Table Of ContentBlockchain for Real World Applications
Blockchain for Real World Applications
Rishabh Garg
Birla Institute of Technology and Science–Pilani, India
This edition first published 2023
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Library of Congress Cataloging-in-Publication Data
Names: Garg, Rishabh, author.
Title: Blockchain for real world applications / Rishabh Garg.
Description: Hoboken, New Jersey : John Wiley & Sons, 2023. | Includes index.
Identifiers: LCCN 2022041346 (print) | LCCN 2022041347 (ebook) | ISBN
9781119903734 (hardback) | ISBN 9781119903741 (pdf) | ISBN 9781119903758
(epub) | ISBN 9781119903765 (ebook)
Subjects: LCSH: Blockchains (Databases) | Electronic funds transfers.
Classification: LCC QA76.9.B56 G37 2023 (print) | LCC QA76.9.B56 (ebook)|
DDC 005.74--dc23/eng/20220920
LC record available at https://lccn.loc.gov/2022041346
LC ebook record available at https://lccn.loc.gov/2022041347
Cover image: © Yuichiro Chino/Getty Images
Cover design by Wiley
Set in 9.5/12.5pt STIXTwoText by Integra Software Services Pvt. Ltd, Pondicherry, India
v
Contents
Illustrations xix
Foreword xxv
Preface xxvii
1 Introduction 1
2 Distributed Ledger Technology 11
2.1 Different Types of Distributed Ledger Technology 11
2.1.1 Blockchain 11
2.1.2 Directed Acyclic Graph 12
2.1.3 Hashgraph 12
2.1.4 Holochain 12
2.1.5 Tempo (Radix) 13
2.2 Chronological Evolution 13
2.2.1 Blockchain 1.0 13
2.2.2 Blockchain 2.0 14
2.2.3 Blockchain 3.0 14
2.2.4 Blockchain 4.0 15
2.3 Blockchain Architecture 15
2.3.1 Block 16
2.3.2 Hash Function 17
2.3.3 Encryption 18
2.3.3.1 Problems 18
2.3.4 Keys: Public and Private 19
2.3.5 Decentralized Identifier 20
3 Blockchain Ecosystem 23
3.1 Working of Blockchain 24
3.2 Key Characteristics 29
3.2.1 Decentralization 29
3.2.2 Persistence 29
vi Contents
3.2.3 Anonymity 29
3.2.4 Auditability 30
3.3 Unspent Transaction Output 30
3.4 Classification of Blockchain on Access Management 30
3.4.1 Public Blockchain 30
3.4.2 Private Blockchain 31
3.4.3 Consortium Blockchain 31
3.5 Consensus 32
3.5.1 Proof-of-Work 33
3.5.2 Proof-of-Stake 34
3.5.3 Peercoin 34
3.5.4 Practical Byzantine Fault Tolerance 35
3.5.5 Delegated Proof-of-Stake 35
3.5.6 Ripple 35
3.5.7 Tendermint 35
3.5.8 Consensus Algorithms: A Comparison 36
3.5.8.1 Node Identity Management 36
3.5.8.2 Energy Saving 36
3.5.8.3 Tolerated Power of Adversary 37
3.5.9 Advances in Consensus Algorithms 37
3.6 Payment Verification in Blockchain 37
3.6.1 Simple Payment Verification 37
3.6.1.1 Key Features 38
3.6.2 Full Payment Verification 38
3.6.2.1 Key Features 38
3.7 Hashgraph 39
3.7.1 Elements of Hashgraph 39
3.7.2 Diagrammatic Representation 39
3.7.3 How Does Hashgraph Work? 39
3.8 Scalability 40
4 Transactions in Bitcoin Blockchain 43
4.1 Coinbase Transactions 43
4.1.1 Structure 44
4.1.2 Key Features of Coinbase Transactions 45
4.1.3 Computation of Transaction Value 47
4.2 Transactions Involving Fiat Currency 47
4.2.1 Cryptocurrency Exchanges 48
4.2.2 Bitcoin Debit Card 48
4.2.3 Bitcoin ATMs 48
4.2.4 Metal Pay 49
4.2.5 Peer-to-Peer Exchanges 49
Contents vii
4.3 Top Fiat Currencies for Bitcoin Transactions 50
4.3.1 US Dollar 50
4.3.2 Japanese Yen 50
4.3.3 Euro 51
4.3.4 Korean Won 51
4.3.5 Chinese Yuan 51
4.3.6 Indian National Rupee 51
4.4 Price Determination for Bitcoin in Transactions 51
4.4.1 Cost of Mining Bitcoin 52
4.4.2 Market Supply and Demand 52
4.4.3 Bitcoin Rewards 52
4.4.4 Exchanges 53
4.4.5 Competing Cryptocurrencies 53
4.4.6 Regulatory Provisions 53
4.4.7 Internal Governance 54
4.4.8 Value of Bitcoin 54
4.4.9 Can the Bitcoin Price Be Zero? 55
4.4.10 Why Is Bitcoin’s Price Volatile? 56
4.5 Controlling Transaction Costs in Bitcoin 57
4.5.1 History of Bitcoin Cash 58
4.5.2 Concerns about Bitcoin Cash 60
4.5.3 Bitcoin Cash Core Features 61
4.5.4 Utility of Bitcoin Cash 62
4.5.5 Advancements over Bitcoin 62
4.5.5.1 Maximum Block Size 63
4.5.5.2 Cost Efficiency 63
4.5.5.3 Smart Contract Support 63
4.5.5.4 Issue of Token 63
4.5.5.5 Nonfungible Tokens 64
4.5.5.6 No Replacement-by-Fee 64
4.5.5.7 Schnorr Signatures 64
4.5.5.8 Difficulty Adjustment Algorithm 65
4.5.6 Bitcoin Cash – Ease of Use 65
4.5.7 Challenges to Bitcoin Cash 65
5 Ethereum and Hyperledger Fabric 67
5.1 Early Attempts to Program Cryptocurrencies 68
5.2 Smart Contracts 69
5.3 Working of Ethereum 72
5.3.1 Gas 73
5.3.2 Ether 73
5.4 Hyperledger 74
viii Contents
5.5 Working of Hyperledger 74
5.5.1 Components 74
5.5.2 Workflow 74
5.5.2.1 Proposal 74
5.5.2.2 Endorsement 74
5.5.2.3 Transmission to Ordering Service 74
5.5.2.4 Updating the Ledger 75
5.5.3 Industrial Applications of Hyperledger Fabric 75
5.5.3.1 Production 76
5.5.3.2 B2B Contract 76
5.5.3.3 Supply Chain 77
5.5.3.4 Asset Depository 77
5.5.3.5 Trading and Asset Transfer 77
5.5.3.6 Insurance 77
5.5.3.7 Real Estate 78
5.5.4 Benefits of Hyperledger Fabric 78
5.5.4.1 Open Source 78
5.5.4.2 Private and Confidential 78
5.5.4.3 Access Control 78
5.5.4.4 Chaincode Functionality 79
5.5.4.5 Performance 79
5.5.4.6 Modular Design 79
5.6 Ethereum Versus Hyperledger 79
5.6.1 Purpose 79
5.6.2 Cryptocurrency 79
5.6.3 Participation 79
5.6.4 Privacy 80
5.6.5 Governance 80
5.6.6 Computer Code 80
5.6.7 Smart Contracts 80
5.6.8 Consensus Mechanism 80
5.6.9 Rate of Transactions 81
5.6.10 Use-cases 81
5.7 Decentralized Applications 81
5.7.1 Merits of Decentralized Applications 82
5.7.1.1 Zero Downtime 82
5.7.1.2 Privacy 82
5.7.1.3 Resistance to Censorship 83
5.7.1.4 Absolute Data Integrity 83
5.7.2 Demerits of Decentralized Applications 83
5.7.2.1 Maintenance 83
Contents ix
5.7.2.2 Performance Overhead 83
5.7.2.3 Network Congestion 83
5.7.2.4 User Experience 83
5.7.2.5 Centralization 83
5.8 Tokens 84
6 Identity as a Panacea for the Real World 87
6.1 Identity Systems 87
6.1.1 Contemporary ID Systems 88
6.2 Centralized Model 92
6.2.1 A Case Study of World’s Largest Biometric ID System – Aadhaar 92
6.2.1.1 Salient Features of Aadhaar 92
6.2.1.2 Biometric and Demographic Standards 93
6.2.1.3 Enrollment Set-up 94
6.2.1.4 Entities and Their Roles 95
6.2.1.5 Process of Authentication 96
6.2.1.6 Budget and Outlay 98
6.2.1.7 Enrollment Status and Saturation 98
6.3 Cost and Benefits 100
6.3.1 Merits 100
6.3.2 Demerits 101
6.3.2.1 Waste of Resources 101
6.3.2.2 Lack of Neutrality 101
6.3.2.3 Technical Glitches 102
6.3.2.4 Security Procedures 102
6.3.2.5 Unauthorized Access 102
6.3.2.6 Absence of Data Protection Act 104
6.3.2.7 Involvement of Private Players 105
6.3.2.8 Freedom of Choice as an Illusion 106
6.3.2.9 Implicit Coercion 107
6.4 Quest for One World – One Identity 108
7 Decentralized Identities 115
7.1 Identity Models 115
7.1.1 Centralized Identity 115
7.1.2 Federated Identity 115
7.1.3 User-centric Identity 116
7.1.4 Self-sovereign Identity 117
7.2 Blockchain-based Solutions 117
7.3 Identity Management 119
7.3.1 Current Challenges 120
