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Blockchain: life of a blockchain transaction

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Erwan Alliaume
Erwan Alliaume

First talk: My life as a blockchain transaction Presentation Given our Sydney Tech Share meetup with Yann Rouillard. You are interested in the blockchain but you are still a bit confused about how it works? Don’t wait anymore to dive into it! In this first talk, we will shed the light on all the dark mechanisms of the blockchain by following the life of an innocent transaction from its birth to its eternal rest in the blockchain immutable history. Cryptography, Network propagation, Proof of work, Transaction execution... nothing will be hidden from you. The only sad thing is that blockchain might not seem so magical to you after this talk. :) https://www.meetup.com/en-AU/Tech-Share-Sydney-Meetup/events/249111190/

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402/55 Lime Street Sydney 2000 NSW > AUSTRALIA> WWW.OCTO.COM My life as a Blockchain Transaction Yann Rouillard + Erwan Alliaume - April 2018 Deep dive into the blockchain
2OCTO TECHNOLOGY > THERE IS A BETTER WAY WHO ARE WE? Yann Rouillard Senior consultant / expert DevOps Erwan Alliaume Senior consultant / CTO
3OCTO TECHNOLOGY > THERE IS A BETTER WAY How to buy us a beer using bitcoin… from your wallet to ours through the blockchain
OCTO TECHNOLOGY > THERE IS A BETTER WAY 4 LIFECYCLE OVERVIEW 1F1tAaz5x1HUXrCNLM ACCOUNT CREATION OCTO TECHNOLOGY > THERE IS A BETTER WAY
OCTO TECHNOLOGY > THERE IS A BETTER WAY 5 TRANSACTION PREPARATION LIFECYCLE OVERVIEW Tx 1F1tAaz5x1HUXrCNLM ACCOUNT CREATION OCTO TECHNOLOGY > THERE IS A BETTER WAY
OCTO TECHNOLOGY > THERE IS A BETTER WAY 6 TRANSACTION SUBMISSION LIFECYCLE OVERVIEW Tx 1F1tAaz5x1HUXrCNLM Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx TRANSACTION PREPARATION ACCOUNT CREATION OCTO TECHNOLOGY > THERE IS A BETTER WAY
OCTO TECHNOLOGY > THERE IS A BETTER WAY 7 TRANSACTION EXECUTION TRANSACTION SUBMISSION Tx 1F1tAaz5x1HUXrCNLM Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx TRANSACTION PREPARATION ACCOUNT CREATION LIFECYCLE OVERVIEW OCTO TECHNOLOGY > THERE IS A BETTER WAY
OCTO TECHNOLOGY > THERE IS A BETTER WAY 8 MINING PROCESS Tx 1F1tAaz5x1HUXrCNLM Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx TRANSACTION EXECUTION TRANSACTION SUBMISSION TRANSACTION PREPARATION ACCOUNT CREATION LIFECYCLE OVERVIEW OCTO TECHNOLOGY > THERE IS A BETTER WAY
OCTO TECHNOLOGY > THERE IS A BETTER WAY 9 MINING PROCESS LIFECYCLE OVERVIEW Tx 1F1tAaz5x1HUXrCNLM Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx TRANSACTION EXECUTION TRANSACTION SUBMISSION TRANSACTION PREPARATION ACCOUNT CREATION OCTO TECHNOLOGY > THERE IS A BETTER WAY
OCTO TECHNOLOGY > THERE IS A BETTER WAY 10 LIFECYCLE OVERVIEW Tx 1F1tAaz5x1HUXrCNLM Tx MINING PROCESS TRANSACTION EXECUTION TRANSACTION SUBMISSION TRANSACTION PREPARATION ACCOUNT CREATION TRANSACTION CONFIRMATION OCTO TECHNOLOGY > THERE IS A BETTER WAY
OCTO TECHNOLOGY > THERE IS A BETTER WAY 11 Account creation Transaction preparation Transaction submission Transaction execution Mining process Lifecycle of a transaction: Some definitions first! Transaction confirmation
OCTO TECHNOLOGY > THERE IS A BETTER WAY 12 THE ORIGIN: THE CYPHERPUNK MOVEMENT
OCTO TECHNOLOGY > THERE IS A BETTER WAY 13 WHAT IS A CRYPTO-CURRENCY? Scarcity Fungibility Transferability Divisibility Durability A crypto-currency is a virtual currency that uses cryptography to guarantee currency essential properties
OCTO TECHNOLOGY > THERE IS A BETTER WAY 14 SOME FAMOUS CRYPTO-CURRENCIES Dogecoin Bitcoin Dash Litecoin Ether Ripple OCTO TECHNOLOGY > THERE IS A BETTER WAY
OCTO TECHNOLOGY > THERE IS A BETTER WAY 15 Early 19th-century German ledger WHAT IS A LEDGER? Not a very new thing !
OCTO TECHNOLOGY > THERE IS A BETTER WAY 16 WHAT IS A DISTRIBUTED LEDGER? Centralised Ledger Distributed Ledger
OCTO TECHNOLOGY > THERE IS A BETTER WAY 17 WHAT IS A BLOCKCHAIN? A blockchain is one of the possible implementations of a distributed ledger where transactions are stored in a series of cryptography-linked blocks
OCTO TECHNOLOGY > THERE IS A BETTER WAY 18 Account creation Transaction preparation Transaction submission Transaction execution Mining process Lifecycle of a transaction: Account creation Transaction confirmation
OCTO TECHNOLOGY > THERE IS A BETTER WAY 19 WHAT IS AN ACCOUNT? An account is a uniquely identified object that will be able to issue transactions and store currency Two problems: ● how to create a unique identifier without a central authority? ● how to ensure transactions has been legitimely issued from an account?
OCTO TECHNOLOGY > THERE IS A BETTER WAY 20 WHAT IS AN ACCOUNT? An account is a uniquely identified object that will be able to issue transactions and store currency Two problems: ● how to create a unique identifier without a central authority? ● how to ensure transactions has been legitimely issued from an account? Cryptography to the rescue!
OCTO TECHNOLOGY > THERE IS A BETTER WAY 2 1 3 CRYPTOGRAPHY 101: ELECTRONIC SIGNATURE IN ONE SLIDE Not John Private key Public key ✗ Someone’s private key Someone else’s private key ≠ Key generator Private key Public key John Lorem ipsum dolor alok sit amet, tipeke consectetur adipiscing so elit, sed do eiusmod te Document Sign Signature Verify ✓ Lorem ipsum dolor alok sit amet, tipeke consectetur adipiscing so elit, sed do eiusmod te
OCTO TECHNOLOGY > THERE IS A BETTER WAY 22 IN ONE SLIDE 01010001000110001011 11010100101110101010 10010101010101010101 01010110101001010101 01010101010100101010 10100101010101010100 1010100101101 0x32ab7f65 Original input Hash value ✗ CRYPTOGRAPHY 101: CRYPTOGRAPHIC HASH FUNCTION 01010001000110001011 11010100101110101010 10010101010101010101 01010110101001010101 01010101010100101010 10100101010101010100 1010100101101 0x32ab7f65 Any size Fixed size 01010001000110001011 11010100101110101010 10010101010101010101 01010110101001010101 01010101010100101010 10100101010101010100 1010100101100 0x47f42e10 Small change Big change 01010001000110001011 11010100101110101010 10010101010101010101 01010110101001010101 01010101010100101010 10100101010101010100 1010100101101 0x32ab7f65 11001000100010010101 01010101010101101010 10101011010101010101 01010101010100010101 01001010010001001010 00100010000011111101 0111011111111 ≠ Original input Different input ✗
OCTO TECHNOLOGY > THERE IS A BETTER WAY 23 ACCOUNT CREATION: STANDARD MECHANISM Private key Public key 1. Key generation Most blockchain use Elliptic Curve Algorithms 2. Public Key Hashing Ensure shorter address Protect against attack on Public key 3. Address Encoding 0bed7abd61247635c197 3eb38474a2516ed1d884 Make it (a bit more) readable
OCTO TECHNOLOGY > THERE IS A BETTER WAY 24 NICE WARNINGA NICE WARNING OCTO TECHNOLOGY > THERE IS A BETTER WAY YOU ARE (often) PSEUDONYMOUS NOT ANONYMOUS
OCTO TECHNOLOGY > THERE IS A BETTER WAY 25 Account creation Transaction preparation Transaction submission Transaction execution Mining process Lifecycle of a transaction: Transaction preparation Transaction confirmation
OCTO TECHNOLOGY > THERE IS A BETTER WAY 26 WHAT IS A TRANSACTION The pay-us-a-beer transaction Issuer Recipients Transactions scripts “ Send to addresses ” Amount
OCTO TECHNOLOGY > THERE IS A BETTER WAY 27 APPEND-ONLY LEDGER Create 25 coins and credit to You Transfert 17 coins from You to Erwan Transfert 8 coins from Erwan to Yann Transfert 5 coins from Yann to You Transfert 15 coins from You to Erwan Is it valid? Time Might need to scan backwards until genesis! asserted by miners signed by you signed by Erwan signed by Yann signed by You Source: https://youtu.be/t7sGcST61sM
OCTO TECHNOLOGY > THERE IS A BETTER WAY 28 A TRANSACTION-BASED LEDGER LIKE BITCOIN Is it valid? Time Input: Ø Outputs: You=25 1 1 Input: Outputs: You=8 Erwan=17 2 1 211 Input: Outputs: Erwan=9 Yann=83 1 22 2 Input: Outputs: Yann=3 You=13 4 1 2 2 1 3 2 Input: Outputs: You=-2 Erwan=24 5 1 4 2 2 3 1 Finite scan to check validity WTF!!! Source: https://youtu.be/t7sGcST61sM
OCTO TECHNOLOGY > THERE IS A BETTER WAY 29 BITCOIN TRANSACTION BOOKKEEPING You have 10 bitcoins as base balance Tx1: pay-me-a-beer Input 1 Output 1 Output 2 Unspent = your balance 10 - 1 = 9 easy! 1 bitcoin 9 bitcoins unspent Tx2: don’t forget Yann! Input 1 Output 1 Output 2 1 bitcoin 5 bitcoins unspent Unspent = your balance 9 - 1 = 5 ??Really?? Yes, you gave 3 bitcoins as mining fees 9 - 1 -5 = 3 Inputs Bitcoins to spend Each input is a signed reference from a previous trnx Outputs Assign to new owners Each output can be used by only 1 input do avoid double spend Unspent outputs = balance of somebody This is what we call bitcoins (add all unspent of a public ledger to know how many bitcoins has the chain Mining fees sum(inputs) - sum(outputs)
OCTO TECHNOLOGY > THERE IS A BETTER WAY 30 TRANSACTION SIGNATURE The pay-us-a-beer transaction Input 1 Output 1 Digital signature Public key 1. You are paying the beer, so you have to sign your transaction with your private key 2. You have to attach the the signature and your public key to the transaction so anybody can check it This process can be done offline!
OCTO TECHNOLOGY > THERE IS A BETTER WAY 31 OK OK, BUT WHAT ARE THE TRANSACTION SCRIPT YOU WERE TALKING ABOUT Bitcoin is using a stack based language Often limited instructions set No-Loops in bitcoin Sender choose the script (but could be refused) ByteCode running in a Virtual Machine
OCTO TECHNOLOGY > THERE IS A BETTER WAY 32 SCRIPTING CAPABILITIES ARE DIFFERENT FROM ONE BLOCKCHAIN TO ANOTHER!
OCTO TECHNOLOGY > THERE IS A BETTER WAY 33 BITCOIN SCRIPT EXECUTION, A REAL LIFE EXAMPLE << Public Key >> << Signature>> Check Transaction signature script! 99% of created transactions in bitcoin are using this script! OP_DUP OP_HASH160 << PubKeyHash? >> OP_EQUAL_VERIFY OP_CHECK_SIG Script scriptPubKey (output) Signature scriptSig (input) << Public Key >> << Signature>> Duplicate top of the stack << Public Key >> Hash top of the stack Source: https://youtu.be/ci1jFDRPoCw INSTRUCTIONS MEMORY
OCTO TECHNOLOGY > THERE IS A BETTER WAY 34 BITCOIN SCRIPT EXECUTION, A REAL LIFE EXAMPLE << Public Key >> << Signature>> Check Transaction signature script! 99% of created transactions in bitcoin are using this script! OP_DUP OP_HASH160 << PubKeyHash? >> OP_EQUAL_VERIFY OP_CHECK_SIG << Public Key >> << Signature>> << Pub Key Hash >> << Pub Key Hash? >> Public key hash given by the sender Check 2 top stack values Check the signature! Source: https://youtu.be/ci1jFDRPoCw INSTRUCTIONS MEMORY Script scriptPubKey (output) Signature scriptSig (input)
OCTO TECHNOLOGY > THERE IS A BETTER WAY 35 Account creation Transaction preparation Transaction submission Transaction execution Mining process Lifecycle of a transaction: Transaction submission Transaction confirmation
OCTO TECHNOLOGY > THERE IS A BETTER WAY 36 FIRST STEP: FIND YOUR FRIENDS To be able to do anything on the blockchain, you must first... Client node Discover the blockchain network!
OCTO TECHNOLOGY > THERE IS A BETTER WAY 37 Bootstrap node Bootstrap node FIRST STEP: FIND YOUR FRIENDS To be able to do anything on the blockchain, you must first... Client node Discover the blockchain network! 1. Find Bootstrap nodes 139.218.14.2 92.164.12.8 Hardcoded addresses
OCTO TECHNOLOGY > THERE IS A BETTER WAY 38 FIRST STEP: FIND YOUR FRIENDS To be able to do anything on the blockchain, you must first... Client node Discover the blockchain network! 1. Find Bootstrap nodes 2. Find Peer nodes Bootstrap node Bootstrap node Unknown nodesKnown nodes
OCTO TECHNOLOGY > THERE IS A BETTER WAY 39 FIRST STEP: FIND YOUR FRIENDS To be able to do anything on the blockchain, you must first... Client node Discover the blockchain network! 1. Find Bootstrap nodes 2. Find Peer nodes 3. Connect to random nodes Bootstrap node Bootstrap node Unknown nodesKnown nodes The whole network is eventually interconnected
OCTO TECHNOLOGY > THERE IS A BETTER WAY 40 SECOND STEP: GOSSIP WITH YOUR FRIENDS Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx OCTO TECHNOLOGY > THERE IS A BETTER WAY Principle Just forward every transaction to your neighbours!
OCTO TECHNOLOGY > THERE IS A BETTER WAY 41 Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Why it is cool? ● Reliable in case of failure SECOND STEP: GOSSIP WITH YOUR FRIENDS OCTO TECHNOLOGY > THERE IS A BETTER WAY Tx Tx Tx Principle Just forward every transaction to your neighbours!
OCTO TECHNOLOGY > THERE IS A BETTER WAY 42 SECOND STEP: GOSSIP WITH YOUR FRIENDS OCTO TECHNOLOGY > THERE IS A BETTER WAY Principle Just forward every transaction to your neighbours! Why it is cool? ● Reliable in case of failure ● Guaranteed delivery in bounded time Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Less than 10s
OCTO TECHNOLOGY > THERE IS A BETTER WAY 43 SECOND STEP: GOSSIP WITH YOUR FRIENDS OCTO TECHNOLOGY > THERE IS A BETTER WAY Principle Just forward every transaction to your neighbours! Why it is cool? ● Reliable in case of failure ● Guaranteed delivery in bounded time ● Scale with the number of peers Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx
OCTO TECHNOLOGY > THERE IS A BETTER WAY 44 BAD TRANSACTIONS SHALL NOT PASS! Transaction validity is first checked before being accepted and transferred ✓Valid transaction format………….. ✓Valid transaction….. instructions used…. ✓Valid signature from the author…… ✓Transaction integrity not tampered………. ✓Coins spent are available………….... There should be a consensus about validation rules among clients Validation rules updates are propagated through software updates
OCTO TECHNOLOGY > THERE IS A BETTER WAY 45 LET’S GO TO THE POOL! Accepted transactions go into a transaction pool Mining node A Pay-us-a-beer Buy Crypto Kitty Buy ICO Scam Token Transactions Buy ICO Scam Token Buy ICO Scam Token TransactionPool Fee 30 25 12 7 0 Orderedbyfee independently maintained by each node Mining node B Buy Crypto Kitty Buy ICO Scam Token Transactions Buy ICO Scam Token Buy ICO Scam Token Fee 25 12 7 0 Buy Drugs 2 TransactionPool Non consistent view across all nodesBuy Drugs 2
OCTO TECHNOLOGY > THERE IS A BETTER WAY 46 Account creation Transaction preparation Transaction submission Transaction execution Mining process Lifecycle of a transaction: Mining process Transaction confirmation
Tx Buy Crypto Kitty OCTO TECHNOLOGY > THERE IS A BETTER WAY 473 A SIMPLE EXECUTION MODEL ...that are executed sequentially Tx Buy Crypto Kitty Tx Buy Beer Transaction Pool Tx Buy Beer Tx Buy Crypto Kitty New Potential Blockchain State State 3State 2 Initial Blockchain State State 1 Transactions are just state transition functions... 47
OCTO TECHNOLOGY > THERE IS A BETTER WAY 483 BUT WHAT IS A BLOCKCHAIN STATE? It depends... 20 coins spendable by Bob 10 coins spendable by John 5 coins spendable by Bob 5 coins spendable by Lucie Unspent transactions coins Bitcoin State 1F1tAaz5x 1F1tAaz5x 1F1tAaz5x Ethereum State Account information Bob has 25 coins John has 10 coins Lucie has 5 coins Contract Foo contains A=10 } cont { 48
OCTO TECHNOLOGY > THERE IS A BETTER WAY 49 Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx OCTO TECHNOLOGY > THERE IS A BETTER WAY A MODEL NOT VERY SCALABLE All nodes execute all the transactions Adding new nodes doesn’t increase computing power
OCTO TECHNOLOGY > THERE IS A BETTER WAY 503 PROTECTIONS AGAINST THE EVIL Solution No Loop or Goto in script langage Pay for each instruction execution Threat 1 Infinite loop in transaction scripts Solution Transaction chaining Incremental id per transaction/account Threat 2 Transaction Replay attack
OCTO TECHNOLOGY > THERE IS A BETTER WAY 51 Account creation Transaction preparation Transaction submission Transaction execution Mining process Lifecycle of a transaction: Block propagation Transaction confirmation
OCTO TECHNOLOGY > THERE IS A BETTER WAY 52 DID WE SAY BLOCKCHAIN? WHAT IS IT? Now that our pay-us-a-beer transaction is executed and validated, it needs to be included in a newly created block Previous Block Hash Transactions Tree Random Nonce Current Block Hash Our block! Previous Block Hash Transactions Tree Random Nonce Current Block Hash Block N-1 Previous Block Hash Transactions Tree Random Nonce Current Block Hash Block N+1 The average block generation time is usually constant ● ~10 mn for Bitcoin ● ~12 seconds for Ethereum Why to bundle transactions in a block? ● Single unit of work for miners ( will be described later ) ● Limit length of the blockchain ( faster to verify history ) Merkle Root Hash Hash HashHashHash Hash Dat a 4 Dat a 3 Dat a 2 Dat a 1 Tx4Tx3Tx1 Tx2 Transactions pay-us-a-beer TX
OCTO TECHNOLOGY > THERE IS A BETTER WAY 53 HOW TO RESOLVE COMPETING STATES? Tx1 Tx2 Tx6 Tx5 Tx4 Tx3 Tx3 Tx4 Tx5 Tx6 Tx3 Tx5 Tx4 Tx6 Tx1 Tx2 Tx3 Tx4 Tx5 Tx6 How to bundle transactions in blocks pay-us-a-beer TX Distributed process = need to arbitrate between several valid states ?
OCTO TECHNOLOGY > THERE IS A BETTER WAY 54 CONSENSUS ALGORITHM “ How to find a truth, in a world full of liars ” ● Agree on a unique blockchain state amongst all valid possibilities ● Prevent bad actors from influencing the outcome ● Ensure a consensus will be eventually reached despite faulty and evil nodes Sybil attack fake multitude of nodes using forged identities Double spend spending the same money twice Transaction censorship or delaying prevent trnx to be included in the blockchain Long Range attack Create a long valid blockchain and advertise it to new nodes joining Most well known attacks
OCTO TECHNOLOGY > THERE IS A BETTER WAY 55 2 main answers to avoid those attacks ● Choose the next block producer randomly! ● Ensure messing with the blockchain is not for free Solution = Mining!
OCTO TECHNOLOGY > THERE IS A BETTER WAY 56 hash( block + random value ) < difficulty PROOF OF WORK, THE MOST COMMON MINING TECHNIQUE A computational challenge must be solved to be able to create a valid block Challenge: Find a random hash value inferior to a threshold (difficulty) Difficulty is regularly adjusted to keep a constant average block generation time
OCTO TECHNOLOGY > THERE IS A BETTER WAY 57 RESOLVING FORKS The process continues and What happen when 2 miners find a block at the same time?
OCTO TECHNOLOGY > THERE IS A BETTER WAY 58 WHAT A MINER IS DOING? 1. Collect transactions from the pool 2. Validate transactions 3. Invest power and electricity! 4. Try to create a new block as previously described 5. Eventually, get rewards in form of new created bitcoins * old numbers
OCTO TECHNOLOGY > THERE IS A BETTER WAY 59 CAREERS.OCTO.COM.AU
OCTO TECHNOLOGY > THERE IS A BETTER WAY 60 Account creation Transaction preparation Transaction submission Transaction execution Mining process Lifecycle of a transaction: Transaction confirmation Transaction confirmation
OCTO TECHNOLOGY > THERE IS A BETTER WAY 61 BEFORE: THE (NOT SO SIMPLE) BLOCK PROPAGATION ● Like transactions, blocks are propagated in the network using the Gossip protocol ● On Bitcoin 50% of blocks are propagated under 6s Problem: High propagation time is bad for security but 10% are often propagated > 120s
OCTO TECHNOLOGY > THERE IS A BETTER WAY 62 2 2 ✗ ✗ 3 IMPACT OF A SMALL BLOCK TIME 1 12 s 18 s 24 s 25% 50% 25% 1 1 2 A B C BLOCK TIME: 6 S PROPAGATION TIME: 12 S 1' ✗ ✗ 2' 12 s 18 s 24 s0 s 6 s
OCTO TECHNOLOGY > THERE IS A BETTER WAY 63 CENTRALISATION COUNTER-MEASURES High propagation time lead to centralisation Solutions: ● Low block size and high block time 1 MB Block size limit ● Make orphan blocks count to select winner
OCTO TECHNOLOGY > THERE IS A BETTER WAY 643 THE TRANSACTION CONFIRMATION ISSUE ● Transactions can be re-organized in the short term as part of forks resolution ● Problem: blockchain are eventually consistent C A P Tx 1 Tx 3 Tx 3 Tx 4 Tx Tx Tx 1 Tx Tx 3 Tx 3
OCTO TECHNOLOGY > THERE IS A BETTER WAY 653 HOW TO BE SURE ABOUT YOUR TRANSACTION The oldest is a transaction the less likely a transaction could be reverted Tx Not sure we will have our beer! 0 confirmation
OCTO TECHNOLOGY > THERE IS A BETTER WAY 663 HOW TO BE SURE ABOUT YOUR TRANSACTION The oldest is a transaction the less likely a transaction could be reverted Tx 1Tx Tx 2 Tx 3 We may have our beer! 3 confirmations
OCTO TECHNOLOGY > THERE IS A BETTER WAY 673 HOW TO BE SURE ABOUT YOUR TRANSACTION The oldest is a transaction the less likely a transaction could be reverted Tx 1Tx Tx 2 Tx 3 Tx 4 Tx 5 Tx 6 6 confirmations We will have our beer!
OCTO TECHNOLOGY > THERE IS A BETTER WAY 683 HOW TO BE SURE ABOUT YOUR TRANSACTION The oldest is a transaction the less likely a transaction could be reverted 6 blocks-old transactions are considered close to 100% safe Tx 1Tx Tx 2 Tx 3 Tx 4 Tx 5 Tx 6 6 confirmations
OCTO TECHNOLOGY > THERE IS A BETTER WAY 69 Thank you! CAREERS.OCTO.COM.AU
OCTO TECHNOLOGY > THERE IS A BETTER WAY 70 Annexes CAREERS.OCTO.COM.AU
Merkle Root Data 4Data 3Data 2Data 1 OCTO TECHNOLOGY > THERE IS A BETTER WAY 713 COINS GROWTH ON (MERKLE) TREES Most blockchains use Merkle Trees to store transactions list or whole blockchain state Data 4Data 3Data 1 Hash H3 Hash(Data 3) Hash H4 Hash(Data 4) Hash H2 Hash(Data 2) Hash H1 Hash(Data 1) Merkle Root Hash(H12+H34) Hash H34 Hash(H3+H4) Hash H12 Hash(H1+H2) Data 2 Hash H2 Hash(Data 2) Merkle Root Hash(H12+H34) Hash H12 Hash(H1+H2) Data 2 Merkle Trees are cool! ● Performant Only re-hash what changed! ● Light Client Friendly Easy to prove a transaction without downloading the whole tree! Data modified
Tx Root Tx 4Tx 3Tx 1 Tx Root Tx 2 Block OCTO TECHNOLOGY > THERE IS A BETTER WAY 723 WHERE ARE MERKLE TREES USED? Bitcoin Ethereum Tx 4Tx 3Tx 1 Tx 2 Tx Root Tx Root Block Receipt Root Rc 4Rc 3Rc 1 Receipt Root Rc 2 Account 1 State Root State Root Account 2 Account 3 Account 4Storage Block
Tx Buy Crypto Kitty OCTO TECHNOLOGY > THERE IS A BETTER WAY 733 BACK TO TRANSACTIONS EXECUTION Transactions are executed sequentially by nodes State Root Data 4 Data 3 Data 2 Data 1 Data 4Data 3Data 1 Data 2 State Root Data 4 Data 3 Data 2 Data 1 Data 4Data 3Data 1 Data 2 State Root Data 4 Data 3 Data 2 Data 1 Data 4Data 3Data 1 Data 2 Tx Buy Crypto Kitty Tx Buy Beer Transaction Pool Tx Buy Beer Tx Buy Crypto Kitty New Blockchain State Hash Ethereumexample

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Blockchain: life of a blockchain transaction

  • 1. 402/55 Lime Street Sydney 2000 NSW > AUSTRALIA> WWW.OCTO.COM My life as a Blockchain Transaction Yann Rouillard + Erwan Alliaume - April 2018 Deep dive into the blockchain
  • 2. 2OCTO TECHNOLOGY > THERE IS A BETTER WAY WHO ARE WE? Yann Rouillard Senior consultant / expert DevOps Erwan Alliaume Senior consultant / CTO
  • 3. 3OCTO TECHNOLOGY > THERE IS A BETTER WAY How to buy us a beer using bitcoin… from your wallet to ours through the blockchain
  • 4. OCTO TECHNOLOGY > THERE IS A BETTER WAY 4 LIFECYCLE OVERVIEW 1F1tAaz5x1HUXrCNLM ACCOUNT CREATION OCTO TECHNOLOGY > THERE IS A BETTER WAY
  • 5. OCTO TECHNOLOGY > THERE IS A BETTER WAY 5 TRANSACTION PREPARATION LIFECYCLE OVERVIEW Tx 1F1tAaz5x1HUXrCNLM ACCOUNT CREATION OCTO TECHNOLOGY > THERE IS A BETTER WAY
  • 6. OCTO TECHNOLOGY > THERE IS A BETTER WAY 6 TRANSACTION SUBMISSION LIFECYCLE OVERVIEW Tx 1F1tAaz5x1HUXrCNLM Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx TRANSACTION PREPARATION ACCOUNT CREATION OCTO TECHNOLOGY > THERE IS A BETTER WAY
  • 7. OCTO TECHNOLOGY > THERE IS A BETTER WAY 7 TRANSACTION EXECUTION TRANSACTION SUBMISSION Tx 1F1tAaz5x1HUXrCNLM Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx TRANSACTION PREPARATION ACCOUNT CREATION LIFECYCLE OVERVIEW OCTO TECHNOLOGY > THERE IS A BETTER WAY
  • 8. OCTO TECHNOLOGY > THERE IS A BETTER WAY 8 MINING PROCESS Tx 1F1tAaz5x1HUXrCNLM Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx TRANSACTION EXECUTION TRANSACTION SUBMISSION TRANSACTION PREPARATION ACCOUNT CREATION LIFECYCLE OVERVIEW OCTO TECHNOLOGY > THERE IS A BETTER WAY
  • 9. OCTO TECHNOLOGY > THERE IS A BETTER WAY 9 MINING PROCESS LIFECYCLE OVERVIEW Tx 1F1tAaz5x1HUXrCNLM Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx TRANSACTION EXECUTION TRANSACTION SUBMISSION TRANSACTION PREPARATION ACCOUNT CREATION OCTO TECHNOLOGY > THERE IS A BETTER WAY
  • 10. OCTO TECHNOLOGY > THERE IS A BETTER WAY 10 LIFECYCLE OVERVIEW Tx 1F1tAaz5x1HUXrCNLM Tx MINING PROCESS TRANSACTION EXECUTION TRANSACTION SUBMISSION TRANSACTION PREPARATION ACCOUNT CREATION TRANSACTION CONFIRMATION OCTO TECHNOLOGY > THERE IS A BETTER WAY
  • 11. OCTO TECHNOLOGY > THERE IS A BETTER WAY 11 Account creation Transaction preparation Transaction submission Transaction execution Mining process Lifecycle of a transaction: Some definitions first! Transaction confirmation
  • 12. OCTO TECHNOLOGY > THERE IS A BETTER WAY 12 THE ORIGIN: THE CYPHERPUNK MOVEMENT
  • 13. OCTO TECHNOLOGY > THERE IS A BETTER WAY 13 WHAT IS A CRYPTO-CURRENCY? Scarcity Fungibility Transferability Divisibility Durability A crypto-currency is a virtual currency that uses cryptography to guarantee currency essential properties
  • 14. OCTO TECHNOLOGY > THERE IS A BETTER WAY 14 SOME FAMOUS CRYPTO-CURRENCIES Dogecoin Bitcoin Dash Litecoin Ether Ripple OCTO TECHNOLOGY > THERE IS A BETTER WAY
  • 15. OCTO TECHNOLOGY > THERE IS A BETTER WAY 15 Early 19th-century German ledger WHAT IS A LEDGER? Not a very new thing !
  • 16. OCTO TECHNOLOGY > THERE IS A BETTER WAY 16 WHAT IS A DISTRIBUTED LEDGER? Centralised Ledger Distributed Ledger
  • 17. OCTO TECHNOLOGY > THERE IS A BETTER WAY 17 WHAT IS A BLOCKCHAIN? A blockchain is one of the possible implementations of a distributed ledger where transactions are stored in a series of cryptography-linked blocks
  • 18. OCTO TECHNOLOGY > THERE IS A BETTER WAY 18 Account creation Transaction preparation Transaction submission Transaction execution Mining process Lifecycle of a transaction: Account creation Transaction confirmation
  • 19. OCTO TECHNOLOGY > THERE IS A BETTER WAY 19 WHAT IS AN ACCOUNT? An account is a uniquely identified object that will be able to issue transactions and store currency Two problems: ● how to create a unique identifier without a central authority? ● how to ensure transactions has been legitimely issued from an account?
  • 20. OCTO TECHNOLOGY > THERE IS A BETTER WAY 20 WHAT IS AN ACCOUNT? An account is a uniquely identified object that will be able to issue transactions and store currency Two problems: ● how to create a unique identifier without a central authority? ● how to ensure transactions has been legitimely issued from an account? Cryptography to the rescue!
  • 21. OCTO TECHNOLOGY > THERE IS A BETTER WAY 2 1 3 CRYPTOGRAPHY 101: ELECTRONIC SIGNATURE IN ONE SLIDE Not John Private key Public key ✗ Someone’s private key Someone else’s private key ≠ Key generator Private key Public key John Lorem ipsum dolor alok sit amet, tipeke consectetur adipiscing so elit, sed do eiusmod te Document Sign Signature Verify ✓ Lorem ipsum dolor alok sit amet, tipeke consectetur adipiscing so elit, sed do eiusmod te
  • 22. OCTO TECHNOLOGY > THERE IS A BETTER WAY 22 IN ONE SLIDE 01010001000110001011 11010100101110101010 10010101010101010101 01010110101001010101 01010101010100101010 10100101010101010100 1010100101101 0x32ab7f65 Original input Hash value ✗ CRYPTOGRAPHY 101: CRYPTOGRAPHIC HASH FUNCTION 01010001000110001011 11010100101110101010 10010101010101010101 01010110101001010101 01010101010100101010 10100101010101010100 1010100101101 0x32ab7f65 Any size Fixed size 01010001000110001011 11010100101110101010 10010101010101010101 01010110101001010101 01010101010100101010 10100101010101010100 1010100101100 0x47f42e10 Small change Big change 01010001000110001011 11010100101110101010 10010101010101010101 01010110101001010101 01010101010100101010 10100101010101010100 1010100101101 0x32ab7f65 11001000100010010101 01010101010101101010 10101011010101010101 01010101010100010101 01001010010001001010 00100010000011111101 0111011111111 ≠ Original input Different input ✗
  • 23. OCTO TECHNOLOGY > THERE IS A BETTER WAY 23 ACCOUNT CREATION: STANDARD MECHANISM Private key Public key 1. Key generation Most blockchain use Elliptic Curve Algorithms 2. Public Key Hashing Ensure shorter address Protect against attack on Public key 3. Address Encoding 0bed7abd61247635c197 3eb38474a2516ed1d884 Make it (a bit more) readable
  • 24. OCTO TECHNOLOGY > THERE IS A BETTER WAY 24 NICE WARNINGA NICE WARNING OCTO TECHNOLOGY > THERE IS A BETTER WAY YOU ARE (often) PSEUDONYMOUS NOT ANONYMOUS
  • 25. OCTO TECHNOLOGY > THERE IS A BETTER WAY 25 Account creation Transaction preparation Transaction submission Transaction execution Mining process Lifecycle of a transaction: Transaction preparation Transaction confirmation
  • 26. OCTO TECHNOLOGY > THERE IS A BETTER WAY 26 WHAT IS A TRANSACTION The pay-us-a-beer transaction Issuer Recipients Transactions scripts “ Send to addresses ” Amount
  • 27. OCTO TECHNOLOGY > THERE IS A BETTER WAY 27 APPEND-ONLY LEDGER Create 25 coins and credit to You Transfert 17 coins from You to Erwan Transfert 8 coins from Erwan to Yann Transfert 5 coins from Yann to You Transfert 15 coins from You to Erwan Is it valid? Time Might need to scan backwards until genesis! asserted by miners signed by you signed by Erwan signed by Yann signed by You Source: https://youtu.be/t7sGcST61sM
  • 28. OCTO TECHNOLOGY > THERE IS A BETTER WAY 28 A TRANSACTION-BASED LEDGER LIKE BITCOIN Is it valid? Time Input: Ø Outputs: You=25 1 1 Input: Outputs: You=8 Erwan=17 2 1 211 Input: Outputs: Erwan=9 Yann=83 1 22 2 Input: Outputs: Yann=3 You=13 4 1 2 2 1 3 2 Input: Outputs: You=-2 Erwan=24 5 1 4 2 2 3 1 Finite scan to check validity WTF!!! Source: https://youtu.be/t7sGcST61sM
  • 29. OCTO TECHNOLOGY > THERE IS A BETTER WAY 29 BITCOIN TRANSACTION BOOKKEEPING You have 10 bitcoins as base balance Tx1: pay-me-a-beer Input 1 Output 1 Output 2 Unspent = your balance 10 - 1 = 9 easy! 1 bitcoin 9 bitcoins unspent Tx2: don’t forget Yann! Input 1 Output 1 Output 2 1 bitcoin 5 bitcoins unspent Unspent = your balance 9 - 1 = 5 ??Really?? Yes, you gave 3 bitcoins as mining fees 9 - 1 -5 = 3 Inputs Bitcoins to spend Each input is a signed reference from a previous trnx Outputs Assign to new owners Each output can be used by only 1 input do avoid double spend Unspent outputs = balance of somebody This is what we call bitcoins (add all unspent of a public ledger to know how many bitcoins has the chain Mining fees sum(inputs) - sum(outputs)
  • 30. OCTO TECHNOLOGY > THERE IS A BETTER WAY 30 TRANSACTION SIGNATURE The pay-us-a-beer transaction Input 1 Output 1 Digital signature Public key 1. You are paying the beer, so you have to sign your transaction with your private key 2. You have to attach the the signature and your public key to the transaction so anybody can check it This process can be done offline!
  • 31. OCTO TECHNOLOGY > THERE IS A BETTER WAY 31 OK OK, BUT WHAT ARE THE TRANSACTION SCRIPT YOU WERE TALKING ABOUT Bitcoin is using a stack based language Often limited instructions set No-Loops in bitcoin Sender choose the script (but could be refused) ByteCode running in a Virtual Machine
  • 32. OCTO TECHNOLOGY > THERE IS A BETTER WAY 32 SCRIPTING CAPABILITIES ARE DIFFERENT FROM ONE BLOCKCHAIN TO ANOTHER!
  • 33. OCTO TECHNOLOGY > THERE IS A BETTER WAY 33 BITCOIN SCRIPT EXECUTION, A REAL LIFE EXAMPLE << Public Key >> << Signature>> Check Transaction signature script! 99% of created transactions in bitcoin are using this script! OP_DUP OP_HASH160 << PubKeyHash? >> OP_EQUAL_VERIFY OP_CHECK_SIG Script scriptPubKey (output) Signature scriptSig (input) << Public Key >> << Signature>> Duplicate top of the stack << Public Key >> Hash top of the stack Source: https://youtu.be/ci1jFDRPoCw INSTRUCTIONS MEMORY
  • 34. OCTO TECHNOLOGY > THERE IS A BETTER WAY 34 BITCOIN SCRIPT EXECUTION, A REAL LIFE EXAMPLE << Public Key >> << Signature>> Check Transaction signature script! 99% of created transactions in bitcoin are using this script! OP_DUP OP_HASH160 << PubKeyHash? >> OP_EQUAL_VERIFY OP_CHECK_SIG << Public Key >> << Signature>> << Pub Key Hash >> << Pub Key Hash? >> Public key hash given by the sender Check 2 top stack values Check the signature! Source: https://youtu.be/ci1jFDRPoCw INSTRUCTIONS MEMORY Script scriptPubKey (output) Signature scriptSig (input)
  • 35. OCTO TECHNOLOGY > THERE IS A BETTER WAY 35 Account creation Transaction preparation Transaction submission Transaction execution Mining process Lifecycle of a transaction: Transaction submission Transaction confirmation
  • 36. OCTO TECHNOLOGY > THERE IS A BETTER WAY 36 FIRST STEP: FIND YOUR FRIENDS To be able to do anything on the blockchain, you must first... Client node Discover the blockchain network!
  • 37. OCTO TECHNOLOGY > THERE IS A BETTER WAY 37 Bootstrap node Bootstrap node FIRST STEP: FIND YOUR FRIENDS To be able to do anything on the blockchain, you must first... Client node Discover the blockchain network! 1. Find Bootstrap nodes 139.218.14.2 92.164.12.8 Hardcoded addresses
  • 38. OCTO TECHNOLOGY > THERE IS A BETTER WAY 38 FIRST STEP: FIND YOUR FRIENDS To be able to do anything on the blockchain, you must first... Client node Discover the blockchain network! 1. Find Bootstrap nodes 2. Find Peer nodes Bootstrap node Bootstrap node Unknown nodesKnown nodes
  • 39. OCTO TECHNOLOGY > THERE IS A BETTER WAY 39 FIRST STEP: FIND YOUR FRIENDS To be able to do anything on the blockchain, you must first... Client node Discover the blockchain network! 1. Find Bootstrap nodes 2. Find Peer nodes 3. Connect to random nodes Bootstrap node Bootstrap node Unknown nodesKnown nodes The whole network is eventually interconnected
  • 40. OCTO TECHNOLOGY > THERE IS A BETTER WAY 40 SECOND STEP: GOSSIP WITH YOUR FRIENDS Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx OCTO TECHNOLOGY > THERE IS A BETTER WAY Principle Just forward every transaction to your neighbours!
  • 41. OCTO TECHNOLOGY > THERE IS A BETTER WAY 41 Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Why it is cool? ● Reliable in case of failure SECOND STEP: GOSSIP WITH YOUR FRIENDS OCTO TECHNOLOGY > THERE IS A BETTER WAY Tx Tx Tx Principle Just forward every transaction to your neighbours!
  • 42. OCTO TECHNOLOGY > THERE IS A BETTER WAY 42 SECOND STEP: GOSSIP WITH YOUR FRIENDS OCTO TECHNOLOGY > THERE IS A BETTER WAY Principle Just forward every transaction to your neighbours! Why it is cool? ● Reliable in case of failure ● Guaranteed delivery in bounded time Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Less than 10s
  • 43. OCTO TECHNOLOGY > THERE IS A BETTER WAY 43 SECOND STEP: GOSSIP WITH YOUR FRIENDS OCTO TECHNOLOGY > THERE IS A BETTER WAY Principle Just forward every transaction to your neighbours! Why it is cool? ● Reliable in case of failure ● Guaranteed delivery in bounded time ● Scale with the number of peers Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx
  • 44. OCTO TECHNOLOGY > THERE IS A BETTER WAY 44 BAD TRANSACTIONS SHALL NOT PASS! Transaction validity is first checked before being accepted and transferred ✓Valid transaction format………….. ✓Valid transaction….. instructions used…. ✓Valid signature from the author…… ✓Transaction integrity not tampered………. ✓Coins spent are available………….... There should be a consensus about validation rules among clients Validation rules updates are propagated through software updates
  • 45. OCTO TECHNOLOGY > THERE IS A BETTER WAY 45 LET’S GO TO THE POOL! Accepted transactions go into a transaction pool Mining node A Pay-us-a-beer Buy Crypto Kitty Buy ICO Scam Token Transactions Buy ICO Scam Token Buy ICO Scam Token TransactionPool Fee 30 25 12 7 0 Orderedbyfee independently maintained by each node Mining node B Buy Crypto Kitty Buy ICO Scam Token Transactions Buy ICO Scam Token Buy ICO Scam Token Fee 25 12 7 0 Buy Drugs 2 TransactionPool Non consistent view across all nodesBuy Drugs 2
  • 46. OCTO TECHNOLOGY > THERE IS A BETTER WAY 46 Account creation Transaction preparation Transaction submission Transaction execution Mining process Lifecycle of a transaction: Mining process Transaction confirmation
  • 47. Tx Buy Crypto Kitty OCTO TECHNOLOGY > THERE IS A BETTER WAY 473 A SIMPLE EXECUTION MODEL ...that are executed sequentially Tx Buy Crypto Kitty Tx Buy Beer Transaction Pool Tx Buy Beer Tx Buy Crypto Kitty New Potential Blockchain State State 3State 2 Initial Blockchain State State 1 Transactions are just state transition functions... 47
  • 48. OCTO TECHNOLOGY > THERE IS A BETTER WAY 483 BUT WHAT IS A BLOCKCHAIN STATE? It depends... 20 coins spendable by Bob 10 coins spendable by John 5 coins spendable by Bob 5 coins spendable by Lucie Unspent transactions coins Bitcoin State 1F1tAaz5x 1F1tAaz5x 1F1tAaz5x Ethereum State Account information Bob has 25 coins John has 10 coins Lucie has 5 coins Contract Foo contains A=10 } cont { 48
  • 49. OCTO TECHNOLOGY > THERE IS A BETTER WAY 49 Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx Tx OCTO TECHNOLOGY > THERE IS A BETTER WAY A MODEL NOT VERY SCALABLE All nodes execute all the transactions Adding new nodes doesn’t increase computing power
  • 50. OCTO TECHNOLOGY > THERE IS A BETTER WAY 503 PROTECTIONS AGAINST THE EVIL Solution No Loop or Goto in script langage Pay for each instruction execution Threat 1 Infinite loop in transaction scripts Solution Transaction chaining Incremental id per transaction/account Threat 2 Transaction Replay attack
  • 51. OCTO TECHNOLOGY > THERE IS A BETTER WAY 51 Account creation Transaction preparation Transaction submission Transaction execution Mining process Lifecycle of a transaction: Block propagation Transaction confirmation
  • 52. OCTO TECHNOLOGY > THERE IS A BETTER WAY 52 DID WE SAY BLOCKCHAIN? WHAT IS IT? Now that our pay-us-a-beer transaction is executed and validated, it needs to be included in a newly created block Previous Block Hash Transactions Tree Random Nonce Current Block Hash Our block! Previous Block Hash Transactions Tree Random Nonce Current Block Hash Block N-1 Previous Block Hash Transactions Tree Random Nonce Current Block Hash Block N+1 The average block generation time is usually constant ● ~10 mn for Bitcoin ● ~12 seconds for Ethereum Why to bundle transactions in a block? ● Single unit of work for miners ( will be described later ) ● Limit length of the blockchain ( faster to verify history ) Merkle Root Hash Hash HashHashHash Hash Dat a 4 Dat a 3 Dat a 2 Dat a 1 Tx4Tx3Tx1 Tx2 Transactions pay-us-a-beer TX
  • 53. OCTO TECHNOLOGY > THERE IS A BETTER WAY 53 HOW TO RESOLVE COMPETING STATES? Tx1 Tx2 Tx6 Tx5 Tx4 Tx3 Tx3 Tx4 Tx5 Tx6 Tx3 Tx5 Tx4 Tx6 Tx1 Tx2 Tx3 Tx4 Tx5 Tx6 How to bundle transactions in blocks pay-us-a-beer TX Distributed process = need to arbitrate between several valid states ?
  • 54. OCTO TECHNOLOGY > THERE IS A BETTER WAY 54 CONSENSUS ALGORITHM “ How to find a truth, in a world full of liars ” ● Agree on a unique blockchain state amongst all valid possibilities ● Prevent bad actors from influencing the outcome ● Ensure a consensus will be eventually reached despite faulty and evil nodes Sybil attack fake multitude of nodes using forged identities Double spend spending the same money twice Transaction censorship or delaying prevent trnx to be included in the blockchain Long Range attack Create a long valid blockchain and advertise it to new nodes joining Most well known attacks
  • 55. OCTO TECHNOLOGY > THERE IS A BETTER WAY 55 2 main answers to avoid those attacks ● Choose the next block producer randomly! ● Ensure messing with the blockchain is not for free Solution = Mining!
  • 56. OCTO TECHNOLOGY > THERE IS A BETTER WAY 56 hash( block + random value ) < difficulty PROOF OF WORK, THE MOST COMMON MINING TECHNIQUE A computational challenge must be solved to be able to create a valid block Challenge: Find a random hash value inferior to a threshold (difficulty) Difficulty is regularly adjusted to keep a constant average block generation time
  • 57. OCTO TECHNOLOGY > THERE IS A BETTER WAY 57 RESOLVING FORKS The process continues and What happen when 2 miners find a block at the same time?
  • 58. OCTO TECHNOLOGY > THERE IS A BETTER WAY 58 WHAT A MINER IS DOING? 1. Collect transactions from the pool 2. Validate transactions 3. Invest power and electricity! 4. Try to create a new block as previously described 5. Eventually, get rewards in form of new created bitcoins * old numbers
  • 59. OCTO TECHNOLOGY > THERE IS A BETTER WAY 59 CAREERS.OCTO.COM.AU
  • 60. OCTO TECHNOLOGY > THERE IS A BETTER WAY 60 Account creation Transaction preparation Transaction submission Transaction execution Mining process Lifecycle of a transaction: Transaction confirmation Transaction confirmation
  • 61. OCTO TECHNOLOGY > THERE IS A BETTER WAY 61 BEFORE: THE (NOT SO SIMPLE) BLOCK PROPAGATION ● Like transactions, blocks are propagated in the network using the Gossip protocol ● On Bitcoin 50% of blocks are propagated under 6s Problem: High propagation time is bad for security but 10% are often propagated > 120s
  • 62. OCTO TECHNOLOGY > THERE IS A BETTER WAY 62 2 2 ✗ ✗ 3 IMPACT OF A SMALL BLOCK TIME 1 12 s 18 s 24 s 25% 50% 25% 1 1 2 A B C BLOCK TIME: 6 S PROPAGATION TIME: 12 S 1' ✗ ✗ 2' 12 s 18 s 24 s0 s 6 s
  • 63. OCTO TECHNOLOGY > THERE IS A BETTER WAY 63 CENTRALISATION COUNTER-MEASURES High propagation time lead to centralisation Solutions: ● Low block size and high block time 1 MB Block size limit ● Make orphan blocks count to select winner
  • 64. OCTO TECHNOLOGY > THERE IS A BETTER WAY 643 THE TRANSACTION CONFIRMATION ISSUE ● Transactions can be re-organized in the short term as part of forks resolution ● Problem: blockchain are eventually consistent C A P Tx 1 Tx 3 Tx 3 Tx 4 Tx Tx Tx 1 Tx Tx 3 Tx 3
  • 65. OCTO TECHNOLOGY > THERE IS A BETTER WAY 653 HOW TO BE SURE ABOUT YOUR TRANSACTION The oldest is a transaction the less likely a transaction could be reverted Tx Not sure we will have our beer! 0 confirmation
  • 66. OCTO TECHNOLOGY > THERE IS A BETTER WAY 663 HOW TO BE SURE ABOUT YOUR TRANSACTION The oldest is a transaction the less likely a transaction could be reverted Tx 1Tx Tx 2 Tx 3 We may have our beer! 3 confirmations
  • 67. OCTO TECHNOLOGY > THERE IS A BETTER WAY 673 HOW TO BE SURE ABOUT YOUR TRANSACTION The oldest is a transaction the less likely a transaction could be reverted Tx 1Tx Tx 2 Tx 3 Tx 4 Tx 5 Tx 6 6 confirmations We will have our beer!
  • 68. OCTO TECHNOLOGY > THERE IS A BETTER WAY 683 HOW TO BE SURE ABOUT YOUR TRANSACTION The oldest is a transaction the less likely a transaction could be reverted 6 blocks-old transactions are considered close to 100% safe Tx 1Tx Tx 2 Tx 3 Tx 4 Tx 5 Tx 6 6 confirmations
  • 69. OCTO TECHNOLOGY > THERE IS A BETTER WAY 69 Thank you! CAREERS.OCTO.COM.AU
  • 70. OCTO TECHNOLOGY > THERE IS A BETTER WAY 70 Annexes CAREERS.OCTO.COM.AU
  • 71. Merkle Root Data 4Data 3Data 2Data 1 OCTO TECHNOLOGY > THERE IS A BETTER WAY 713 COINS GROWTH ON (MERKLE) TREES Most blockchains use Merkle Trees to store transactions list or whole blockchain state Data 4Data 3Data 1 Hash H3 Hash(Data 3) Hash H4 Hash(Data 4) Hash H2 Hash(Data 2) Hash H1 Hash(Data 1) Merkle Root Hash(H12+H34) Hash H34 Hash(H3+H4) Hash H12 Hash(H1+H2) Data 2 Hash H2 Hash(Data 2) Merkle Root Hash(H12+H34) Hash H12 Hash(H1+H2) Data 2 Merkle Trees are cool! ● Performant Only re-hash what changed! ● Light Client Friendly Easy to prove a transaction without downloading the whole tree! Data modified
  • 72. Tx Root Tx 4Tx 3Tx 1 Tx Root Tx 2 Block OCTO TECHNOLOGY > THERE IS A BETTER WAY 723 WHERE ARE MERKLE TREES USED? Bitcoin Ethereum Tx 4Tx 3Tx 1 Tx 2 Tx Root Tx Root Block Receipt Root Rc 4Rc 3Rc 1 Receipt Root Rc 2 Account 1 State Root State Root Account 2 Account 3 Account 4Storage Block
  • 73. Tx Buy Crypto Kitty OCTO TECHNOLOGY > THERE IS A BETTER WAY 733 BACK TO TRANSACTIONS EXECUTION Transactions are executed sequentially by nodes State Root Data 4 Data 3 Data 2 Data 1 Data 4Data 3Data 1 Data 2 State Root Data 4 Data 3 Data 2 Data 1 Data 4Data 3Data 1 Data 2 State Root Data 4 Data 3 Data 2 Data 1 Data 4Data 3Data 1 Data 2 Tx Buy Crypto Kitty Tx Buy Beer Transaction Pool Tx Buy Beer Tx Buy Crypto Kitty New Blockchain State Hash Ethereumexample