LEDGERS, BLOCK CHAIN &

CRYPTOGRAPHIC HASH FUNCTION

Introduction to Cryptocurrency
Ledgers
Ledger

A pays B ₹100

C pays D ₹150

E pays A ₹50

B pays C ₹250
 Protocol

 Anyone can add lines to the ledger.

 Ledgers
Ledger

A pays B ₹100 A

C pays D ₹150 C

E pays A ₹50 E

B pays C ₹250 B
 Digital Signatures
Public key / Secret key

pk: 0100010…. pk: 10000101…. pk: 00100011….

sk: 1010011.… sk: 00010111…. sk: 11101011….

A B C
 Digital Signatures
Sign(Message , sk) = Signature
Verify (Message, Signature , pk) = True/False
Ledger
____________________
____________________
____________________
____________________
____________________
____

\ 0001101011100……
Verify (Message, 256 bit signature , pk)

0000000000000000000000000000000000000000000
0000000000000000000000000000000000000000000
0000000000000000000000000000000000000000000
0000000000000000000000000000000000000000000
0000000000000000000000000000000000000000000
0000000000000000000000000000000000000000000

No. of Possibilities :2256

 Ledgers
Ledger

UID 1. A pays B ₹100 A

UID 2. C pays D ₹150 C

UID 3. E pays A ₹50 E

UID 4. B pays C ₹250 B

 Protocol

 Anyone can add lines to the ledger.

 Only signed transactions are valid.

• Who hosts the ledger ?

• Who controls the rules for adding new

transactions ?
 LEDGER
_____________
_____________
_____________
________
00011100……

LEDGER LEDGER
_____________
_____________ B E _____________
_____________
_____________ _____________
________ ________
00011100…… 00011100……

C D
LEDGER
LEDGER _____________
_____________ _____________
_____________ _____________
_____________ ________
________ 00011100……
00011100……
Cryptographic Hash Function
Fraud ↔ Computationally infeasible
 Cryptographic Hash Function
• Input – any message/file
• Output – string of bits of fixed length (hash)

• Altering the input even slightly completely

changes the output.
• Hence, inverse is very tough.

• Not actually random

• SHA256(“IISER Mohali”) =

• 011000011110001101110100001111001000010111010011010011100000101011110100100
101010111100001010100011001000110101011101110110011111000100001100010110011
011101001101101010110011101111100011010010010101011111100101100010111101000
1110100010011000100110100011001

• SHA256(“IISERMohali”) =

• 011101010001000001100100010100010000010100011000000101011000101010001001011
000011000000000101110101010000111011000110100000101101011111010011001000111
010000000000011001001011111011000001011100111000011010110100000001110110001
0001000000001101100000011110011
 Ledger Probability ~ 1 in a billion

UID 1. A pays B ₹100 A 30 zeroes

UID 2. C pays D ₹150 C • 0000000000000000000000

0000000010101101011000
SHA256
UID 3. E pays A ₹50 E 1111111000001111001000
1011011011001100101011
1101001100111100111100
UID 4. B pays C ₹250 B 0010111101111111010001
1001011011011111101111
1001111111011001110110
0001000010001110011011
1000001001101110100010
1082541650125053052
1010101011110111101011
000000101011000001
Proof of Work
 UID 1 ------------  UID 1 ------------  UID 1 ------------
<Signature> <Signature> <Signature>

 UID 2 ------------  UID 2 ------------  UID 2 ------------

<Signature> <Signature> <Signature>

 UID 3 ------------  UID 3 ------------  UID 3 ------------

<Signature> <Signature> <Signature>

 UID 4 ------------  UID 4 ------------  UID 4 ------------

<Signature> <Signature> <Signature>

PROOF OF WORK PROOF OF WORK PROOF OF WORK

Blocks
 Previous Hash Previous Hash Previous Hash

 UID 1 ------------  UID 1 ------------  UID 1 ------------

<Signature> <Signature> <Signature>

 UID 2 ------------  UID 2 ------------  UID 2 ------------

<Signature> <Signature> <Signature>

 UID 3 ------------  UID 3 ------------  UID 3 ------------

<Signature> <Signature> <Signature>

 UID 4 ------------  UID 4 ------------  UID 4 ------------

<Signature> <Signature> <Signature>

PROOF OF WORK PROOF OF WORK PROOF OF WORK

“Block Chain”
 Previous Hash Previous Hash Previous Hash

 Block creator 1 gets 100 LD  Block creator 2 gets 100 LD  Block creator 3 gets 100 LD

 UID 2 ------------  UID 2 ------------  UID 2 ------------

<Signature> <Signature> <Signature>

 UID 3 ------------  UID 3 ------------  UID 3 ------------

<Signature> <Signature> <Signature>

 UID 4 ------------  UID 4 ------------  UID 4 ------------

<Signature> <Signature> <Signature>

PROOF OF WORK PROOF OF WORK PROOF OF WORK

“Block Chain”
 Main Ideas

 Digital Signatures

 Decentralize

 Proof of work

 Block Chain