RP BD 6
Blockchain Fundamentals
Module 1: Blockchain Intuition
Module 2A: Cryptocurrency Intuition
Module 2B: Cryptocurrency Transactions
Module 1
Blockchain Intuition
• What is a Blockchain? • Understanding SHA256 Hash • Immutable Ledger • Distributed P2P Network • How Mining Works ( Part 1: The Nonce) • How Mining Works ( Part 2: The cryptographic puzzle)
What is a Blockchain
1
Data Prev. Hash 000000000 Hash: 054DFA298
What is a Blockchain
1
Data
Prev. Hash 000000000
Hash: 054DFA298
2
Data
Prev. Hash 054DFA298
Hash: 1DA4E0F05
What is a Blockchain
1
Data
Prev. Hash 000000000
Hash: 054DFA298
2
Data
Prev. Hash 054DFA298
Hash: 1DA4E0F05
3
Data
Prev. Hash 1DA4E0F05
Hash: 8E023F0A1
What is a Blockchain
1
Data
Prev. Hash 000000000
Hash: 054DFA298
2
Data
Prev. Hash 054DFA298
Hash: 1DA4E0F05
3
Data
Prev. Hash 1DA4E0F05
Hash: 8E023F0A1
What is a Blockchain
1
Data
Prev. Hash 000000000
Hash: 054DFA298
2
Data
Prev. Hash 054DFA298
Hash: 1DA4E0F05
3
Data
Prev. Hash 1DA4E0F05
Hash: 8E023F0A1
What is a Blockchain
1
Data
Prev. Hash 000000000
Hash: 054DFA298
2
Data
Prev. Hash 054DFA298
Hash: 1DA4E0F05
3
Data
Prev. Hash 1DA4E0F05
Hash: 8E023F0A1
What is a Blockchain
“Blocks are cryptographically linked together”
What is a Blockchain
Hash Cryptography
Immutable Ledger
Distributed P2P Network
Mining
Consensus Protocol
1
2
3
4
5
Hash Cryptography
https://www.tutorialspoint.com/cryptography/cryptogr aphy_hash_functions.htm
Hash Cryptography
https://www.cast-inc.com/security/encryption-primitives/sha-256/
Hash Cryptography
https://www.cast-inc.com/security/encryption-primitives/sha-256/
Online tools - SHA256
Hash Cryptography
The ideal cryptographic hash function has the following main properties:
1) One-way
2) Deterministic
https://en.wikipedia.org/wiki/Cryptographic_hash_function
3) Fast Computation
4) The Avalanche Effect
5) Must Withstand collisions
What is a Blockchain
Hash Cryptography
Immutable Ledger
Distributed P2P Network
Mining
Consensus Protocol
1
2
3
4
5
Immutable Ledger
Chris Berg, Sinclair Davidson & Jason Potts (2017),The Blockchain Econo my: A beginner’s guide to institutional cryptoeconomics
Immutable Ledger
What is a Blockchain
Hash Cryptography
Immutable Ledger
Distributed P2P Network
Mining
Consensus Protocol
1
2
3
4
5
What is Mining
https://people.eecs.berkeley.edu/~luca/cs174/byzantine.pdf
The Byzantine Generals Problem
Block: # 10
Data: Gasan à Mike 1000 hadcoins Gasan à Jennifer 200 hadcoins Mike à john 50 hadcoins
Prev Hash
Hash
d04b98f48e8f8bcc1
0000f9e65c4e16e7807
Nonce: 100
Block: # 32
Data: Gasan à Mike 1000 hadcoins Gasan à Jennifer 200 hadcoins Mike à john 50 hadcoins
Prev Hash
Hash
d04b98f48e8f8bcc1
0000f9eF0FF0EDF
Nonce: 456
Block: # 3400
Data: Gasan à Mike 1000 hadcoins Gasan à Jennifer 200 hadcoins Mike à john 50 hadcoins
Prev Hash
Hash
d04b98f48e8f8bcc1
0000f9e65EDDE59F
Nonce: 9876543
What is Mining
What is Mining
63595c41486f1f75aa6dac237cae8c0e992e1baf72bfe6f1c 5f63d3d259a69b7
801f72e26a350aed97ac99fee142a41f311daecd5e3f781028713 36289fa10e7
00000000005385838d95ce3024de09c86cd4a27b95609a98c98 3bf97cdc9fc23a
Large Value
Small Value
X X X
X X
Target hash value
X X
What is Mining Large Value
Small Value
X
Target hash value
Block: # 10
Data: Gasan à Mike 1000 hadcoins Gasan à Jennifer 200 hadcoins Mike à john 50 hadcoins
Prev Hash
Hash
d04b98f48e8f8bcc1
0000f9e65c4e16e7807
Nonce: 100
(Nonce = 100)
What is Mining Large Value
Small Value
X
Target hash value
Block: # 10
Data: Gasan à Mike 1000 hadcoins Gasan à Jennifer 200 hadcoins Mike à john 50 hadcoins
Prev Hash
Hash
d04b98f48e8f8bcc1
Nonce: 546 (Nonce = 546)
0000f9eF0FF0EDF
What is Mining Large Value
Small Value
X Target hash value
Block: # 3400
Data: Gasan à Mike 1000 hadcoins Gasan à Jennifer 200 hadcoins Mike à john 50 hadcoins
Prev Hash
Hash
d04b98f48e8f8bcc1
Nonce: 9876543
(Nonce = 9876543)
0000f9e65EDDE59F
Block # 3400 can be added
Byzantine Fault Tolerance
What is Mining
What is Mining
This Photo by Unknown Author is licensed under CC BY
Byzantine Fault Tolerance
https://www.youtube.com/watch?v=VWG9xcwjxUg&t=12s
What is a Blockchain
Hash Cryptography
Immutable Ledger
Distributed P2P Network
Mining
Consensus Protocol
1
2
3
4
5
Consensus Protocol
Proof of work ( PoW)
Consensus Protocols
Consensus Protocol
Orphaned Block
Orphaned Block
Consensus Protocol
Additional Readings
https://www.coindesk.com/short-guide-blockchain-consensus-protocols
Block Chain Visual Demo How Mining work ?
https://www.youtube.com/watch?v=_160oMzblY8&t=774s
Module Two
Cryptocurrency Intuition
Cryptocurrency Intuition
• What we will learn in this section: • What is Bitcoin?
• Bitcoin’s Monetary Policy • Understanding Mining Difficulty • Virtual tour of a Bitcoin Mine • Mining Pools
• Nonce Range • How Miners Pick Transactions ( Part 1) • How Miners Pick Transactions (Part 2)
• CPU vs GPUs vs ASICs • How do Mempools work?
Bi tc
oi n
Blockchain Te
ch no
lo gy
Pr ot
oc ol
Co in
To ke
n
Waves Ethereum Bitcoin Neo Ripple
What is Bitcoin The Bitcoin Ecosystem:
1) Nodes:
2) Miners
3) Large Mines
4) Mining Pools
Bitcoin’s Monetary Policy
The Halving Bitcoin’s Monetary Policy
https://news.bitcoin.com/bitcoins-third-halving-complete-reward-cut-surprisingly-faster-than-previous-time-estimates/
https://www.coindesk.com/wp-content/uploads/2020/04/BitcoinHalvingWhyItMatters_CoindeskResearch.pdf
Bitcoin Monetary Inflation Inflation = Coinbase * (Blocks / year) / (Existing Coins)
https://bashco.github.io/Bitcoin_Monetary_Inflation/
Block Frequency
Sources
• https://www.blockchain.com/ • https://bashco.github.io/Bitcoin_Monetary_Inflation/ • s3.amazonawa.com • https://medium.com/@_Checkmatey_/decred-following-in-bitcoins-
footsteps-f8d0e0bbaff5 • https://news.bitcoin.com/bitcoins-third-halving-complete-reward-
cut-surprisingly-faster-than-previous-time-estimates/ • https://www.coindesk.com/crypto-investment-research/bitcoin-
halving-2020-research-report