What is IQBBA? Blockchain fundamentals

About lecturer
Founding CTO at ClickLog.io
X MD at Techgarden Ventures (Delaware, USA)
XKPMG, XHuawei
Google developers group Astana Community manager
Singularity University Ambassador

Tasks
Teachers supervised independent study of students (TSIS)
Activity
Students independent study (SIS)

Syllabus

Silicon valley context
Organizational aspects – information exchange with group
Askar Aituov
[e-mail] / [e-mail]
Telegram: @AskarAi
Phone: [phone]

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Organizational aspects – information exchange with group
Telegram chat?
If yes:
Block Chain Technology and applications Айтуов А.Т.
https://t.me/joinchat/H-dQbBk5h3W35h1bWlxZ5g

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Lecture 1 - Intro
Larsen describes that a focus on 5G and AI should not overshadow the threat from China with digital currencies and blockchain technology. According to Larsen, the Chinese Government has subsidized vast amounts of energy needed to fuel cryptocurrency “miners”.
According to Larsen, “…at least 65 percent of cryptocurrency mining is concentrated in China, which means the Chinese government has the majority needed to wield control over those protocols and can effectively block or reverse transactions”.

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Lecture 1 - Intro

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Lecture 1 - Intro

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Lecture 1 - Intro

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Lecture 1 - Intro

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Lecture 1 – Intro. Experience in blockchain

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Lecture 1 – Intro. Experience in blockchain
http://chain489.rssing.com/chan-9369409/all_p5.html

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Lecture 1 - Contents
- Blockchain
- Decentralization
- DLT components
- Consensus
- Tokens

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Distributed ledgers
Distributed Ledgers ‒ base technology for distributed databases, while blockchain – is a subspecy of Distributed Ledger Technology (DLT)
Main difference between general DLT and blockchain is in decentralization, which is not mandatory in DLT, but mandatory for public blockchain
Technically «private blockchain» should not exist, it is created by marketing guys.

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Decentralized or distributed?

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Distributed communication network
In 1962 Paul Baran one of founders of Internet proposed three models of network organization
http://pages.cs.wisc.edu/~akella/CS740/F08/740-Papers/Bar64.pdf

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Technical aspect
Term Distributed is actively used in IT and considered from several points:
❖ Number of network nodes (P-2-P)
❖ Data Integrity (CAP theorem)
❖ Remoteness of nodes from each other
❖ Complexity of tasks

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CAP theorem
A distributed database system can only have 2 of the 3: Consistency, Availability and Partition Tolerance. CAP Theorem is very important in the Big Data world, especially when we need to make trade off's between the three, based on our unique use case

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Consistency and availability
Consistency: Every read receives the most recent write or an error
Availability: Every request receives a (non-error) response, without the guarantee that it contains the most recent write
When choosing availability over consistency, the system will always process the query and try to return the most recent available version of the information, even if it cannot guarantee it is up to date due to network partitioning.
In the absence of network failure – that is, when the distributed system is running normally – both availability and consistency can be satisfied.

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Organizational aspect
Terms centralized, decentralized and distributed should be viewed from the following points of view:
❖ Trust
❖ Control
❖ Decision making
❖ Management
❖ Economics

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Coffee break 20 mins

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Lecture 1 - Announcement
UNITY 3D developer

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Distributed ledger technology
1. If we create organizationally centralized business, i.e. distributed base in the network of one organization and there is complete trust between nodes. Then it is enough to use Raft or Paxos consensus protocol
The need for such systems arises when increased load and / or to increase fault tolerance and service availability.
Examples of distributed databases:
● BigTable on Google,
● DynamoDB in AWS, or
● open source analogue of Cassandra

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Raft consensus protocol

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Raft consensus protocol
Raft achieves consensus via an elected leader. A server in a raft cluster is either a leader or a follower, and can be a candidate in the precise case of an election (leader unavailable).
The leader is responsible for log replication to the followers. It regularly informs the followers of its existence by sending a heartbeat message.
Each follower has a timeout (typically between 150 and 300 ms) in which it expects the heartbeat from the leader. The timeout is reset on receiving the heartbeat. If no heartbeat is received the follower changes its status to candidate and starts a leader election.

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Distributed ledger technology
2. In the event that we create organizationally decentralized or distributed business, that is, as soon as the trust between
nodes / malicious nodes appear
the need to use Distributed Ledger
Technology, including blockchain

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DLT components
1. A data model that captures the current state
2. A transaction language that changes state
3. Consensus Protocol
Two main properties of DLT:
- Data does not change after recording
- There is no central node to discreetly change the state

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DLT: state model
● Blockchain - Chain of blocks (UTX0, etc.)
● HashGraph - HashGraph
● Directed Acyclic Graph (DAG) - Directional Acyclic Graph
● HOLOCHAIN

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DATA model - blockchain
● Hash Tree or Merkle Tree
● Assumes change history linear in strict sequence
● Cannot be used if possible side events
● Low extensibility due to high Transaction validation “costs”
● Low performance ~ 3+ TPS

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DATA model - blockchain
● Hash Tree or Merkle Tree
● Assumes change history linear in strict sequence
● Cannot be used if possible side events
● Low extensibility due to high Transaction validation “costs”
● Low performance ~ 3+ TPS

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DATA model - blockchain

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DATA model – hashgraph (1/2)
● Hash Graph as the main structure
● relies solely on the consensus mechanism for checking transactions on your network
● consensus is achieved through virtual voting methods and gossip

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DATA model – hashgraph (2/2)
● Provide higher scalability and softer storage requirements
● Declares a performance of 10,000 + TPS by Compared to Bitcoin 3+ TPS

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DATA model – DAG (1/2)
● Directional acyclic graph
● The ability to conduct nano transactions, for which no commission is charged
● The more transactions on the network, the faster it becomes

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DATA model – DAG (1/2)
● Any node can initiate a transaction, but
to check he must check two previous transactions in the registry
● Miners are not used for validation
● Suitable for IoT applications
● DAG, is resistance to quantum attacks

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DLT – TYPES (1/2)
Federated - the toughest in terms of restrictions: limited access, much better scalability, transparency and confidentiality; e.g. Central Bank or R3 Consortium
Permission Required / Private - Access may be public or private, but permission to audit or audit is given only to a few persons; simplified approval and processing data;

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DLT – TYPES (2/2)
Permission-free / public - public network with open source code; transparency and anonymity because no third party is involved; minimum costs without the need for maintenance. Among the disadvantages: long processing time; e.g. Bitcoin.
Hybrid - a combination of a public / private network with partially limited participation; has flexible an approach to what is stored in the public domain and what is in the public. Improved scalability due to the fact that consent is not required from each node of the network; e.g. Hyperledger

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Etherium full node hosts the software needed for transaction initiation, validation, mining, block creation, and smart contract execution.

Etherium full node hosts the software needed for transaction initiation, validation, mining, block creation, and smart contract execution.

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DLT Smart contractions. Application (1/2)
● Clearing - reduction of errors, costs. According to research by Santander InnoVentures
By 2022, implementation could reduce annual infrastructure costs by 12–20
billions of $
● Supply chain - a solution for servicing the supply chain from raw materials to finished ones
of products
● Health - combining into one registry will help to conduct research and
anonymous polls, and if scientists decide to reward those who share information,
smart contracts - the best way to ensure payment upon transfer
of information

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DLT Smart contractions. Application (2/2)
● Internet of things - the ownership of gadgets can be fixed in the blockchain, and it means that the user will be able to sell or donate the device without leaving the blockchain networks and without involving third parties
● Media industry - a problem is relevant for copyright holders and content creators Royalty - fees for the use of intellectual property. Smart here contracts can be used for transparent distribution of funds.

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Conclusion: Blockchain is a subset of DLT (1/2)
Distributed Ledger Technology and Blockchain in particular are needed for a decentralized / distributed business model whose members are geographically distant from each other, or have a large-scale community.
This business model must be scalable and use Network effects.

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Conclusion: Blockchain is a subset of DLT (1/2)
If necessary, you can manage access rights to the blockchain; rights management models are added:
Read: public vs limited
Write: unlimited vs restricted by rights
The level of decentralization affects whether the nodes will belong to a closed group of people or will be to anyone

Laboratory

Practice exercise:
1 Go to https://www.blockchain.com/explorer
2 Find block 43515
3 Locate Hash of previous block and send it to me via chat