1. Unit 2
Block chain Mining, Consensus Protocols, Peer-to-Peer Networks,
Distributed Ledger Technology, Block chain types: Public, Private, and
Hybrid Block chain, Block chain platforms, Bitcoin basics and other
cryptocurrencies
2. Blockchain Technology-
• Blockchain technology, started in 1991, is an advanced database mechanism that allows
transparent information sharing within a business network. A blockchain database stores data
in blocks that are linked together in a chain.
• Blockchain helps in the verification and traceability of multistep transactions. It can provide
secure transactions, reduce compliance costs, and speed up data transfer processing.
Blockchain technology can help contract management and audit the origin of a product.
• The data is recorded in chronological order. Also, once the data is recorded, it cannot be
changed.
• Benefits:
• It is an immutable public digital ledger, which means when a transaction is recorded, it
cannot be modified
• Due to the encryption feature, Blockchain is always secure
• The transactions are done instantly and transparently, as the ledger is updated automatically
• As it is a decentralized system, no intermediary fee is required
• The authenticity of a transaction is verified and confirmed by participants
4. Blockchain Security-
One of the negatives of digital transformation has been the growth in personal data theft.
Government databases are a target of cyber hackers. Database hacks have exposed names, Social
Security numbers, birthdates, addresses, and driver’s license numbers of millions of Americans,
such as the 2017 Equifax database breach. Booz Allen Hamilton wrote that blockchain data
structures harden network security by reducing single-point-of-failure risk, making a database
breach difficult.
McKinsey said the technology could store hash values of citizen documents on the blockchain,
allowing governments to provide a verifiable electronic version of these documents when needed.
Increasing Government Accountability
In specific applications, blockchain could reduce government redundancy, streamline processes,
decrease audit burden, increase security, and ensure data integrity. One process ripe for
streamlining is GSA’s FASTLane process, which manages incoming proposals from vendors. Booz
Allen Hamilton wrote it currently takes 40 days to process incoming submissions. However, GSA
hopes that a blockchain solution will help process them in 10 days.
5. Reducing Government Corruption
While blockchain won’t prevent crime, the World Economic Forum (WEF) wrote there are
five use cases to address weaknesses in government systems.
• Land Title Registries
As mentioned earlier, blockchain is a way for some countries to increase efficiency in land
title registries. WEF wrote that Honduras and India are working on using blockchain to
expand property rights and enhance transparency in a process known to have corrupt
practices. Blockchain-based land registries could provide a secure, decentralized, publicly
verifiable, and immutable record system where people could prove their land rights. A
limitation would be that countries without land registries would have to build and digitize the
information before blockchain could be used.
6. • Electronic Voting
Governments are considering blockchain-based voting platforms due to concerns about
election security, voter registration integrity, poll accessibility, and voter turnout. Blockchain’s
information security qualities could help address election tampering and increase poll
accessibility. WEF said a limitation would be blockchain’s vulnerability to cyberattacks and
other security issues.
• Beneficial Corporate Ownership Registries
According to WEF, secretly operated companies present avenues for money laundering,
influence peddling, and steering government investments. Blockchain can develop central
registries to help track conflicts of interest and criminal activity. It also could provide
transparency and disclosure. However, there are several limitations as most countries don’t
require companies to maintain beneficial ownership information themselves. Also, a
blockchain-based registry would require buy-in from politicians, lawyers, banks, and big
business, which may be a heavy lift in some locations.
7. How Will Blockchain Disrupt Industries?
Several industries like Unilever, Walmart, Visa, etc. use blockchain technology and have gained
benefits in transparency, security, and traceability. Considering the benefits blockchain offers, it
will revolutionize and redefine many sectors.
5 prominent industries that will be disrupted by blockchain technology in the near future:
1.Banking
2.Cyber Security
3.Supply Chain Management
4.Healthcare
5.Government
8. 1. Banking
Before Blockchain
Banking has both expensive and time-consuming transfer fees. Also, sending money overseas
becomes even more difficult due to the exchange rate and other hidden costs.
After Blockchain
Blockchain eliminates the need for a middleman. Blockchain is disrupting the banking system by
providing a peer-to-peer payment system with the highest security and low fees.
•Blockchain technology provides instant and borderless payments across the globe
•Cryptocurrencies (like Ethereum, bitcoin) remove the requirement for a third party to perform
transactions
•Blockchain records all the transactions in a public ledger which is globally accessible by
bitcoin users.
9. 2. Cyber Security
Before Blockchain
Earlier, cyberattacks were a significant threat to the public. Several organizations were
developing an effective solution to secure the data against unauthorized access and tampering.
After Blockchain
•Blockchain quickly identifies malicious attack due to the peer-to-peer connections where data
cannot be tampered with. Every single piece of data stored on the blockchain network is
verified and encrypted using a cryptographic algorithm
•By eliminating the centralized system, blockchain provides a transparent and secure way of
recording transactions (without disclosing your private information to anyone)
10. 3. Supply Chain Management
Before Blockchain
Due to the lack of transparency, supply chain management often had its challenges like service
redundancy, lack of coordination between various departments, and lack of reliability.
After Blockchain
Tracking of a product can be done with blockchain technology, by facilitating traceability
across the entire Supply chain.
Blockchain gives the facility to verify and audit transactions by multiple supply chain partners
involved in the supply chain management system. It records transaction (history, timestamp,
date, etc.) of a product in a decentralized distributed ledger into a block
Each transaction is recorded With blockchain, anyone can verify the authenticity or status of a
product being delivered
11. 4. Healthcare
Before Blockchain
In the healthcare system, patients can connect to other hospitals and collect their medical
data immediately. Apart from the delay, there are high data corruption chances since the
information is stored in a physical memory system.
After Blockchain
•Blockchain removes a central authority, which results in instant access to data
•Here, each block is linked to another block and distributed across the computer node. This
becomes difficult for a hacker to corrupt the data
12. 5. Government
Before Blockchain
Rigged votes is an illegal activity that occurs during most traditional voting systems. Also,
citizens who want to vote to wait a little longer in a queue and cast their votes to a local
authority, which is a very time-consuming process.
After Blockchain
•Voters are allowed to vote without the need of disclosing their identity in public
•The votes are counted with high accuracy by the officials knowing that each ID can be
attributed to just one vote
•As soon the vote is added to the public ledger, the information can never be erased
13. Fundamentals of Blockchain:
1. Public Distributed Ledgers
A blockchain is a decentralized public distributed ledger that is used to record transactions
across many computers and is shared among the users of the blockchain network. The
transactions are accessed and verified by users associated with the bitcoin network, thereby
making it less prone to cyberattack.
2. Encryption
Blockchain eliminates unauthorized access by using the cryptographic algorithm (SHA256) to
ensure the blocks are kept secure and each user in the blockchain has their key.
14. 3. Proof of Work
Proof of Work (PoW) is a mechanism used in blockchain technology to secure the network,
validate transactions, and add new blocks to the blockchain. It requires participants (nodes)
to perform a substantial amount of computational work to solve complex mathematical
puzzles called mining.(Users trying to solve the puzzle are called miners.)
When a miner successfully solves the puzzle, they broadcast the new block to the network.
Other nodes verify the validity of the solution. Once confirmed, the miner is rewarded with
cryptocurrency (e.g., Bitcoin) and the newly created block is added to the blockchain. The
process of solving cryptographic puzzles requires significant computational power, which
translates into high electricity use.
15. 4. Mining
When computers on the network verify and process transactions, new bitcoins are created, or
mined. These networked computers, or miners, process the transaction in exchange for a
payment in Bitcoin. Bitcoin is powered by blockchain, which is the technology that powers
many cryptocurrencies. It is a crucial part of blockchain networks, particularly in those that
use Proof of Work (PoW) as their consensus mechanism, such as Bitcoin.
16. Block chain Mining-
Mining in blockchain refers to the process by which transactions are verified, new blocks are
added to the blockchain, and new cryptocurrency coins are introduced into circulation. It is a
crucial part of blockchain networks, particularly in those that use Proof of Work (PoW) as
their consensus mechanism, such as Bitcoin.
Steps:
• Verification of Transactions: Miners collect transactions from the network into a group
called a block. Each transaction must be verified by checking if the sender has sufficient
funds, preventing issues like double-spending.
17. • Solving a Cryptographic Puzzle: To add a block to the block chain, miners must solve a
cryptographic puzzle, which involves finding a valid hash (a unique string of characters)
that meets certain criteria (usually starting with a specific number of leading zeros). This
process requires significant computational power and is based on trial and error.
The cryptographic puzzle is usually based on the block header, which includes the hash of
the previous block, a timestamp, and a nonce (an arbitrary number that miners adjust to try
to find the right hash).
• Proof of Work (PoW): Mining is the core activity in the PoW consensus mechanism. The
first miner to solve the puzzle and produce a valid hash "wins" the right to add the block to
the blockchain. This "work" is then verified by other nodes to ensure that the solution is
valid.
18. • Block Reward: Miners are incentivized to participate through block rewards. When a miner
successfully adds a block to the blockchain, they receive newly minted cryptocurrency as a
reward. For example, in Bitcoin, miners are rewarded with newly created bitcoins. In
addition to the block reward, miners also collect transaction fees from users who included
them in their transactions.
• Over time, block rewards decrease in some cryptocurrencies, such as Bitcoin, through a
process called halving (Bitcoin’s reward halves every 210,000 blocks or approximately
every 4 years).
• Broadcasting the Block: Once a miner successfully finds a valid hash, they broadcast the
new block to the network. Other nodes on the network verify the block and its transactions,
ensuring that the solution is valid and no tampering has occurred. Once verified, the block is
added to the blockchain.
19. • Decentralization: Mining is decentralized, meaning anyone with sufficient computational
resources can participate. This decentralized process helps to ensure the security and
immutability of the blockchain by preventing single points of control or failure.
• Difficulty Adjustment: The difficulty of solving the cryptographic puzzle is automatically
adjusted by the network to ensure that blocks are added at a consistent rate. For example,
in Bitcoin, the target is to add a new block approximately every 10 minutes. As more
computational power (hash rate) is added to the network, the puzzle becomes more
difficult.
20. Types of Mining-
1.Solo Mining: In solo mining, an individual miner works alone to solve the cryptographic
puzzle.
2.Pool Mining: In pool mining, miners work together in groups, combining their
computational resources to solve the cryptographic puzzle.
3.Cloud Mining: In cloud mining, users rent mining hardware from data centers without
buying expensive equipment.
4.ASIC Mining: Application-Specific Integrated Circuits (ASICs) are specialized hardware
designed specifically for mining certain cryptocurrencies and are more efficient at solving
the cryptographic puzzles than regular CPUs or GPUs.
21. Energy Consumption and Environmental Impact
One of the major criticisms of mining, especially in Proof of Work systems like Bitcoin, is
the significant energy consumption required. The vast amount of computational power
needed to solve the puzzles leads to high electricity usage, raising environmental concerns.
Proof of Stake (PoS) is a different approach to validating transactions and achieving
consensus in a blockchain network. Unlike PoW, which relies on mining, PoS allows users
with a small amount of cryptocurrency to participate in staking i.e., instead of using
computational power to solve puzzles, validators are chosen based on the number of coins
they hold and are willing to "stake" as collateral.
22. Consensus Protocols
A consensus protocol is a set of rules that ensure that multiple machines in a system agree on
a common value or sequence of values. Consensus protocols are important in distributed
computing systems, especially when processes may have different initial values.
Consensus protocols are responsible for-
Determining who can produce a block
Handling chain selection
Verifying blocks
Handling conflicts
23. Working of consensus algorithm-
In a distributed network, it's uncommon for all system nodes to be online whenever a
consensus is needed. Also, there are chances that some information is lost during
transmission. Consensus algorithm ensures that consensus is achieved with minimal
resources, keeping integrity and transparency in the decisions it takes. To ensure that the
whole system is fault-tolerant, consensus algorithm only require a reply from 51% of the
resources at a time.
Understanding consensus algorithm using an example of PoW -
A person sends 0.2 BTC (Bitcoin ) from his wallet to another wallet. To ensure that the
transaction goes through, the miner mines the block that the transaction needs to be in.
Now, the miners start mining the block. After a while, it will get validated when the system
does the minimum required for validations. In case of BTC, it takes only six validations to
reach consensus.
24. The most popular consensus
algorithms are:
(1) Proof of Work(PoW)
(2) Proof of Stake(PoS)
(3) Delegated Proof of Stake
(DPoS)
(4) Proof-of-Authority(PoA)
25. Proof-of-Work (PoW): The first blockchain, Bitcoin, uses PoW. To validate transactions
to the Bitcoin blockchain “miners,” who are the nodes solve cryptographic, or
mathematical problems, using their computers. Miners who solve a problem and validate
and enable a block record are rewarded with bitcoin.
Proof-Of-Stake (PoS): Ethereum is moving from PoW to PoS. In PoS there are “forgers”
instead of miners. These forgers stake an amount of cryptocurrency which allows them a
chance, based on probability, to be a block validator. The successful forger receives the
relevant block transaction fees as a reward. Staking their own cryptocurrency on a block
provides a disincentive for a forger to try and trick the network as they'll lose the stake if
they're proven to be incorrectly adding transactions to the network.
26. Delegated Proof-of-Stake (DPoS): This method functions in a similar way to PoS. But,
instead of using probability, cryptocurrency holders are able to cast votes apportioned to
their stake in order to appoint witnesses. These witnesses secure and validate the blockchain,
they do not need their own cryptocurrency, but they do need votes. This consensus protocol
is more centralized than others. DPoS is used by BitShares, Steem, and EOS.
Proof-of-Authority (PoA): Arguably more centralized again, PoA has predetermined block
validators. New blocks on a blockchain are only created when the validators are in majority.
The protocol is similar to PoS. The validators are publicly known and accountable for
determining their role and eligibility for PoS validation. A newer blockchain, Elysian, uses
PoA as well as some Ethereum testnets, or test blockchains.
28. Peer-to-Peer Networks
Consensus protocols and peer-to-peer (P2P) networks are both important components of
block chain technology.
A peer-to-peer (P2P) network is based on the concept of decentralisation, which allows the
participants to conduct transactions without needing a central server. The peers or nodes
(usually a computer) communicate with each other on the network freely without an
intermediary. The P2P structure of block chain contributes to the immutability of the block
chain, making it difficult to maliciously modify data that has been entered into the block
chain.
With currencies, P2P refers to the exchange of cryptocurrencies, which were created to
enable anonymous P2P transactions that don't require processing by a financial institution.
This required encryption and block chain to enable two parties to safely conduct a
transaction without the need for a trusted third party.
29. How Peer-to-Peer Networks are decentralized?
• In a P2P network, every participant (node) has equal privileges, and there is no central
server. Each node can act as both a client (requesting services) and a server (providing
services).
• When a user initiates a bitcoin transaction e.g., sending Bitcoin to another user, the
transaction is broadcasted to all nodes in the network. Each node that receives the
transaction validates it to ensure the sender has sufficient funds and the transaction follows
Bitcoin’s rules. This is called Transaction Broadcasting.
• All nodes in the P2P network maintain a copy of the blockchain — a public ledger that
records all Bitcoin transactions. Instead of relying on a central server to update the ledger,
each node independently updates its own copy of the blockchain whenever new
transactions are validated and added. This makes it decentralized which is the
30. …
• Some nodes in the network, called miners, take part in the process of validating transactions
and creating new blocks through a process known as mining. Miners collect unconfirmed
transactions and attempt to add them to the blockchain by solving a cryptographic puzzle
(Proof of Work). Once a miner solves the puzzle, it broadcasts the new block to the rest of
the P2P network for verification. Other nodes validate the new block, ensuring it follows the
rules of Bitcoin called Block Validation (Mining).
• The P2P network works together to achieve consensus on which transactions are valid and
which blocks should be added to the blockchain. Bitcoin uses Proof of Work (PoW) as its
consensus mechanism, requiring miners to perform computationally intensive work to
propose valid blocks. Once a majority of nodes agree that a block is valid, it is added to the
blockchain, and the process continues leading to a Consensus Mechanism.
31. Since Bitcoin’s P2P network is decentralized, it is highly resilient to failures. Even if some
nodes go offline or are compromised, the network can continue to operate making it Fault
Tolerant.
Bitcoin transactions are pseudo-anonymous, meaning that the identities of the participants
are not directly revealed. Instead, transactions are tied to cryptographic keys (Bitcoin
addresses). The P2P nature of the network further enhances privacy, as users do not need to
interact with a central authority to send or receive Bitcoin maintaining Anonymity and
Privacy.
32. Advantages of P2P Networks in Bitcoin:
• Decentralization
• Resilience
• Trustless System operates without requiring trust between participants.
• Transparency All transactions on the Bitcoin network are publicly visible on the
blockchain. Anyone with a copy of the blockchain can verify transactions, which enhances
transparency and security.
• Security Proof of Work ensures that tampering with the blockchain would require
controlling over 50% of the network’s computing power (known as a 51% attack), making
it extremely difficult and expensive for attackers to alter the ledger.
33. Bitcoin P2P Networking- example on the Bitcoin testnet:
Bitcoin uses P2P networking and is a distributed, world-wide, global network of nodes.
If you download the bitcoin software stack, you (your computer) become a node in the bitcoin
global network. Though it s a peer-to-peer networking,you donot network with all other nodes
in the world. You peer with 8 other nodes and using the Bitcoin Core software, you can find out
the addresses of those 8 peers.
The “Debug Window” has a “Peers” tab that shows the 8 nodes. To verify that you have 8
peers, run the command “getconnectioncount” in the debug console window:
To get info about the 8 connections you can run the command “getpeerinfo” in the debug
console window. OR you can select the “Peers” tab in the Debug window and you’ll see the list
of 8 connections with their IP and Port number. Further, if you select one of the nodes, you’ll get
more detailed information.
37. Distributed Ledger Technology
Distributed Ledger Technology (DLT) is the foundational concept behind blockchain and
refers to a decentralized database or ledger that is maintained across multiple locations or
nodes or computers. Each participant in the network holds a copy of the ledger, and updates
are applied concurrently, ensuring transparency, security, and data integrity. Several
technologies like digital signatures, distributed networks, and encryption/ decryption methods
including distributed ledger technologies are used to enable blockchain applications.
Blockchain is one of the types of DLT in which transactions are recorded with an
unchangeable cryptographic signature called a hash. That is why distributed ledgers are often
called blockchains.
38. Features:
1.Decentralized
2.Immutable: uses cryptography to create a secure database in which data once stored cannot
be altered or changed.
3.Append only: are append-only in comparison to the traditional database where data can be
altered.
4.Distributed: no central server or authority managing the database, hence transparent.
5.Shared: DLT is not associated with any single entity but shared among the nodes on the
network where some nodes have a full copy of the ledger while some nodes have only the
necessary information that is required to make them functional and efficient.
39. …
6. Smart Contracts: Distributed ledgers can be programmed to execute smart contracts,
which are self-executing contracts with the terms of the agreement between buyer and
seller being directly written into lines of code. This allows for transactions to be automated,
secure, and transparent.
7. Fault Tolerant
8. Transparent
9. Efficient
10. Secure
40. Blockchain as a Type of DLT:
Blockchain is a specific implementation of DLT where records/ transactions are stored in
blocks, and each block is linked to the previous one, forming a chain. It offers additional
features like-
•Smart Contracts: Self-executing contracts with the terms of the agreement directly written
into code.
•Decentralized Applications (dApps): Applications built on blockchain platforms (e.g.,
Ethereum) that operate without a central authority.
42. • Public BlockChain : A public block chain is a fully decentralized network where anyone
can participate by reading, writing, or auditing the block chain. It is open and transparent,
with no single entity controlling the network. Public block chains are most commonly
associated with cryptocurrencies like Bitcoin and Ethereum.
It is a decentralized, transparent, secure and an immutable (once transactions are confirmed,
they cannot be altered or deleted) type of block chain but has a slower transaction speed due to
complex consensus mechanisms and consumes high energy, especially in Proof of Work
systems (e.g., Bitcoin).
43. Private Block chain: A private block chain is a permissioned network where access is
restricted. Only authorized participants can read or write on the block chain. Unlike public
block chains, private block chains are centralized, and a single organization or consortium
typically controls the network. Private block chains are often used within enterprises to
improve internal processes. Preferable in supply chain management, internal auditing, Banking
and financial systems.
It is a centralized system with access to only selected participants hence making it efficient
and providing higher levels of confidentiality.
Though faster and more scalable than public block chains, centralized control can lead to trust
issues and potential security vulnerabilities if the controlling entity is compromised.
44. Hybrid (Consortium) Blockchain:
A hybrid blockchain, also known as a consortium blockchain, combines elements of both
public and private blockchains. In this model, specific nodes or organizations control parts of
the blockchain, while the network retains certain decentralized features. It offers a balance
between transparency and privacy, providing flexibility on how data is shared and accessed
and also it can be customized i.e., Organizations can tailor the level of decentralization,
privacy, and access control to their needs. It finds application in Multi-organization supply
chain management, Government and public sector applications.
Though it balances decentralization with control and privacy, it is more complex to set up
and manage compared to fully public or private blockchains.
45. Block chain platforms:
Blockchain has evolved beyond Bitcoin to become a mainstream technology with diverse
applications. In 2009, Blockchain emerged as Bitcoin, but now it has become a mainstream
technology day by day. Nowadays, Blockchain has various working functionality apart from
bitcoin. It is used in industries, healthcare technology, supply chain, logistics, and many other
fields. It was designed and developed to create efficient, tamper-resistant and transparent
business processes enhancing privacy and security. It eliminates intermediaries, facilitating
faster transactions.
A blockchain platform is a shared digital ledger that allows users to record and securely share
transactions and information.
Top 10 Blockchain platforms include IBM Blockchain, Tron, Stellar, NEO, Corda, Ethereum,
MultiChain, EOS, Hyperledger Fabric, OpenChain, Quorum, and NEM.
46. Bitcoin basics and other cryptocurrencies:
Bitcoin basics
• Bitcoin (abbreviation: BTC; sign:: ) is the first decentralized
₿ and most well-known crypto
currency.
• Launched in 2009 by an anonymous person or group of people under the pseudonym
Satoshi Nakamoto.
• This Operates on a decentralized ledger called the blockchain, which records all
transactions ever made on the network. The blockchain is a series of "blocks," each
containing a list of transactions. These blocks are linked in a chronological chain, forming
an immutable and secure history of all Bitcoin transactions.
Official logo from bitcoin.org
47. Bitcoin basics and other cryptocurrencies:
Bitcoin basics
• Bitcoin (abbreviation: BTC; sign:: ) is the first decentralized
₿ and most well-known crypto
currency.
• Launched in 2009 by an anonymous person or group of people under the pseudonym
Satoshi Nakamoto.
• This technology operates on a decentralized ledger called the blockchain, which records all
transactions ever made on the network. The blockchain is a series of "blocks," each
containing a list of transactions. These blocks are linked in a chronological chain, forming
an immutable and secure history of all Bitcoin transactions.
Official logo from bitcoin.org
48. ……
• Unlike traditional currencies controlled by governments and central banks, BTC is
decentralized. The BTC network is maintained by a distributed group of computers (nodes)
around the world, with no central authority controlling it. This decentralization ensures that no
single entity can manipulate the currency or censor transactions.
• BTC uses a consensus mechanism called PoW where the "miners" solve complex
mathematical puzzles to validate transactions and add them to the blockchain. As a reward,
miners receive newly created bitcoins (called a block reward) and transaction fees. This
process is responsible for introducing new bitcoins into circulation. The difficulty level adjusts
automatically based on the network's computational power to ensure that a new block is added
approximately every 10 minutes. The block reward is halved roughly every 4 years, in an event
called the halving. The most recent halving occurred in 2020, reducing the reward to 6.25 BTC
49. ……
• Bitcoin has a fixed total supply of 21 million bitcoins. This cap was built into the protocol to
create scarcity, making Bitcoin a deflationary asset. As of now, over 19 million bitcoins have
been mined, and the last bitcoin is expected to be mined around the year 2140.
• Bitcoin transactions are recorded in the blockchain and involve sending bitcoin from one
digital wallet (address) to another. Each transaction is verified through the mining process and
is secured using Private Key or Public Key.
• To interact with Bitcoin, users need a Bitcoin wallet, which can be in the form of a Software
wallets (applications installed on computers or smartphones), Hardware wallets: Physical
devices that store private keys offline for better security, or Paper wallets: A printed or written
form of private and public keys..
50. ……
Bitcoin's decentralized nature and cryptographic design make it highly secure. Once a transaction
is confirmed and added to the blockchain, it cannot be altered, ensuring the integrity of the
network. However, Bitcoin is not anonymous; it is pseudonymous (nicknamed). While wallet
addresses are not tied to real-world identities, transactions can be traced.
Bitcoin’s price is highly volatile, often experiencing significant price swings. While it has seen
tremendous growth since its inception, its value fluctuates due to market demand, investor
sentiment, regulatory developments, and other factors.
51. Cryptocurrencies are digital or virtual currencies that use cryptography for security,
making them difficult to counterfeit or double-spend. Most cryptocurrencies operate on
decentralized networks based on blockchain technology, which is a distributed ledger
enforced by a network of computers (or nodes). They enable peer-to-peer transactions
without the need for intermediaries like banks or payment processors. They represent a
revolutionary shift in the way value is transferred and stored, offering decentralization,
transparency, and security. With a wide variety of cryptocurrencies and applications
ranging from digital payments to decentralized applications and finance (DeFi), the
technology continues to evolve. While offering significant advantages, cryptocurrencies
also come with risks, such as volatility and regulatory challenges.
52. What is the dark web, deep web, and surface web? (https://www.kaspersky.com/resource-
center/threats/deep-web)
The Internet is sizable with millions of web pages, databases, and servers all run 24 hours a
day. But the so-called "visible" Internet (aka surface web or open web) — sites that can be
found using search engines like Google and Yahoo — is just the tip of the iceberg.
The surface web or open web
The open web, or surface web, is the “visible” surface layer. If we continue to visualize the
entire web like an iceberg, the open web would be the top portion that’s above the water.
From a statistical standpoint, this collective of websites and data makes up under 5% of the
total internet.
All commonly public-facing websites accessed via traditional browsers like Google
Chrome, Internet Explorer, and Firefox are contained here. Websites are usually labeled
with registry operators like “.com” and “.org” and can be easily located with popular
search engines.
53. The deep web
The deep web rests below the surface and accounts for approximately 90% of all websites.
This would be the part of an iceberg beneath the water, much larger than the surface web. In
fact, this hidden web is so large that it's impossible to discover exactly how many pages or
websites are active at any one time.
Carrying on with the analogy, big search engines could be considered like fishing boats that
can only "catch" websites close to the surface. Everything else, from academic journals to
private databases and more illicit content, is out of reach. This deep web also includes the
portion that we know as the dark web.
The dark web
The dark web refers to sites that are not indexed and only accessible via specialized web
browsers. Significantly smaller than the tiny surface web, the dark web is considered a part of
the deep web. Using our ocean and iceberg visual, the dark web would be the bottom tip of
the submerged iceberg.
The dark web, however, is a very concealed portion of the deep web that few will ever interact
with or even see. In other words, the deep web covers everything under the surface that's still
accessible with the right software, including the dark web.
54. The reputation of the dark web has often been linked to criminal intent or illegal content,
and "trading" sites where users can purchase illicit goods or services. However, legal
parties have made use of this framework as well.
When it comes to dark web safety, the deep web dangers are very different from dark web
dangers. Illegal cyber activity cannot necessarily be stumbled upon easily but tends to be
much more extreme and threatening if you do seek it out.
dark web has attracted many parties who would otherwise be endangered by revealing their
identities online. Abuse and persecution victims, whistleblowers, and political dissidents
have been frequent users of these hidden sites. But of course, these benefits can be easily
extended to those that want to act outside of the constraints of laws in other explicitly
illegal ways.
Illegal drug marketplaces like the Silk Road have been hijacked for police surveillance in
the past. By utilizing custom software to infiltrate and analyze activity, this has allowed law
officials to discover user identities of patrons and bystanders alike. Even if you never make
a purchase, you could be watched and incriminate yourself for other activities later in life.
Infiltrations can put you at
55. How crypto helps Latin America's drug cartels do business
Crypto is being used for money laundering and to sell drugs online, posing a tough challenge
for police fighting organized crime
Cryptocurrency use growing among drug traffickers
Bitcoin the most common payment in online drug sales
Many law enforcement agencies lack crypto literacy
BOGOTA/MEXICO CITY - For decades, drug traffickers carried their cash in suitcases to
dodge banking controls, and the police. Today, many are also using virtual cryptocurrency
wallets installed on their cellphones.
When the U.S. Justice Department announced charges in April against four sons of jailed
Mexican drug lord Joaquín "El Chapo" Guzmán, the indictment said they had used
"untraceable cryptocurrency" to launder the profits of their U.S. fentanyl smuggling operation.
Known as the "Chapitos", the leaders of the Sinaloa cartel are accused of procuring chemicals
from China to manufacture fentanyl, a synthetic opioid, in clandestine labs in Mexico for
distribution in the United States.
On the same day in April, U.S. authorities also announced the arrest in Guatemala of a
wanted money launderer who they say worked for the cartel, accusing him of collecting
$869,000 in drug profits and depositing the cash in cryptocurrency wallets.
56. The cases highlight how drug cartels and crime gangs in Latin America have taken up virtual
currencies to launder money, receive payments and sell drugs on the darknet because law
enforcement authorities are finding it harder to detect the deals, researchers and officials say.
"The technology is basically getting better and better which is making it even more difficult for
law enforcement to go after these bad actors because this process provides and allows for
anonymity," said Gretta Goodwin, a director in the Homeland Security and Justice team at the
U.S. Government Accountability Office (GAO), a congressional watchdog.
Criminals use cryptocurrencies because it is an easy and efficient way to do business,
particularly across borders, said Kim Grauer, a data scientist and cryptocurrency researcher.
"Cryptocurrency is really just used because it's a fast and instantaneous payment," said
Grauer, head of research at Chainalysis, a blockchain analytics firm.
57. The shadows of a drug paddler may soon be invisible on the street corner as they have moved to
online drug marketplaces called ‘cryptomarkets’. The criminogenic attributes of drug trafficking
on cryptomarkets have attracted organized crime groups (OCGs) to make use of technology to
further its illicit goals. The OCGs making use of cryptocurrencies help in retaining anonymity to
an extent, and makes easier for them to launder their proceeds. There is a dearth of literature
explaining the increase in drug trafficking on cryptomarkets by OCGs. In a first attempt of its
kind, this paper aims at studying the drug trafficking by OCGs on cryptomarkets and explaining
the said conundrum by applying Rational Choice Theory (RCT). It is argued that OCGs make a
rational choice of dealing drugs online as the benefits attached to drug trafficking on
cryptomarkets outweigh the potential costs, such as getting arrested. Through a qualitative
analysis of data and online sources, it is revealed that the participants on cryptomarkets have
loose hierarchies and have mostly opportunistic connections. The voluminous sales are made by a
handful of entrepreneurs who have OCGs like structures, who operate in smaller groups to
minimize the risks.
Sankul Kabra, Saira Gori , “Drug trafficking on cryptomarkets and the role of organized crime
groups”, Journal of Economic Criminology, Volume 2, December 2023, 100026
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