Lecture 2 - Introducing DLT, HyperLedgerFabric, Ethereum Flashcards
Name some primary differences between the two concepts: Traditional Finance and Decentralized Finance
(T)raditional: Proprietary Software
(D)ecentralized: Open Source
T: Intermediaries
D: Peer-to-peer/Web
T: Trust in institutions
D: Trust in technology
T: Limited Transparency
D: Transparent
T: Central Clearing
D: Blockchain
There are four key characteristics in blockchain that brings trust. What are they
- Cryptographically secure
- Ledger
- Shared
- Distributed
Explain what a ledger is
Append only ledger for full transactional history (no value overriding)
What is a centralized network?
A centralized network is where participants must communicate with a central authority to communicate with one another.
All participants must go through a single centralized source (single point of failure).
What is a decentralized network?
A decentralized network is where there are multiple authorities that serve as a centralized hub for a subsection of participants. Since some participants are behind a centralized hub, the loss of that hub will prevent those participants from communicating.
What is a distributed network?
A distributed network is where every participant can communicate with one another without going through a centralized point. (also known as a peer-to-peer network)
What is meant by the peer-to-peer model?
Not client-server model –-> nodes are both servers as well as clients (peers).
Each peer mostly have similar functionality.
What is Distributed Ledger Technology (DLT)?
A distributed ledger is a distributed record of transactions
maintained by consensus among a network of peer-to-peer nodes.
Blockchain is a popular data structure for distributed ledgers.
What are the properties of Distributed Ledger Technology(DLT)?
Pseudo-anonymity: user identifiers in cryptocurrency
Public access: anonymized transactions
Proof of work (/consensus protocols): to stop double-spending (also offers block ordering guarantee)
Small transaction size: small sizes
Immutable records: change to one record cause subsequent records to be invalid.
Distributed
Replication and Synchronization: After successful validation, all peers have an identical copy due to consensus protocols
Integrity protection: Cryptographic hashes.
What are some popular DLTs?
- Blockchain
- Tangle
- Hashgraph
- Sidechain
Flip to see a comparison and SWOT analysis of the different DLTs
https://www.notion.so/sardorf/DLTs-Comparison-fef47c1ff3444d7c94a8fbed92888991
What is a Node?
an individual system within a blockchain network
There are two types of nodes. What are these, and how do they differentiate?
Full node: stores entire blockchain, ensures transactions are valid.
• Publishing node: Full node that publishes new blocks.
Lightweight node: Does not store/maintain a copy of blockchain and must pass their transactions to full nodes.
Explain a permissionless blockchain, what are the issues, and whats an example?
- Permissionless Blockchain are where anyone can publish new blocks.
Issues:
- Privacy and Scaling
- Malicious users can join
- Consensus protocol is expensive
Example: Ethereum
Explain a permissioned blockchain, what are the issues, and whats an example?
Permissioned Blockchains (consortium)
• Knowns only participants
• More control than public blockchains (corporate intranet)
• Publishing new blocks are restricted.
• Better privacy and confidentiality • Faster consensus protocol is in use
Issues:
• Not fully decentralized
Example: Hyperledger Fabric
What are the components of Blockchain?
- Hashing
- Transaction
- Cryptography
- Addresses and Address deviation
- Ledgers
What is the disadvantage of asymmetric encryption?
Its slower than symmetric encryption
What is a “Nonce”
Cryptographic nonce is an arbitrary number (used once).
Nonce = Number used Once
What is a nonce used for?
Can be combined with data to produce different hash digests (per nonce):
• hash (data + nonce) = digest (PoW consensus model)
Explain what an address is in Blockchain
Addresses is user’s public-facing identifier in a blockchain network (e.g., QR code)
What are addresses used for?
Smart contract uses addresses for execution purposes.
Wallet is a software to store private/public keys, associated addresses, digital assets.
Explain the Consensus Protocol
The consensus protocol determines which user publishes next block.
Consensus systems in permissionless blockchain promote non-malicious behavior through rewarding publishers of protocol-conforming blocks with a native cryptocurrency.
One protocol per system.
There’s more on this in lecture 3
Name a couple of different consensus protocols
- Proof of Work
- Proof of Stake
- Delegated Proof of Stake
Flip to see a list of different consensus protocols, their benefits and drawbacks
https://www.notion.so/sardorf/Consensus-Protocols-Comparison-8b3d3869eeb643c294df83fe40458895
What are smart contracts?
- Collection of business logic (and data).
- Executed by nodes of blockchain network.
- Execution results are recorded on blockchain.
- Deployed by cryptographically signed transactions on blockchain network
Name some existing blockchain platforms and their ledger type and consensus protocol
Bitcoin - Public - PoW
Ethereum - Public - PoW & PoS
Hyperledger Fabric - Consortium - Pluggable Algorithm
Stellar - Public & Private - Stellar Consensus protocol
Quorum - Private - Majority voting
Ripple - Private - Probabilistic voting
The runtime for smart contracts in Ethereum is ___
The Ethereum Virtual Machine(EVM)
How do things get executed on the Ethereum network?
In Ethereum, there is a single, canonical computer (EVM) whose state everyone on Ethereum network agrees on.
- Requests for computation are called transaction requests.
- Record of all transactions + EVM’s present state is stored in blockchain.
What is Hyperledger Fabric?
Hyperledger Fabric is a permissioned distributed ledger framework for developing blockchain applications.
What are the primary features of Hyperledgeer Fabric?
Consensus: A unique approach to consensus enables flexibility and scalability needed for enterprise
- Privacy: Channels and private data collections enable private and confidential exchange assets on a common network.
- Security & Membership Services: Permissioned membership provides a trusted blockchain network.
Assets: Enable exchange of almost anything with monetary value over network.
Smart contract/Chaincode: Execution is partitioned from transaction ordering.
• Limits required levels of trust
• Verification across node types
• Optimize for network scalability and performance.
Ledger: immutable, shared ledger encodes entire transaction history for each channel, and supports query.
