Introduction to Blockchain Technology: Lecture 8a

Question 1

Why can’t pay online in the past?

Answer 1

No electronic cash and security

Question 2

Why was BTC invented?

Answer 2

To allow transfer of money peer-to-peer without any trusted centralized intermediary

Question 3

Flow of Tech

Answer 3

1) Ethernet
2) TCP/IP
3) HTTP
4) SSL/TLS
5) Bitcoin

Question 4

What is a blockchain?

Answer 4

1) Timestamped append-only log

2) Auditable database
Secure via Cryptography
- Hash functions are for tamper resistance and integrity
- Digital signatures for consent
- Consensus for agreement

3) Addresses ‘cost of trust’ (Byzantine Generals Problem)
- Permissioned (Only invited)
- Permissionless (Any one can join the network)

Question 5

Permissioned Blockchains

Answer 5

• Known set of participants (Only authorised nodes can join)
• No proof-of-work or mining
• No need for a native currency
• Distributed database technology

Question 6

Permissionless Blockchains

Answer 6

• Unknown participants
• Security based on incentives
  (If want participants to find the nonce to put the block into the chain, need to incentivise to motivate them to do it)
• Native Currency
• Crypto-economics

Question 7

Bitcoin and its technical features

Answer 7

1) Cryptographic Hash Functions
2) Timestamped Append-only Logs (Blocks)
3) Block Headers & Merkle Trees
4) Asymmetric Cryptography & Digital Signatures
5) Addresses
6) Consensus through Proof of Work (PoW)
7) Network of Nodes
8) Native Currency
9) Transaction Inputs & Output
10) Unspent Transaction Output (UTXO)
11) Scripting Language

Question 8

Properties of Hash Functions

Answer 8

1) Pre-image resistant (one-way): Infeasible to determine x from hash(x)
2) Collision resistant: Infeasible to find x and y where Hash(x) = Hash(y)
3) Avalanche effect: Change x slightly and Hash(x) changes significantly
4) Puzzle friendliness: Knowing Hash(x) and part of x it is still very hard to find the rest of x

Question 9

Block Header

Answer 9

1) Version
2) Previous Block Hash
3) Merkle Root Hash
4) Timestamp
5) Difficulty Target
6) Nonce

Question 10

Proof of Work (PoW)

Answer 10

Hash of previous block + Transaction hash + Timestamp + Nonce

Question 11

Network

Answer 11

Full Nodes - Store full Blockchain & able to validate all transactions
Pruning Nodes - Prune transactions after validation and aging
Lightweight Nodes - Simplified payment verification nodes, they store Blockchain Headers only
Miners - Performs PoW and crease new blocks, they do not need to be a Full node
Mining pool operators
Wallets - Store, view, send and receive transactions and create key pairs
Mempool - Pool of unconfirmed (yet validated) transactions

Question 12

Proofs

Answer 12

Randomised selection may be based upon:
Proof of Stake - Stake in Native Currency
Proof of Activity - Hybrid of PoW and PoS
Proof of Burn - Validation comes with burning of coins
Proof of Capacity (Storage or Space) - Based upon hardware space.

Delegated selection may be based on upon Tiered Systems of nodes