transactions.
 Benefits of Using Blockchain Technology in IoT
• Quick Data Change: Blockchain minimizes the time taken to verify the
transactions by utilizing its trusted nodes and handling the performance
requirements of IoT (Internet of Things). It also fastens the speed of
exchanging data of IoT. This simplifies the process and builds new
business value across the whole system by banking on the data conveyed
by the IoT-connected smart devices and sensors.

• Streamline Finances: The finance department is the utmost important

section for any business house, it deals with important and sensitive data
that needs more transparency backed by IoT and blockchain.Blockchain
secures the information added to the ledger but also it makes sure that no
unauthorized personnel can access or change it without permission.
 Benefits of Using Blockchain Technology in IoT
• Efficient Supply Chain: Every single business aims for an efficient and
effective supply chain, but economic and global challenges make this
process difficult. By removing negotiators, blockchain and IoT can greatly
enhance the supply chain and its efficiency, speed up transactions, and
also reduce the cost of the supply chain.
 Challenges of IoT with Blockchain
Where the potential of integrating blockchain with the Internet of Things is
enormous, several challenges must be mentioned. Scalability, energy
consumption, conformity, and cost are among the key challenges for
implementing the technology.
• Scalability: IoT and blockchain generate a huge amount of data, and
ensuring that the blockchain can handle the scalability requirements of IoT
devices is a challenging task.
• Security Risk: To extend the capabilities of an IoT-powered blockchain
system, you need smart arrangements that offer efficiency by automating
contract administration. Yet, this results in security risks, which can hinder
blockchain adoption in IoT.
 Challenges of IoT with Blockchain
• Sensor Reliability: The question arises that how reliable are the sensors
which are in use? They could interfere with correctly calculating the
standards required to execute a transaction. It is important to take
measures to ensure external interference does not change sensors and
you can create a safe and secure environment for the data recording and
transactions.
• Network Privacy: The transaction history in the shared digital ledger for a
network of IoT-connected devices cannot be presented on the public
blockchain. This happens because the transaction patterns analysis is
applied to make inferences about the user or device essence behind public
keys.
 Challenges of IoT with Blockchain
• Complex IoT and Blockchain Projects: Since Blockchain is a relatively
new technology, its integration with IoT Solutions may not be as suitable as
we expect. This is because both the latest technologies need experts with
sufficient experience and knowledge to handle any related issue that might
arise.
 Introduction to NFTs
• A Non-Fungible Tokens (NFT) is essentially a digital token that represents
ownership of a digital asset.
• The token is stored on the blockchain, usually the Ethereum blockchain,
and is not fungible like other cryptocurrencies like Bitcoin or Ethereum.
• This means that each NFT is unique and can’t be duplicated or exchanged
in the same way.
• NFTs represent ownership of a variety of digital assets, including artwork,
music, virtual real estate, collectible items, and more.
 Reason behind NFTs’ Popularity
• A Non-Fungible Tokens (NFT) is essentially a digital token that represents
ownership of a digital asset.
• The token is stored on the blockchain, usually the Ethereum blockchain,
and is not fungible like other cryptocurrencies like Bitcoin or Ethereum.
• This means that each NFT is unique and can’t be duplicated or exchanged
in the same way.
• NFTs represent ownership of a variety of digital assets, including artwork,
music, virtual real estate, collectible items, and more.
 Summary
• IoT refers to the interconnection of computing devices embedded in everyday
objects via the Internet, enabling them to send and receive data.
• IoT is not owned by any one engineering branch. It is a reality when multiple
domains join forces and combine efforts.
• IoT is all about providing service to any device, anywhere, anybody, and any
network.
• IoT has certain characteristics which are important: a. Connectivity. b. Intelligence
and identity. c. Scalability. d. Dynamic and self-adapting (complexity). e.
Architecture. f. Safety.
• “Things” refer to variety of devices. At times, even humans in the loop becomes a
thing. For anything to qualify as a “thing”, it requires identity. The “thing” can
monitor, measure, etc.; for example, a temperature sensor could be a “thing”.
References