How to find consensus in decentralized networks. A short introduction into Blockchains using Bitcoin as example.

1. Institute for Web Science and Technologies · University of Koblenz-Landau, Germany
Introducing Blockchains
How to fid coiseisus ii deceitralized ietworks
Matthias Lohr

2. Matthias Lohr December 21, 2017 2
The Bitcoin Idea
●
Bitcoii: A Peer-to-Peer Electroiic Cash System [1]
– Published 2008 by Satoshi Nakamoto (alias)
– No ceitral authority required!
– Most famous crypto curreicy
http://www.finanzen.net/devisen/bitcoin-euro/chart

3. Matthias Lohr December 21, 2017 3
Generalizing Bitcoin Approach
●
Blockchaii: A Peer-to-Peer Electroiic Coiseisus
System
– Uiderlyiig techiology of Bitcoii
– Basis of maiy other deceitralized software projects

4. Matthias Lohr December 21, 2017 4
Problem
Terms are used ambiguously
– Bitcoii
●
Blockchaii
●
Software Product
●
Digital Curreicy
●
Techiical specifcatioi of data processiig [1]
– Blockchaii
●
Bitcoii
●
(Other) iistaice(s) of a block-chaii-based techiology
●
Fuidameital coicept behiid iistaices

5. Matthias Lohr December 21, 2017 5
Block
Header
Payload
●
„Block of Data“
coisists of
– Header (Payload Iiformatioi, Author, Timestamp, ...)
– Payload (arbitrary data, depeids oi implemeitatioi)
●
Bitcoii: Traisactiois
B=(H , P)
H=(sizeof (P),author ,timestamp ,...)
P=(d1,d2 ,d3 ,...)

6. Matthias Lohr December 21, 2017 6
Blockchain: Chain of blocks
●
Uiique ideitifer for blocks*: Hash h(B)
●
Header felds for liikiig
→ Poiiter to precediig block
●
First block („Geiesis Block“)
●
Blocks are broadcasted to a P2P ietwork
* collisioi detectioi required
Hi=(sizeof (P),author ,timestamp ,h(Bi−1),...)
for i=0:
H0=(sizeof (P),author ,timestamp ,0,...)
b0
b1
b2
b3
bi

7. Matthias Lohr December 21, 2017 7
Why we need consensus
Alice: 1,000$
Bob: 1,000$
●
Everyoie cai broadcast iew blocks (P2P ietwork)
●
Oily valid blocks accepted by others
●
Valid, but competiig blocks possible(!)
Alice sends 5,000$ to Bob
Alice: 1,000$
Bob: 6,000$
invalid
Alice sends 500$ to Bob
Alice: 500$
Bob: 1,500$
valid
Alice sends 500$ to ShoeCompany
Alice: 500$
Bob: 1,000$
ShoeCompany: 500$
valid

8. Matthias Lohr December 21, 2017 8
1st consensus approach
●
Block ackiowledged by successors
●
Loigest chaii wiis
●
Next problem: How to limit block geieratioi?
– Make it hard to fid a valid block
– Miiiig: Solve mathematical problem to fid a valid block
A: 3
B: 7
C: 42
t(B, C, 2)
A: 3
B: 5
C: 44
t(C, A, 22)
A: 25
B: 5
C: 22
t(B, A, 5)
A: 30
B: 0
C: 22
t(C, A, 3)
A: 33
B: 0
C: 19
t(B, A, 7)
A: 10
B: 0
C: 42

9. Matthias Lohr December 21, 2017 9
2nd consensus approach
●
Oily blocks with special hash value are valid:
d: Difficulty (Hash must start with # zeros)
h(Bi) = 0000xxxx more difficult to fid thai
h(Bi) = 00xxxxxx
●
Exteid block header
●
Task: Fiid salt that h(Bi) < d
„Proof-of-Work“
block valid⇔h(Bi)<d
Hi=(sizeof (P),author ,timestamp ,h(Bi−1),nonce ,...)

10. Matthias Lohr December 21, 2017 10
Bitcoin‘s Proof-of-Work
●
Miiiig rules:
– Always use the loigest chaii as miiiig base
– If a iew block is broadcasted while miiiig, restart with iew block
●
Chaices for attackers [1][2]:
●
~ 10 miiutes a iew block is created
●
Difficulty is adjusted every 2 weeks
●
Miier
– Collects Traisactioi Fees
– Cai traisfer „iew“ Bitcoiis to owi accouit
p=propability honest node finds new block
q=propability attacker finds new block
qz=propability attacker will ever catch up from z blocks behind
qz=
{
1 if p≤q
(q
p )
z
if p>q

11. Matthias Lohr December 21, 2017 11
Blockchains not limited to static content
●
Ethereum
– Turiig-complete programmiig laiguage („Solidity“)
– Compiled to EVM byte code
– Executed by every iode

12. Matthias Lohr December 21, 2017 12
Beyond the blockchain
●
Taigle: Directed acyclic graph with outdeg > 1
– Poiits to i predecessor blocks
– Used for IOTA [3]
●
IOTA:
– Deceitralized traisactioi ledger for IoT
– Fixed amouit of IOTAs
– No miiiig → less eiergy coisumptioi

13. Matthias Lohr December 21, 2017 13
Summary: Receipe for your own blockchain
●
Block format defiitioi
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P2P Network (e.g. Kademlia)
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Coiseisus Method
– Maiual Choice
– Raidom Choice
– Proof-of-Work [1]
– Proof-of-(Stake|Activity|Buri|Capacity|Elapsed-Time|…)
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Software implemeitatioi
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Users
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Applicatioi Purpose¹
¹) https://www.multichaii.com/blog/2015/11/avoidiig-poiitless-blockchaii-project/

14. Matthias Lohr December 21, 2017 14
That‘s it!
Thank you very much!

15. Matthias Lohr December 21, 2017 15
References
●
[1] S. Nakamoto, Bitcoii: A peer-to-peer electroiic
cash system. 2008.
●
[2] Grubbs, Fraik E. "Ai iitroductioi to probability
theory aid its applicatiois." (1967): 342-342.
●
Popov, E.: The Taigle.
http://iotatokei.com/IOTA_Whitepaper.pdf (accessed
oi 11.12.2017)