Blockchain essentials for ICT

professionals
Table of Contents
● Introduction
1. Blockchain terminologies
2. Distinction between databases and blockchain ledgers
● Cryptographic component
1. Cryptography, hash functions and digital signatures
● Consensus components
1. Principles and paradigms of distributed systems
2. Blockchain consensus algorithms
● Blockchain structures
1. Blockchain structure
2. Types of blockchain
 Blockchain terminologies

● Blockchain – What is it?

o Aka DLT (Distributed Ledger Technology) - rudimentary shared accounting system.
o Blockchain technology is a decentralized and distributed digital ledger system that
records transactions across multiple computers in a way that ensures security,
transparency, and immutability.

o Technologically, it is :

• Distributed database – public ledger (you can insert,

select data, but can’t update or delete data.
• Distributed computer – execute digital contracts
• Based on p2p (peer-to-peer) technology, cryptology
and API

Image source:
 Blockchain terminologies
● Decentralization: Blockchain operates on a network of computers (nodes) spread across
the globe, eliminating the need for a central authority or intermediary to oversee
transactions. This decentralization enhances security and reduces the risk of a single
point of failure.

● Distributed Ledger: Transactions are recorded in blocks, which are linked together in a
chronological chain. Each participating node maintains a copy of the entire blockchain,
ensuring that the ledger is distributed and synchronized among all participants.

● Transparency: All transactions on the blockchain are visible to every participant in the
network. This transparency fosters trust, as users can independently verify the
authenticity and validity of transactions.

● Security: Blockchain employs cryptographic techniques to secure transactions and

prevent unauthorized changes to the data. Once a block is added to the chain, it becomes
extremely challenging to alter or delete the information within it.
 Blockchain terminologies
● Immutability: The data recorded on a blockchain is immutable, meaning it cannot be
altered or tampered with once confirmed and added to the chain. This feature ensures the
integrity and trustworthiness of the ledger.

● Consensus Mechanisms: Blockchains use consensus algorithms to validate and agree on

the content of each block before it is added to the chain. Common consensus
mechanisms include Proof of Work (PoW) and Proof of Stake (PoS), which help maintain
the integrity of the ledger.

● Smart Contracts: Some blockchains, like Ethereum, support smart contracts, self-
executing agreements with predefined rules and conditions. These contracts automate
processes and transactions, eliminating the need for intermediaries and reducing costs.
For example, if Party A agrees to pay Party B a certain amount when a specific date is
reached, the smart contract will transfer the funds automatically on that date.

● Cryptocurrencies: Many blockchains power digital currencies, such as Bitcoin and

Ethereum. These cryptocurrencies use blockchain technology to enable secure and peer-
to-peer financial transactions.
 Consensus Mechanisms
Proof of Work (PoW):
● In a PoW-based blockchain, nodes (also known as miners) compete to solve complex
mathematical puzzles or computational problems.
● The first miner to successfully solve the problem broadcasts the solution to the network
for verification.
● Other nodes in the network then verify the solution, and if it's correct, the new block is
added to the blockchain.
Proof of Stake (PoS):
● PoS, in contrast, doesn't rely on computational competition but rather on the amount of
cryptocurrency (stake) held by a participant.
● In a PoS-based blockchain, validators (nodes) are chosen to create new blocks based on
the amount of cryptocurrency they hold and are willing to "stake" as collateral.
● Validators are incentivized to act honestly because they stand to lose their staked assets
if they engage in malicious behavior.
Blockchain terminologies
● Blockchain – What is it?
In fact, the blockchain is more than a technology, it
o Usually contains financial transactions
o Is replicated across a number of systems in almost real-time
o Uses cryptography and digital signatures to prove identity, authenticity and
enforce read/write access rights
o Can be written by everyone in a public blockchain (but only certain participants
in a private blockchain)
o Can be read by participants, often a wider audience
o Has mechanisms to make it hard to change historical records, or at least make it
easy to detect when someone is trying to do so

hash hash hash hash

Block 1 Block 2 Block 3 Block 4

Source: https://miethereum.com/wp-content/uploads/2017/11/A.-A-Gentle-Introduction-To-Blockchain-
Blockchain terminologies

● Distributed ledger – How it works?

Users initiate Nodes

Users One or more
transactions aggregate
Broadcast their Nodes begin
using their validated
transactions to validating each
Digital transactions
Nodes transaction
Signatures into Blocks

Nodes Block reflecting

Broadcast Consensus “true state” is
Blocks to each protocol used chained to prior
other Block

Source: https://ccl.yale.edu/sites/default/files/files/A%20Brief%20Introduction%20to%20Blockchain%20(Final%20without
 Blockchain terminologies
● Transaction & blocks
o A transaction is a value transfer;
o A block is a collection of transactions, gathered into a block that are hashed and added
to the blockchain.

Image source: https://pplware.sapo.pt/informacao/monero-xmr-uma-moeda-segura-privada-e-

Blockchain terminologies

● Mining
o The process by which transactions are verified and added to a
blockchain.

Source:
https://marmelab.com/blog/2016/05/12/blockchain-
Blockchain terminologies

● Mining
o Miners on the network select transactions from pools and form them into a ‘block’.

Image source:
Blockchain terminologies

● Bitcoin
o Crypto currency, first asset based on Blockchain
o Used for drug/weapons e-commerce, ransom ware
o Used for remittance, speculation, store of value

“What is needed is an electronic payment system based on

cryptographic proof instead of trust, allowing any two willing
parties to transact directly with each other without the need for
a trusted third party.”
Satoshi Nakamoto – October
31st, 2008

Source: https://medium.com/@flatoutcrypto/what-is-the-point-of-eos-
Distinction between databases and
blockchain ledgers
Databases Blockchains
VS

Databases have admins & No on is the admin or in-charge

centralized control
Only entities with rights can access Anyone can access (public) blockchain
database
Only entities entitled to read or Anyone with right proof of work can write on
the blockchain
write can do so
Databases are fast Blockchains are slow

No history of records & ownership History of records & ownership of digital

records
of digital records

Source: https://coinsutra.com/blockchain-vs-databas
Cryptography, hash functions and
digital signatures
● Cryptography: the encryption and decryption of data
o 2 main cryptographic concepts used in Blockchain:
- Hashing
- Digital Signatures

o 3 forms of encryption that are widely used:

Symmetric Asymmetric Hashing
cryptography cryptography
Same password one password to Maps to fixed
to encrypt & encrypt, the other to size
decrypt decrypt

2 ways function Passwords come by pair 1 way function

 Cryptography, hash functions and digital
signatures
In cryptography, a hash function is a mathematical algorithm that takes an input (or
"message") and produces a fixed-length string of characters, which is typically a
hexadecimal number. This output is often referred to as the hash value or digest.

Digital signatures in cryptography are a technique used to verify the authenticity and
integrity of digital messages or documents. They provide a way for a sender to prove that a
message was indeed created by them and has not been altered during transmission. Digital
signatures use cryptographic algorithms to achieve this level of security.
The process begins with the generation of a cryptographic key pair: a private key and a
corresponding public key.
The private key is kept secret and securely by the sender, while the public key is shared
openly.
To create a digital signature for a message or document, the sender uses their private key.
Cryptography, hash functions and
digital signatures

Image source: Scorechain

Cryptography, hash functions and
digital signatures

Image source: https://pascalpares.gitbook.io/an-introduction-to-the-bitcoin-system/the-transactions/structure-of-a-

Types of blockchain
o There mainly three types of Blockchains that have emerged after Bitcoin introduced
Blockchain to the world.
 Public Blockchain:

no one in charge, anyone can participate in reading/writing/auditing the blockchain (i.e.

Bitcoin, Litecoin, etc.)
 Private Blockchain:

a private property of an individual or an organization, there is one in charge of important

things such as read/write or whom to selectively give access to read or vice versa (i.e.
Bankchain)
 Consortium or Federated Blockchain:

More than one in charge. A group of companies or representative individuals come

together and make decisions for the best benefit of the whole network (i.e. r3, EWF)
Smart Contract Theory and
architecture
● Smart Contract Theory

o A computer protocol designed digitally facilitate, verify, or

enforce the negotiation or performance of a contract.
o It allows the performance of credible transactions without
the third parties.
o The transactions are traceable and irreversible.

Source: https://en.wikipedia.org/wiki/Smart_contrac
Smart Contract Theory and
architecture
● Smart Contract architecture

* Transaction without smart contract

If yes

Check if it Check if Message

is signed there are will be
by the enough added to Date: Price of Condi- Condi- Condi-
message coins for the before gasoline tion 3 tion 4 tion X
sender. the blockchain 31 >50$/ … … …
payment Dec. liter
If 2019
If yes …
yes

* Transaction with smart contract Image source: Scorechain

Existing blockchain applications, related
structures and architectures
● ERC-20
o Proposed on November 19, 2015 by Fabian Vogelsteller.
o A technical standard used for smart contracts on the
Ethereum blockchain for implementing tokens. (ERC:
Ethereum Request for Comment, 20: the number that was
assigned to this request.)
o It defines a common list of rules that an Ethereum token has
to implement, allowing developers to program how new
tokens will function within the Ethereum ecosystem. These
rules include how the tokens are transferred between
addresses and how data within each token is accessed.
o + 142,200 ERC-20 token contracts (as of November 19,
2018): EOS, Bancor, Qash, etc…

Source: https://en.wikipedia.org/wiki/ERC-20
Existing blockchain applications, related
structures and architectures
● ERC-721: a class of unique tokens
o A free, open standard that describes how to build non-fungible or
unique tokens on the Ethereum blockchain. While most tokens are
fungible (every token is the same as every other token, i.e.ERC-20),
ERC-721 tokens are all unique.
o It defines a minimum interface a smart contract must implement to
allow unique tokens to be managed, owned and traded.
● ERC-725: Ethereum Identity Standard
o A proposed standard for blockchain-based identity which lives on
the Ethereum blockchain.
o It describes proxy smart contracts that can be controlled by
multiple keys and other smart contracts, it can describe humans,
groups, objects and machines.
o Users should be able to own and manage their identity instead of
Source:
ceding ownership of identity to centralized organizations.
http://erc721.org/
https://