UNIT 1 (1).pptx of block chain technologies

UNIT 1
Blockchain- Public Ledgers, Blockchain as Public Ledgers - Block in a
Blockchain, Transactions-The Chain and the Longest Chain -
Permissioned Model of Blockchain, Cryptographic –Hash Function,
Properties of a hash function-Hash pointer and Merkle tree

Centralized, Decentralized, and Distributed systems
• A network can be described as a group of two or more computer systems that are
connected and communicate through sharing files or other resources.
• The connection between these computers may be established through a wire
medium, through a LAN or ethernet cable, or wirelessly, through a wifi modem

Centralized network
• A centralized network is a network where the nodes don’t directly communicate
with each other. In this system, a single server handles the major part of the
network’s processing system.

Decentralized network
• A decentralized network distributes workload
among several servers without having a single
central server to manage network activity. Each
of these servers can act as an independent central
server.
Distributed network systems
In a distributed network system, the
processing power is spread evenly across the
network. This system can often seem similar to
a decentralized system.

Challenges of Distributed Systems in Blockchain
❌ Scalability Issues: More nodes mean higher processing time.
❌ Energy Consumption: Proof-of-Work blockchains require high computational power.
❌ Consensus Delays: Reaching agreement among nodes takes time
Feature Centralized Distributed Decentralized
Control One central authority
Multiple nodes, some
coordination
No central control, fully
autonomous
Security
High risk (Single point of
failure)
More resilient, but still
coordinated
Highly secure, trustless
system
Speed Fast Moderate Slower (Consensus-based)
Failure Risk
High (System crashes if
central server fails)
Low (Redundancy exists)
Very low (No single point
of failure)
Examples
Banks, Google,
Government Databases
Cloud Computing, CDNs,
Enterprise Systems
Bitcoin, Blockchain, P2P
Networks

 Blockchain is Distributed – Data is stored across many nodes.
✔ Blockchain is Decentralized – No central authority controls it.
✔ Some blockchains may be partially centralized, depending on their use case.

Blockchain
• Definition: Blockchain is a peer-to-peer, distributed ledger that is
cryptographically-secure, append-only, immutable (extremely hard
tochange), and updateable only via consensus or agreement among
peers.
• Blockchain was introduced with the invention of Bitcoin in 2008
• Initially designed for secure cryptocurrency transactions, it has now
expanded into multiple industries, transforming finance, supply chain,
healthcare, and more.

Key Concepts
Peer-to-Peer (P2P) Network
A peer-to-peer network means that there is no central authority controlling the system.
Instead, all nodes (computers) in the network participate equally and maintain a copy of
the ledger.
• Transactions are broadcast to all nodes.
• Each node independently verifies transactions.
• A consensus mechanism ensures all nodes agree on the validity of transactions.
• This decentralized structure enhances security and reduces the risk of failure.
Distributed Ledger
A distributed ledger means that the blockchain database is replicated across multiple
nodes in different locations instead of being stored in a single central database.
• Every participant (node) has a copy of the ledger.
• Any updates to the ledger require validation from the network.
• This distribution enhances fault tolerance, making blockchain highly resilient to failures.

Cryptographically Secure
Blockchain uses cryptographic techniques to secure transactions and maintain data
integrity.
Key cryptographic concepts include:
a. Hash Functions
A hash function (e.g., SHA-256) converts input data into a fixed-length hash, ensuring:
• Data Integrity: Any small change in data results in a completely different hash.
• Tamper Detection: If someone tries to alter a block, its hash changes, invalidating
• the entire chain.
b. Digital Signatures
Transactions are signed using public-private key cryptography to:
• Ensure authenticity (only the sender can initiate a transaction).
• Prevent forgery (transactions cannot be altered without invalidating the signature).

Append-Only (Data Cannot Be Deleted or Modified)
Blockchain follows an append-only model, meaning that once data is recorded, it cannot be
altered or deleted.
• New data (blocks) can only be added at the end of the chain.
• Old data remains permanently stored and visible to all participants.
• Any attempt to modify past transactions would require altering every subsequent block, which is
computationally infeasible.
Immutable (Extremely Hard to Change)
Blockchain’s immutability ensures that transactions cannot be reversed or changed after they
are confirmed. This is achieved through:
• Cryptographic Hashing: Each block contains a hash of the previous block, making tampering
detectable.
• Decentralization: No single entity has control over the ledger.
• Consensus Mechanisms: Only valid transactions agreed upon by the majority of nodes are
added to the blockchain.

Updateable only via consensus or agreement among peers.
One of the key properties of blockchain technology is that it can only be updated
when a majority of participants (peers) in the network agree on a change. This
is known as consensus, and it ensures that only valid transactions or data are added
to the blockchain.
• No single entity can alter the blockchain: Changes only happen when a
majority of participants agree.
• Prevents fraud: An attacker cannot modify past transactions unless they
control more than 50% of the network (which is extremely difficult).
• Ensures transparency and security: Every update is verified and agreed
upon by independent participants.

Network View of Blockchain
Blockchain can be thought of as a layer of a
distributed peer-to-peer network running on top of
the internet
• It is analogous to SMTP, HTTP, or FTP running on top of
TCP/IP.
• At the bottom layer in the preceding diagram, there is the
internet, which provides a basic communication layer for
any network.
• In this case, a peer-to-peer network runs on top of the
internet, which hosts another layer of blockchain.
• That layer contains transactions, blocks, consensus
mechanisms, state machines, and blockchain smart contracts
• All of these components are shown as a single logical entity
in a box, representing blockchain above the peer-to-peer
network.
• Finally, at the top, there are users or nodes that connect to
the blockchain and perform various operations such as
consensus, transaction verification, and processing.

Components of Blockchain
1. Transactions
Transactions are the fundamental units of blockchain. They represent data
exchanges between participants, such as transferring cryptocurrency, executing
smart contracts, or storing information. Each transaction includes:
• A sender and receiver
• A digital signature for authentication
• The amount or data being transferred
• A timestamp
• A unique transaction ID
2. Blocks
Blocks are containers that hold a batch of
transactions. Each block consists of:
• A block header (contains metadata such as
timestamp, nonce, and previous block hash)
• A block body (contains verified transactions)
• A cryptographic hash that links it to the previous
block, forming a chain

3. Consensus Mechanisms
Consensus mechanisms ensure that all participants agree on the current state of the
blockchain. These mechanisms prevent fraud and maintain network security.
Common consensus algorithms include:
• Proof-of-Work (PoW) – Used in Bitcoin; miners solve complex puzzles to validate
transactions.
• Proof-of-Stake (PoS) – Used in Ethereum 2.0; validators are chosen based on their stake in
the network.
• Practical Byzantine Fault Tolerance (PBFT) – Used in permissioned blockchains; nodes
reach consensus through majority agreement.
4. State Machines
A state machine defines the current status of the blockchain at any
given time and updates it when new transactions are added. It
ensures that all nodes maintain a synchronized and valid ledger
5. Smart Contracts
Smart contracts are self-executing programs stored on the blockchain that execute
predefined rules when specific conditions are met. They eliminate intermediaries and
automate transactions

1. Block Structure
Each block in a blockchain is made up of two main parts:
1.Block Header – Contains metadata and cryptographic
information.
2.Block Body – Stores a list of validated transactions.
Block Header (Metadata and Security Information)
The block header ensures integrity and links the block to the
previous one, forming a secure chain. It contains:
• Previous Block Hash – A cryptographic hash of the previous
block, ensuring immutability.
• Merkle Root – A hash representing all transactions in the
block, used for verification.
• Timestamp – The time the block was created, ensuring
chronological order.
• Nonce – A number used in Proof-of-Work (PoW) consensus to
validate blocks.
• Difficulty Target – A parameter used in PoW that determines
mining difficulty.
• Version Number – Specifies the protocol version of the
blockchain.
Block Body (Transaction Data)
The block body contains:
•List of Transactions – All validated transactions
included in this block.
•Transaction Counter – The number of transactions
in the block.

2. Blockchain Structure (Chain of Blocks)
• Each block is cryptographically linked to the previous block, forming a chain.
This structure ensures that altering any block would require modifying all
subsequent blocks, which is computationally infeasible.
Block 1 → Block 2 → Block 3 → Block 4 → ... → Latest Block
3. Genesis Block
The Genesis Block is the first block in a blockchain. It is unique
because it does not reference a previous block. All subsequent blocks
are built on top of the Genesis Block.

Address
• Addresses as Unique Identifiers
• Address Reuse & Privacy Concerns
• Bitcoin's Pseudonymity
• Privacy Protection
3. Types of Blockchain Addresses
Different blockchains use different address
formats.
Bitcoin Address Formats:
• P2PKH (Legacy Address) – Starts with "1"
(e.g., 1A1zP1...)
• P2SH (SegWit Address) – Starts with "3" (e.g.,
3J98t1...)
• Bech32 (Native SegWit Address) – Starts with
"bc1" (e.g., bc1qw5...)
Ethereum Address Format:
•Starts with "0x" followed by 40 hexadecimal
characters.
•Example:
0xde0B295669a9FD93d5F28D9Ec85E40f4cb6
97BAe
Other Blockchain Addresses:
•Solana: 4oEs9Ex...3FJ
•Ripple (XRP):
rDsbeomae4FXwgQTJp9Rs64Qg9vDiTCdBv
Blockchain addresses are created through the following steps:
Step 1: Generate a Private Key
A private key is a randomly generated number that provides full
control over funds. Example:
5J3mBbAH58...3ErthbW7xY
Step 2: Derive the Public Key
Using elliptic curve cryptography (ECC), the private key is used
to generate a public key. Example:
04bfcab9...59f9a2e7b8
Step 3: Generate the Blockchain Address
The public key is hashed using SHA-256 and RIPEMD-160 to
generate the blockchain address, making it shorter and more secure.

The Growth of Blockchain Technology
• The first cryptocurrency, Bitcoin, introduced the world to blockchain technology
and the concept of a blockchain ecosystem.
• In order to understand the history of blockchain, we must go back to 2009. The
2009 Bitcoin white paper published by the anonymous Satoshi Nakamoto detailed
a solution to the double-spend problem encircling digital peer-to-peer payments.

UNIT 1 (1).pptx of block chain technologies

Phase 1: The Birth of Blockchain (2008 - 2013)
• 2008: Satoshi Nakamoto introduced Bitcoin and blockchain technology.
• 2009: The first Bitcoin transaction took place (Genesis Block mined).
• 2011: Other cryptocurrencies (Litecoin, Namecoin) emerged.
• 2013: Ethereum was conceptualized by Vitalik Buterin, introducing smart contracts
Blockchain as a public decentralized ledger for digital currency.
Phase 2: Blockchain 2.0 – Smart Contracts & Expansion (2014 - 2018)
• 2015: Ethereum launched, enabling smart contracts and decentralized applications
(DApps).
• 2016: Enterprises started exploring blockchain (Hyperledger project launched by IBM,
Linux Foundation).
• 2017: ICO (Initial Coin Offering) boom—fundraising via blockchain-based tokens.
• 2018: Rise of private and permissioned blockchains (e.g., Hyperledger, Corda).
Blockchain moved beyond finance, supporting decentralized applications (DApps) and
tokenization.

Phase 3: Blockchain 3.0 – Enterprise Adoption & Scalability (2019 - Present)
• 2019-2020: Rise of Decentralized Finance (DeFi) platforms like Uniswap,
Compound.
• 2021: NFT (Non-Fungible Tokens) boom—digital assets on blockchain (Ethereum,
Solana).
• 2022: Major companies (Meta, Microsoft) explored Metaverse & Web3 powered
by blockchain.
• 2023-Present: Focus on scalability (Layer-2 solutions like Polygon), sustainability
(energy-efficient consensus like Proof of Stake), and regulation.
Scalability, interoperability, DeFi, NFTs, Web3, Metaverse integration.

Factors Driving Blockchain Growth
1. Decentralization & Transparency
• Eliminates intermediaries, reducing costs.
• Ensures trust through tamper-proof ledgers.
2. Financial Innovation
• Growth of cryptocurrencies, DeFi, and Central Bank Digital Currencies (CBDCs).
• Tokenization of assets (stocks, real estate).
3. Enterprise & Government Adoption
• Companies like IBM, Amazon, Microsoft using blockchain for supply chain, identity verification.
• Governments exploring digital identity & voting systems.
4. Security & Fraud Prevention
• Blockchain is immutable, making it resistant to fraud.
• Used in cybersecurity, healthcare records, and anti-counterfeiting.
5. Web3 & Metaverse Integration
• Decentralized internet (Web3) powered by blockchain.
• Blockchain-based Metaverse projects (Decentraland, Sandbox).

Benefits Of Using Blockchain Technology
Blockchain offers a number of benefits to
businesses (startups, SMEs and Big Brands) and
industries

Blockchain Working Mechanism
A comprehensive overview of how blockchain technology works, breaking it down
into a step-by-step process.
1. Transaction Initiation
2. Transaction Verification
3. Transaction Aggregation into a Block
4. Consensus Mechanism
5. Block Addition to the Blockchain
6. Network Synchronization
7. Transaction Completion
8.Immutability and Security

Alice Sends Bitcoin to Bob
Step 1: Transaction Initiation
•Alice wants to send 1 Bitcoin (BTC) to Bob.
•She creates a transaction with:
• Sender Address (Alice's Public Key)
• Receiver Address (Bob's Public Key)
• Amount (1 BTC)
• Digital Signature (created using Alice's private key
to prove ownership)
Step 2: Transaction Verification
•Alice’s transaction is broadcast to the Bitcoin network (a peer-to-peer network
of nodes).
•Nodes verify:
• Alice’s digital signature to ensure she owns the Bitcoin.
• Whether Alice has sufficient balance (1 BTC) in her wallet.
• If the transaction follows Bitcoin’s rules.
Step 3: Transaction Aggregation into a Block
•Valid transactions are grouped into a block by
miners.
•The block includes:
• A list of transactions (including
Alice’s transaction).
• A reference to the previous block’s
hash (to maintain the chain).
• A nonce (a random number used in
mining).
Step 4: Consensus Mechanism (Proof of
Work)
•Miners compete to solve a cryptographic
puzzle (find a nonce that produces a hash
with a specific number of leading zeros).
•The first miner to solve the puzzle
broadcasts the solution to the network.
•Other nodes verify the solution and agree
on the validity of the block.

Step 5: Block Addition to the Blockchain
•Once consensus is reached, the new block is added to the blockchain.
•The block is linked to the previous block using its hash, creating an immutable
chain.
Step 6: Network Synchronization
• The updated blockchain is shared with all nodes in the network.
• Every node updates its copy of the blockchain to include the new block
Step 7: Transaction Completion
•Alice’s transaction is now confirmed and recorded on the blockchain.
•Bob receives 1 BTC in his wallet.
Step 1: 1. Transaction Creation
Alice's Wallet:
- Sender: Alice's Public Key
- Receiver: Bob's Public Key
- Amount: 1 BTC
- Digital Signature: Signed with Alice's Private Key
Step 2: Transaction Broadcast
Alice's Transaction → Bitcoin Network (Nodes)
Step 3:Block Formation
Block:
- Previous Block Hash: 0000abc123...
- Transactions: [Alice → Bob (1 BTC), ...]
- Nonce: 12345
Step 4 :Block Formation
Miners Compete:
- Find Nonce such that Hash(Block) = 0000xyz...
- First Miner to Solve Adds Block to Chain
Step 5 : Mining (Proof of Work)
Blockchain:
- Block 1: 0000abc123...
- Block 2: 0000xyz... (Contains Alice's Transaction)
Step 6 :Blockchain Update
All Nodes Update Their Blockchain Copies:
- Block 1: 0000abc123...
- Block 2: 0000xyz...
Step 7: Transaction Confirmed
Bob's Wallet: - Balance Updated: +1 BTC

Types of Blockchain
Some features and functionalities fluctuate across different types of blockchains. At
the most basic level, there are two buckets: permissioned and permissionless
• In a permissioned blockchain, access to participate in the network is restricted.
Network administrators have control over who can join, view data and engage in
the consensus process.
• On the other hand, a permissionless blockchain is characterized by open and
unrestricted participation.
• Four common types of blockchain: public, private, hybrid and consortium

Four Common types of Blockchain
Public Blockchain
• Definition: A decentralized, open-to-all blockchain where anyone can participate in
verifying and validating transactions.
• Open, transparent, and censorship-resistant.
• Example: Bitcoin – A permissionless blockchain where miners validate transactions,
and anyone can join the network without restrictions.
Private Blockchain
• Definition: A restricted blockchain where only selected participants can access and
validate transactions. It is usually controlled by a single entity.
• Faster transactions, better scalability, and more control over data access.
• Example: Hyperledger Fabric – A permissioned blockchain used by enterprises like
IBM for supply chain tracking and business transactions

Consortium (Federated) Blockchain
• Definition: A semi-decentralized blockchain where a group of pre-approved organizations
manages the network.
• Partially decentralized, better scalability, and improved efficiency compared to public
blockchains.
• Example: R3 Corda – A blockchain used by banks and financial institutions to facilitate
secure transactions while maintaining privacy.
Hybrid Blockchain
• Definition: A combination of public and private blockchains, allowing certain data to be
accessible to the public while keeping other information restricted.
• Flexibility in data visibility, optimized for enterprise use cases.
• Example: XinFin (XDC Network) – A blockchain used for financial settlements where
public transactions are visible, but sensitive enterprise data remains private.

Sidechain
• Definition: A sidechain is a separate blockchain that runs parallel to the main
blockchain, allowing for the transfer of assets between the two. It can have different
rules and features compared to the main chain.
• Example: Liquid Network is a sidechain of Bitcoin that enables faster and more
private transactions. It is used by exchanges and traders to move Bitcoin between
different platforms quickly and securely.
Layer 2 Blockchain
• Definition: Layer 2 blockchains are built on top of existing blockchains to improve
scalability and efficiency. They handle transactions off the main chain and then settle
them on the main chain.
• Example: Lightning Network is a Layer 2 solution for Bitcoin that enables instant,
low-cost transactions by creating payment channels off the main Bitcoin blockchain. It
is used for microtransactions and everyday payments.

Tokenized vs. Tokenless Blockchain
Understanding Tokenized and Tokenless blockchains is crucial for differentiating how
value and transactions work in different blockchain systems.
A tokenized blockchain uses digital tokens as a core part of its system. These tokens can
represent value, ownership, or access rights and are often used for transactions, incentives,
or governance.
• A tokenless blockchain operates without a native token. These blockchains focus on
data storage, verification, or process automation without requiring a token for transactions
or incentives.
Aspect Tokenized Blockchain Tokenless Blockchain
Native Token Yes No
Economic
Incentives
Tokens used for rewards, payments, and
governance
No tokens; incentives may not be required
Use Cases Public blockchains, DeFi, NFTs, payments Enterprise, supply chain, data management
Transaction Costs Often requires tokens for fees No token fees; costs may be handled externally
Examples Bitcoin, Ethereum, Binance Smart Chain Hyperledger Fabric, Corda, Quorum

Consensus Mechanism
• A consensus mechanism is a protocol or algorithm that enables nodes in a
blockchain network to agree on the validity of transactions and the state of the
ledger. It ensures:
• Decentralization: No single entity controls the network.
• Security: Protects against malicious actors (e.g., double-spending attacks).
• Immutability: Once a transaction is confirmed, it cannot be altered.
Why is Consensus Important?
• Prevents double-spending and ensures only valid transactions are recorded.
• Maintains security and prevents attacks like 51% attacks.
• Enables decentralization by removing central authorities

Types of Consensus Mechanisms
1. Proof of Work (PoW)
• How it works: Nodes (miners) solve complex mathematical puzzles to validate
transactions and create new blocks. The first miner to solve the puzzle gets to add the
block to the blockchain and is rewarded.
• Key Features: High energy consumption Secure but slow.
• Example: Bitcoin and Ethereum (pre-merge) use PoW.
2. Proof of Stake (PoS)
• How it works: Validators are chosen to create new blocks based on the number of tokens
they "stake" (lock up) as collateral. The more tokens staked, the higher the chance of
being selected.
• Key Features: Energy-efficient compared to PoW. Encourages holding tokens.
• Example: Ethereum 2.0 (post-merge) and Cardano use PoS.

3. Delegated Proof of Stake (DPoS)
• How it works: Token holders vote to elect a small group of delegates who validate
transactions and create blocks. Delegates are incentivized to act honestly.
• Key Features: Faster and more scalable than PoW and PoS. Centralization risk due to a
small number of delegates.
• Example: EOS and TRON use DPoS.
4. Proof of Authority (PoA)
• How it works: A small number of pre-approved validators (usually trusted entities) are
responsible for validating transactions and creating blocks.
• Key Features: Highly efficient and fast.Centralized, as validators are pre-selected.
• Example: VeChain and POA Network use PoA.

5. Proof of Burn (PoB)
• How it works: Miners "burn" (destroy) tokens to gain the right to validate transactions
and create blocks. The more tokens burned, the higher the chance of being selected.
• Key Features: Reduces token supply, potentially increasing value, Energy-efficient
compared to PoW.
• Example: Slimcoin uses PoB.
6. Proof of Capacity (PoC)
• How it works: Miners use available hard drive space to solve cryptographic puzzles.
The more storage space a miner has, the higher the chance of being selected to create a
block.
• Key Features:
• Energy-efficient compared to PoW.
• Requires significant storage capacity.
• Example: Burstcoin uses PoC.

7. Proof of Elapsed Time (PoET)
• How it works: Nodes wait for a randomly assigned time period before validating
a block. The node with the shortest wait time gets to create the block.
• Key Features:
• Energy-efficient.
• Requires trusted execution environments (TEEs).
• Example: Hyperledger Sawtooth uses PoET.
8. Byzantine Fault Tolerance (BFT)
• How it works: Nodes communicate with each other to reach consensus, even if
some nodes are malicious or faulty. A supermajority (e.g., 2/3) of nodes must
agree on the validity of a block.
• Key Features:
• High security and fault tolerance.
• Scalability challenges.
• Example: Stellar and Ripple (XRP) use BFT-based consensus.

9. Practical Byzantine Fault Tolerance (PBFT)
• How it works: A variant of BFT where nodes vote in multiple rounds to reach
consensus. It is more efficient than traditional BFT.
• Key Features:
• Suitable for permissioned blockchains.
• Requires a known set of validators.
• Example: Hyperledger Fabric uses PBFT.
10. Proof of History (PoH)
• How it works: Uses a cryptographic clock to prove the passage of time between
events, enabling faster consensus.
• Key Features:
• High throughput and scalability.
• Requires a trusted time source.
• Example: Solana uses PoH in combination with PoS.

11. Proof of Space and Time (PoST)
• How it works: Combines storage space (Proof of Space) with time delays (Proof of Time)
to achieve consensus.
• Key Features:
• Energy-efficient.
• Requires significant storage and computational resources.
• Example: Chia uses PoST.
12. Proof of Activity (PoA)
• How it works: A hybrid of PoW and PoS. Miners first perform PoW to create a block, and
then validators are selected via PoS to validate the block.
• Key Features:
• Combines the security of PoW with the energy efficiency of PoS.
• Complex to implement.
• Example: Decred uses PoA.

13. Proof of Importance (PoI)
• How it works: Validators are chosen based on their "importance" score, which considers factors like the
number of tokens held and transaction activity.
• Key Features:
• Encourages active participation in the network.
• Less energy-intensive than PoW.
• Example: NEM uses PoI.
14. Federated Consensus
• How it works: A group of pre-selected nodes (federation) validates transactions and creates blocks.
• Key Features:
• Fast and efficient.
• Centralized, as validators are pre-selected.
• Example: Ripple (XRP) uses a federated consensus model.
15. Directed Acyclic Graph (DAG)
• How it works: Transactions are linked directly to each other in a graph-like structure, eliminating the need
for blocks. Consensus is achieved through validation of previous transactions.
• Key Features:
• High scalability and speed.
• No miners or validators required.
• Example: IOTA and Nano use DAG-based consensus.

Consensus mechanisms are the backbone of blockchain networks, ensuring security,
decentralization, and agreement among participants. Each mechanism has its
strengths and weaknesses, making it suitable for specific use cases:
• PoW is ideal for highly secure, decentralized networks like Bitcoin.
• PoS and DPoS are better for energy-efficient, scalable networks like Ethereum 2.0
and EOS.
• BFT and PBFT are suited for permissioned, enterprise-focused blockchains like
Hyperledger Fabric.
• DAG is ideal for high-throughput, feeless networks like IOTA and Nano.

Public Ledger
• A public ledger is a record-keeping system that is open to the public, allowing
anyone to view and verify transactions.
• Traditionally, ledgers have been used by businesses, governments, and banks to
maintain records of transactions. However, with the rise of digital technology,
public ledgers have evolved into decentralized, tamper-proof systems powered by
blockchain technology.
A public ledger has the following characteristics:
• Transparency – All transactions are visible to participants.
• Immutability – Once recorded, transactions cannot be altered.
• Security – Uses cryptographic techniques to prevent fraud.
• Decentralization – No single authority controls the ledger.

Blockchain as Public Ledger
Blockchain technology is a distributed ledger system that maintains a continuous and
unchangeable record of transactions across multiple computers (nodes). It is a
decentralized system, meaning no single entity has complete control over the data.
Blockchain functions as a public ledger because:
• Transactions are visible to all network participants.
• Records are immutable, ensuring data integrity.
• Cryptographic methods such as hashing and digital signatures secure transactions.
• Consensus mechanisms (e.g., Proof of Work, Proof of Stake) validate transactions
without a central authority.

Example: Bitcoin Blockchain as a Public Ledger
Let's consider how Bitcoin utilizes blockchain as a public ledger:
1.Transaction Creation: Alice wants to send 1 Bitcoin to Bob.
2.Broadcasting: The transaction is broadcasted to the Bitcoin network.
3.Validation: Miners verify the transaction using cryptographic rules.
4.Block Addition: Once verified, the transaction is added to a block.
5.Consensus Mechanism: Bitcoin’s Proof of Work (PoW) ensures that miners solve
complex puzzles to validate blocks.
6.Permanent Record: The block is added to the blockchain, and the transaction becomes
immutable.
7.Transparency: Anyone can verify the transaction by checking Bitcoin’s public ledger.
For example, if Alice's Bitcoin transaction ID is abcd1234, anyone can enter it into a
blockchain explorer (like Blockchain.com or Etherscan) and see the details of the
transaction.

Block in a Blockchain
• A block is a container of data that holds multiple transactions in a blockchain
network. Each block consists of:
• Block Header (contains metadata like timestamp, previous block hash, and
nonce).
• Transaction List (all transactions added to the block).
• Hash (a unique fingerprint of the block).
• Previous Block Hash (links to the previous block, forming a chain).

Structure of a Block in Blockchain
A blockchain block consists of three main components:
Block Header (Metadata)
• Contains key information that helps maintain blockchain integrity:
• Previous Block Hash – Links to the last block in the chain.
• Timestamp – Records when the block was created.
• Nonce – A random number used in mining (Proof of Work).
• Merkle Root – A cryptographic summary of all transactions in the block.
• Difficulty Target – Determines how hard it is to mine the block.
Transaction List
• Stores verified transactions that were included in the block.
• Transactions are hashed and organized in a Merkle Tree to ensure security.
Block Hash
• A unique digital fingerprint of the block.
• Generated using a cryptographic function (e.g., SHA-256 in Bitcoin).
• Ensures data immutability (any small change in the block changes the hash completely).

How Blocks Are Connected in Blockchain?
• Each block references the previous block’s hash, ensuring that the chain remains
intact. If someone attempts to modify a previous block, the hash will change,
invalidating all following blocks.
Block # Previous Block Hash Transactions Current Block Hash
Block #1 (Genesis) 0000… Alice → Bob (5 BTC) 1234…
Block #2 1234… Bob → Charlie (2 BTC) 5678…
Block #3 5678… Charlie → Dave (1 BTC) 9101…
Types of Blocks in Blockchain
1.Genesis Block
1. The first block in the blockchain (hardcoded).
2. In Bitcoin, it was created by Satoshi Nakamoto in 2009.
2.Mined Blocks
1. Blocks added through Proof of Work (PoW) or Proof of Stake (PoS) mechanisms.
2. Contain valid transactions verified by nodes.
3.Orphan Blocks (Stale Blocks) Blocks that were mined but rejected due to the Longest
Chain Rule.

Advantages
• Security & Immutability
• Transparency
• Decentralization
• Faster Transactions (in Private Blockchains)
• No Intermediaries
• Fault Tolerance
Disadvantages of Blocks in Blockchain
• Scalability Issues
• High Energy Consumption
• Storage Problems
• Regulatory Challenges
• Risk of 51% Attack

Transaction
• A transaction is the fundamental unit of operation in a blockchain. It represents the transfer of digital
assets, such as cryptocurrency (Bitcoin, Ethereum), tokens, or smart contract executions.
• In Bitcoin and other blockchain systems, transactions follow a decentralized, cryptographic, and
immutable process to ensure security and transparency.
Attributes of Transactions
Transactions have the following key attributes:
• Index
• Transaction hash ( Content of transaction)
• Sender address
• Recipient address
• Amount
• Fee ( Gas price and Gas limit)
• Data ( Info relevant to the transaction)
• Events

Attribute Description
Index The position of the transaction inside a block.
Transaction Hash (TXID) A unique identifier for the transaction.
Sender Address The wallet/public key of the sender.
Recipient Address The wallet/public key of the recipient.
Amount The value being transferred in native cryptocurrency or tokens.
Fee (Gas Price & Gas Limit) The cost paid to miners/validators for processing.
Data (Input Data)
Additional transaction data (smart contracts, DeFi, NFT
transfers).
Events Logs emitted by smart contracts (e.g., token transfers, swaps).

Transaction Process and Validation Process
Step Description
1. Transaction Creation User initiates the transaction & signs it.
2. Transaction Broadcast Sent to blockchain nodes via P2P network.
3. Transaction Validation Nodes verify signature, balance, double-spending.
4. Mempool (Waiting Area) Transaction waits for miners/validators.
5. Block Inclusion (Mining/PoS Validation) Miners/validators add it to a block.
6. Consensus & Block Propagation Network agrees on the new block.
7. Transaction Finalization The transaction is permanently recorded.

Blockchain Transaction Lifecycle

Validating a Transaction
When a transaction is received, nodes validate it before adding it to a block
• Verify Digital Signature
• Check Sender’s Balance
• Prevent Double-Spending - Bitcoin checks UTXOs (Unspent Transaction Outputs)
• Validate Transaction Fees
• Add Transaction to Mempool
• UTXOs - is an amount of Bitcoin that is available to be spent

• Advantages of Blockchain Transactions
• Immutable – Cannot be modified or deleted.
Decentralized – No need for banks or intermediaries.
Secure – Cryptographic encryption prevents fraud.
Transparent – Public blockchains allow anyone to verify transactions.
Fast & Cost-Effective – Reduces cross-border transaction times.
Challenges & Limitations
• Slow Processing (Bitcoin: 7 TPS vs. Visa: 24,000 TPS)
Irreversible Transactions (No refunds)
High Energy Use (PoW mining consumes huge resources)
Scalability Issues (Large networks = longer processing times)

The Chain and the Longest Chain
• In blockchain technology, a "chain" refers to the interconnected series of blocks
that contain records of transactions.
• Each block contains a cryptographic hash of the previous block, creating a chain-
like structure.
• The chain in blockchain refers to this linked structure of blocks, providing a
secure and transparent way to record and verify transactions.
Longest Chain
• The concept of the "longest chain" refers to the chain with the most cumulative
computational work (also known as the "heaviest" or "most difficult" chain).
• The longest chain is the chain of blocks that took the most effort to build.
• In short, to add a new block to the blockchain you need to use processing power,
which means that every block on the blockchain required a certain amount of
energy to get there.

How Does It Work?
• Miners solve complex cryptographic puzzles to add new blocks to the blockchain.
• Each block requires a certain amount of energy (computational work) to be mined.
• If two miners solve the puzzle at the same time, two different versions of the blockchain
may temporarily exist.
• The network will eventually follow the chain that has the most computational work (i.e.,
the longest chain).
• This prevents conflicts and ensures all nodes agree on a single version of the blockchain.
Longest Chain : The chain with more blocks (more work done) is considered the valid
chain

Is the longest chain the one with the most blocks?
• This is because changes to the difficulty mean that some blocks are
going to require more energy to mine than others.
• Calculate the longest chain – Chain Rule
The total chainwork is the sum of the average number of expected
hashes to mine each block in the chain.

• When multiple miners create new blocks at the same time, the
network may temporarily have multiple competing chains. The
longest valid chain (the chain with the most accumulated
computational work) is considered the correct one, and shorter
chains are discarded.
• Why is the Longest Chain Rule Important?Prevents Forking Issues:
Ensures all nodes follow the same blockchain version.Maintains
Security: Attackers must outperform the entire network to create a
longer chain.Consensus Agreement: Nodes in a decentralized network
automatically agree on a single chain.

Example of the Longest Chain Rule
• Competing Chains
• Suppose a blockchain currently has Block A as the latest block.
• Two miners M1 and M2 solve a new block simultaneously and broadcast Block B1 and Block
B2 to the network.
• Some nodes receive B1 first and start extending it, while others extend B2.
• Now, there are two competing chains:
• Chain 1: A → B1
• Chain 2: A → B2 Another miner M3 extends B1 by adding Block C:lessCopyEdit
• Chain 1: A → B1 → C
• Chain 2: A → B2
• Since Chain 1 is longer, the network accepts it as the valid chain, and Block B2 is discarded.

Chain Work
• is a measure of the total computational effort (Proof of Work)
invested in a blockchain. It helps determine the validity of competing
chains by ensuring that the chain with the most accumulated work is
considered the longest and most secure.
• How is Chain Work Calculated?
• Each block in a blockchain has a difficulty level, which represents the
amount of work required to mine that block. Chain Work is the sum
of the work done to mine all blocks in a chain.
• Formula for Chain Work

Total Chain Work=∑ 2 256
/ Target Difficulty of each block
Where:
•Target Difficulty is a value that determines
how hard it is to find a valid block.
•Higher difficulty means more computational
work is required.

Block Difficulty
Block A 1000
Block B1 1500
Block C1 1200
Total Chain Work = 1000 +
1500 + 1200 = 3700
Block Difficulty
Block A 1000
Block B2 2000
Total Chain Work = 1000 + 2000 = 3000
Example: Competing Chains and
Chain Work
Scenario: Two Competing
Chains
Suppose we have two chains:

UNIT 1 (1).pptx of block chain technologies

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