CSIT6000Q-Blockchain &
Smart Contracts
Week – 1
Pritom Rajkhowa
Top 5 Reasons to Make a Career in Blockchain
(2024-25)
Exploring Opportunities in One of the Fastest-Growing Industries
High Demand for Skills
• The demand for blockchain professionals has skyrocketed, with job
postings increasing by over 300% in the last few years.
• Industries from finance to healthcare are seeking blockchain
expertise.
Competitive Salaries
• Blockchain professionals earn competitive salaries, often exceeding
$100,000 per year.
• Roles in blockchain development and consulting are especially
lucrative.
Innovation and Impact
• Work on cutting-edge technology that is transforming industries.
• Contribute to projects that have real-world applications, such as
improving supply chain transparency and enhancing security in
transactions.
Diverse Career Paths
• Opportunities in various roles: Blockchain Developer, Data Analyst,
Project Manager, Legal Consultant, and more.
• Flexibility to work in multiple sectors, including finance, logistics, and
cybersecurity.
Community and Networking
• Join a vibrant community of innovators and thought leaders.
• Opportunities to attend conferences, workshops, and meetups to
expand your professional network.
Tokens
Small items of value such as shell or precious metal,
were often exchanged instead of large quantity of
goods. These becomes coins of value. The earliest
coins were minted in the middle east in 7th century
BC.
Written Promises
Paper money is a written promise to pay the bearer a specific
sum. It was invented in China in the 9 th century as a lighter,
cheaper substitute for metal coins. Cheques extended this
system of promises between individuals. The first recorded is
use was in 17 th century London as the become widespread
during 19 th century.
Today Is Another Day
Money started to become invisible rather than the physical with the electrical transmission of funds by
telegraph in the 19 th century and telegraph company Western Union pioneered payment cards in 1914. It was
the first company to issue a metal plaque that could be presented at its offices instead of cash. This trend
towards virtual money accelerated with automated banking. International Payment cards and electronics
money transfer
Digital Currency
What Is a Digital Currency?
Digital currency is a form of currency that is available only in digital or
electronic form. It is also called digital money, electronic money,
electronic currency, or cybercash.
Payment Systems are Critical Components of an
Economy
“An efficient payments system provides the infrastructure needed to
transfer money in low-cost and convenient ways. Efficient systems are
innovative in improving the quality of services in response to changing
technology and changing demand.”
Federal Reserve Chairman Jerome Powell
China has the largest card network in the
world with 8.2 billion cards.
But there are only about 32 million point-of-
sale terminals
• Explosive Growth: China’s Two Dominant Firms, Alipay and WeChat
• Mobile Payments Rise to Dominance Continues.
• India China in a different league than US.
China’s Transformation: Alipay’s
Origin Story is P2B and B2B
• Account holders can move funds out of Alipay or WeChat Pay for a
small fee.
• This is by design, as it encourages users to keep money in the
ecosystem.
What does it mean to have a
bitcoin?
Who is this?
Distributed Encryption Database
Distributed Ledger Technology
Next Generation of Internet
Tool for Decentralize the World
Technology
Economics
Society
Currency Economics Trust Value Exchange
Blockchain
Distributed System
Cryptography
Distributed Secure System
The Internet: Connecting the
World
The Internet, as we know it today, has its roots in the
ARPANET project of the 1960s. It started as a network
of computers, allowing researchers and scientists to
share information and communicate. Over the years,
the internet has grown exponentially, reaching billions
of users worldwide. It enabled the creation of websites,
email, e-commerce, social media, and numerous other
applications that have become integral to our daily
lives.
Limitations of the Internet
While the Internet has undeniably transformed society,
it is not without its limits. Centralization is one such
drawback. In the current Internet model, power is
concentrated in the hands of a few centralized entities
that control user data, online platforms, and digital
transactions. This centralization poses risks, including
censorship, data breaches, and privacy concerns.
Web3: The Next Frontier
Web3, also known as the decentralized web or the
Internet of value, is an evolution beyond the traditional
Internet. It is built upon blockchain technology, which
enables decentralized data storage, smart contracts,
and peer-to-peer interactions. Web3 aims to address
the limitations of the internet by fostering trust,
privacy, and individual sovereignty.
Applications of Web3
Decentralized Finance (DeFi): Web3 has brought
about a financial revolution through DeFi. It
enables peer-to-peer lending, decentralized
exchanges, and programmable money, removing
the need for intermediaries such as banks. DeFi
provides access to financial services for the
unbanked and facilitates borderless transactions.
Decentralized Finance (DeFi)
Web3 has brought about a financial revolution
through DeFi. It enables peer-to-peer lending,
decentralized exchanges, and programmable
money, removing the need for intermediaries such
as banks. DeFi provides access to financial services
for the unbanked and facilitates borderless
transactions.
Decentralized Applications
(dApps)
Web3 fosters the development of dApps, which
are open-source applications built
on decentralized networks. These applications
offer increased security, privacy, and user control.
They cover various domains, including social
media, gaming, supply chain management, and
healthcare.
Digital Identity
Web3 introduces self-sovereign identity,
empowering individuals to manage their digital
identities without relying on centralized
authorities. This technology has the potential to
eliminate identity theft, streamline identity
verification processes, and enhance user privacy.
Challenges and the Road Ahead
• While Web3 holds immense promise, there are challenges to overcome.
Scalability, energy consumption, user experience, and regulatory frameworks are
some of the critical areas that require attention. However, as technology
advances and the ecosystem matures, these obstacles can be addressed through
collaboration, research, and innovation.
• Web3 represents a paradigm shift in the evolution of the internet. By embracing
decentralization, trust, and user empowerment, it has the potential to
revolutionize various industries and reshape the digital landscape. As we move
forward, it is crucial for stakeholders, including developers, businesses, and
policymakers, to embrace Web3’s principles and collaborate to build a more
inclusive, secure, and transparent internet for the future.
What is Network?
Centralized Network
Distributed Network
The problem of the Byzantine Generals
“It is not sufficient that everyone knows X. We also need everyone to know that everyone knows X, and that everyone knows
that everyone knows that everyone knows X — which, as in the Byzantine Generals’ problem, is the classic hard problem of
distributed data processing.”
- James A. Donald
Prior to Bitcoin, this problem was considered perhaps impossible to
solve. Computer scientists declared in 1982 that the generals’
problem can at most be reduced to a “commander and lieutenant”
problem, in which all lieutenants must act in accordance with the
commander’s orders, as long as they are loyal. They have shown that
the problem can only have a solution if more than two-thirds of the
generals are loyal.
COORDINATED ATTACK
UNCOORDINATED ATTACK
Ledger
Bob paid Alice $20
Alice paid Eve $220
Eve paid Bob $50
User Interface
Underlaying System Bitcoin protocol Banking System
Ledger
Bob paid Alice $20
Alice paid Eve $220
Eve paid Bob $50
Protocol
• Anyone can add line in Ledger.
• Settle up all with real money.
Ledger
Bob paid Alice $20
Alice paid Eve $220
Eve paid Bob $50
Eve paid Bob $50
Eve paid Bob $50
Protocol
• Anyone can add line in Ledger.
• Settle up all with real money.
• Only Sign transaction are valid.
Ledger
Bob paid Alice $20
Alice paid Eve $220
Eve paid Bob $50
Eve paid Bob $50
Public Key /Private Key
Public Key /Private Key
Public Key /Private Key
Public Key /Private Key
Sign(Message, ) = Signature
Verify(Message, Signature , ) = True/False
2256 possible signature
Verify(Message, 256 bit Signature , ) = True/False
Ledger
Bob paid Alice $20
Alice paid Eve $220
Alice paid Eve $220
Alice paid Eve $220
Ledger
1. Bob paid Alice $20
2. Alice paid Eve $220
3. Alice paid Eve $220
4. Alice paid Eve $220
Protocol
• Anyone can add line in Ledger.
• Only Sign transaction are valid.
• No Overspending.
Ledger
1. Bob get $100
2. Alice get $100
3. Eve get $100
4. Eve paid Bob $50
5. Eve paid Bob $50
6. Eve paid Bob $20
INVALID
Eve's Balan
ce
Ledger
$100 +
1. Bob get $100 $50 -
$0 -
2. Alice get $100
Overdrawn
3. Eve get $100
4. Eve paid Bob $150
5. Eve paid Bob $50
6. Eve paid Bob $20
INVALID
Ledger This is the step
that detached
real money from
1. Bob get $100 this process
2. Alice get $100
3. Eve get $100
4. Eve paid Bob $150
5. Eve paid Bob $50
6. Eve paid Bob $20
INVALID
Ledger
1. Bob paid Alice LD20
2. Alice paid Eve LD100
3. Bob paid Eve LD120
Currency Transaction
Ledger
1. Bob paid Alice LD20
2. Alice paid Eve LD220
3. Bob paid Eve $100
Decentralize Centralize
LD
1. Bob paid Alice LD20
1. Bob paid Alice LD20
1. Bob paid Alice LD20
Protocol
• Anyone can add line in Ledger.
• Only Sign transaction are valid.
• No Overspending.
What to add
here?
Computation Work
Main Tool : Cryptographic Hash Function
IT IS ESSENTIAL TO UNDERSTAND HOW CERTAIN KEY CONCEPT WORK
Cryptography
Without Cryptography
SECURITY
PRIVACY
Your
Email, Bank Details, Browsing Histroy
What is a hash function?
• CHOP & MIX
Plan Text
Plan Text
USER PASSWORD
Hash Function
SHA256("Some Message or File")=
Hash or Digest
HASH BASED MESSAGE
AUTHENTICATION CODE(HMAC)
Plan Text
Plan Text
Shared Key
SYMMETRIC ENCRYPTION
Public Key Encryption
Digital Signature
Digital Signature
Probability 1 / 230 ≈ 1/ 1,000,000,000
Ledger
30 Zero
1. Bob paid Alice LD20
2. Alice paid Eve LD220
3. Bob paid Eve $100
1786498 SHA256
Computation Work
Bob paid Alice LD50 Alice paid Bob LD20
Bob paid Alice LD20
{Signature} {Signature} {Signature}
Bob paid Eve LD20 Eve paid Alice LD30 Alice paid Eve LD100
{Signature} {Signature} {Signature}
Proof of Work Proof of Work Proof of Work
Blocks
Bob paid Alice LD50 Alice paid Bob LD20
Bob paid Alice LD20
{Signature} {Signature} {Signature}
Bob paid Eve LD20 Eve paid Alice LD30 Alice paid Eve LD100
{Signature} {Signature} {Signature}
85665780 81224567 78567901
Blocks
Bob paid Alice LD50 Alice paid Bob LD20
Bob paid Alice LD20
{Signature} {Signature} {Signature}
Bob paid Eve LD20 Eve paid Alice LD30 Alice paid Eve LD100
{Signature} {Signature} {Signature}
85665780 81224567 78567901
SHA256 SHA256 SHA256
MUST START WITH 60 ZEROS
SHA256
Transaction
85665780
Bob paid Alice LD50 Alice paid Bob LD20
Bob paid Alice LD20
{Signature} {Signature} {Signature}
Bob paid Eve LD20 Eve paid Alice LD30 Alice paid Eve LD100
{Signature} {Signature} {Signature}
85665780 81224567 78567901
SHA256 SHA256 SHA256
Previous Hash Previous Hash Previous Hash
Bob paid Alice LD50 Alice paid Bob LD20
Bob paid Alice LD20
{Signature} {Signature} {Signature}
Bob paid Eve LD20 Eve paid Alice LD30 Alice paid Eve LD100
{Signature} {Signature} {Signature}
85665780 78567901
81224567
LEDGER
BLOCK CHAIN
Block Creator 1
Block Creator 2
Block Creator 3
Bob paid Alice LD20
{Signature}
Bob paid Eve LD20
Block Creator 1 {Signature}
Eve paid Alice LD30
{Signature}
Block Creator 2
Block Creator 3
Previous Hash
Bob paid Alice LD20
{Signature}
Bob paid Eve LD20
Block Creator 1 {Signature}
Eve paid Alice LD30
{Signature}
7567454092
Block Creator 2
SHA256
Block Creator 3
Block Creator 1
Block Creator 2
Block Creator 3
Previous Hash
Reword LD10
Bob paid Alice LD20
{Signature}
Bob paid Eve LD20
Block Creator 1 {Signature}
Eve paid Alice LD30
{Signature}
7567454092
Block Creator 2
SHA256
Block Creator 3
Conflicting Transaction
TRUST CENTRAL
AUTHORITY
COMPUTATION
WORK
Eve want to fraud
Bob with fake
transaction
Transaction
85665780
Eve want to fraud
Bob with fake
transaction
Transaction
85665780
Ethereum
Publish in 2014
Smart Contract
• Written using EVM
• Can also store data
• Written in high level language
How it work
• Class containing field and method.
• Compile Solidity to EVM bytecode.
• Sending EVM bytecode to Network.
• Send transaction invoke methods.
Gas
• Gas is a unit of computation.
• Price of Gas expressed as Ether.
• Paid by sender of transaction.
NETWORK
Current Block Reword 6.25 bitcoins 2.097 Eth
Block Time 10 min 14 second
Market Cap BTC 537.93B ETH 208.28B
Mining Centralization
• Bitcoin mining exploited by ASICs
• ASICs creates mining centralization.
• Ethereum target to use GPU to
reduce centralization.
Ethereum Scaling Challenge
• Throughput is 16 TPS.
• Congestion during peak network activity.
• Developing scaling technique like sharding, Proof of
stack and state channel.
1. Address 1. Address
2. Private Key 2. Private Key
3. Balance 3. Balance
