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Foundations of Blockchain
Foundations of Blockchain

Foundations of Blockchain: The pathway to cryptocurrencies and decentralized blockchain applications

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Profile Icon Koshik Raj
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Paperback Jan 2019 372 pages 1st Edition
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Paperback Jan 2019 372 pages 1st Edition
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Foundations of Blockchain

A Bit of Cryptography

This chapter will cover all the basics of cryptography that are required for you to understand the vital role it plays in blockchain technology. We will delve deeply into all the aspects of cryptography that blockchain relies on. We will explain a few concepts in practical terms so that we can implement them with ease in later chapters. These include the following:

  • Cryptography in blockchain
  • Classical cryptography
  • Cryptographic primitives
  • Merkle trees
  • Encoding schemes

Modern cryptography is the study of private or secure communication. The fundamental objective of cryptography is to enable two people to communicate over an unsecure medium. This is achieved by encrypting a plaintext from the sender to form a ciphertext that can only be decrypted by the receiver, with whom the sender shares a secret. However, third parties can access the channel by which...

Cryptography in blockchain

Although we have mentioned that cryptography is crucial to the success of blockchain technology, we haven't explored any topic in particular. Most cryptographic primitives have some role or other in the creation of a decentralized blockchain application. We will study all the primitives that contribute to blockchain in this chapter.

Hashing is used in most blockchain applications to create links between blocks. It is also used in consensus algorithms such as proof-of-work, which basically exploits the hashing power of the computing systems that form the blockchain network. Digital signatures are used to sign and verify events such as transactions. Asymmetric key cryptography is a core concept in blockchain applications that gives identity to the participants of the network or can prove the ownership of assets.

Hence, cryptography is an excellent...

Classical cryptography

In this section, we'll look at a number of cryptographical techniques that have been used in historical ciphers. These ad hoc ciphers are not secure enough to be used in modern applications, but because of their simplicity, they can encourage us to learn more about cryptography. Exploring the weaknesses of classical cryptography also helps us to learn more about some of the principles of cryptography. Take a look at the following diagram:

Figure 2.1: Model of conventional encryption

Figure 2.1 shows the conventional encryption model used to encrypt a plaintext using a secret key that is shared with the other user over a secure channel. The user who wants to read the text will decrypt the ciphertext using the secret key, which will return the original plaintext. The key is private, and the encryption and decryption algorithms are made public because...

Cryptographic primitives

Cryptographic primitives are low-level cryptographic algorithms that are used to construct cryptographic protocols used by applications. These are the building blocks of designing a cryptographic system. A designer planning to implement a cryptographic protocol in a system doesn't have to worry about the low-level abstraction of the primitives and can concentrate entirely on building the application:

Figure 2.2: Taxonomy of cryptographic primitives

Figure 2.2 shows a detailed classification of cryptographic primitives. Blockchain technology makes use of most of these cryptographic primitives to achieve basic blockchain functionalities and secure data on the decentralized network: asymmetric cryptography for managing keys; digital signatures for transactions; and, most importantly, hashing, which is the backbone of the blockchain, are some of the...

Symmetric key cryptography

The symmetric key is a key-based cryptography whose algorithms use the same keys to perform encryption of plaintext and decryption of the ciphertext. These keys are shared between two parties over a secure channel. Any participant owning the shared key can perform both encryption and decryption operations on the data. A symmetric key cipher can either be stream encrypted or block encrypted.

Symmetric key cryptography doesn't play any significant role in blockchain-based applications. However, it will provide a better insight into key-based cryptography before we look into asymmetric cryptography.

Stream cipher

The stream cipher uses symmetric key cryptography. Each plaintext character is encrypted...

Asymmetric key cryptography

Asymmetric key cryptography is a widely used encryption technique in modern cryptography. It has a lot of applications other than encryption. It is also commonly used in several elements of blockchain, so we will cover this cryptography technique in depth, along with its primitives.

Symmetric key cryptography uses a shared key for both encryption and decryption. The biggest problem with this is that the shared key needs to be exchanged between participants over a secure channel, which can be quite hard to achieve. It also defeats the objective of encryption if we have a secure channel for communication in the first place. This is where asymmetric cryptography comes in. It uses a pair of keys called a public/private pair. The public key is constructed from the private key and can be freely broadcasted to other users.

In 1978, Ronald Rivest, Adi Shamir...

Cryptographic hashing

A cryptographic hash function is a type of function that maps arbitrary sized data to a fixed size string called a hash. Hash functions possess certain properties that make them ideal for use in cryptography.

Hash functions are widely used in hash table data structures. A hash table stores the data in a key-value pair. Hash tables are used when large keys need to be converted into smaller keys using a hash function, and then the values are mapped to these smaller keys. This makes the mapping of key to value quite easy, and this could be achieved in O(1) time complexity. This is due to the fact that hash functions have a constant time complexity.

We have repeatedly mentioned that hashing is the backbone of blockchain architecture, and it has several properties that make it really valuable and ideal for blockchain implementation.

Every hash function has the...

Encoding schemes

Encoding schemes are generally used in data storage or the transmission of textual data over a medium. You can often observe the conversion of binary to text-encoding schemes in primitive cryptographic implementations.

Encoding schemes provide a compact way of representing long sequences of characters using a base. For example, a decimal system uses base 10, which uses characters from 0-9, and a hexadecimal system uses additional characters from A-F, along with the numbers from the decimal system. The bigger the base of a system, the smaller the size of the encoded string.

Base64 is an encoding scheme that is widely used to store and transmit large files such as an image. It uses 26 lowercase letters, 26 uppercase letters, 10 numerical characters, and 2 special characters ("+" and "/").

Base58 is an encoding scheme developed for Bitcoin and...

Summary

This chapter covered all the essential cryptography topics, from classic cipher techniques to advanced cryptographic primitives. We began the chapter by discussing the classical cipher techniques. We explored both symmetric and asymmetric cryptography, along with a few examples. Cryptographic primitives, such as hashing and digital signatures, were covered in greater detail as they will act as the foundation for the blockchain concepts covered throughout this book.

Since we have covered some of the essential concepts in cryptography and looked at their respective applications, in the next chapter, we will try to implement some of the cryptography concepts that are applicable to the blockchain protocol by looking at a simple blockchain example.

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Key benefits

  • Learn the core concepts and foundations of the blockchain and cryptocurrencies
  • Understand the protocols and algorithms behind decentralized applications
  • Master how to architect, build, and optimize blockchain applications

Description

Blockchain technology is a combination of three popular concepts: cryptography, peer-to-peer networking, and game theory. This book is for anyone who wants to dive into blockchain from first principles and learn how decentralized applications and cryptocurrencies really work. This book begins with an overview of blockchain technology, including key definitions, its purposes and characteristics, so you can assess the full potential of blockchain. All essential aspects of cryptography are then presented, as the backbone of blockchain. For readers who want to study the underlying algorithms of blockchain, you’ll see Python implementations throughout. You’ll then learn how blockchain architecture can create decentralized applications. You’ll see how blockchain achieves decentralization through peer-to-peer networking, and how a simple blockchain can be built in a P2P network. You’ll learn how these elements can implement a cryptocurrency such as Bitcoin, and the wider applications of blockchain work through smart contracts. Blockchain optimization techniques, and blockchain security strategies are then presented. To complete this foundation, we consider blockchain applications in the financial and non-financial sectors, and also analyze the future of blockchain. A study of blockchain use cases includes supply chains, payment systems, crowdfunding, and DAOs, which rounds out your foundation in blockchain technology.

Who is this book for?

This book is for anyone who wants to dive into blockchain technology from first principles and build a foundational knowledge of blockchain. Familiarity with Python will be helpful if you want to follow how the blockchain protocols are implemented. For readers who are blockchain application developers, most of the applications used in this book can be executed on any platform.

What you will learn

  • The core concepts and technical foundations of blockchain
  • The algorithmic principles and solutions that make up blockchain and cryptocurrencies
  • Blockchain cryptography explained in detail
  • How to realize blockchain projects with hands-on Python code
  • How to architect the blockchain and blockchain applications
  • Decentralized application development with MultiChain, NEO, and Ethereum
  • Optimizing and enhancing blockchain performance and security
  • Classical blockchain use cases and how to implement them

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Length: 372 pages
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Language : English
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Publication date : Jan 29, 2019
Length: 372 pages
Edition : 1st
Language : English
ISBN-13 : 9781789139396
Category :
Languages :
Concepts :
Tools :

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Table of Contents

13 Chapters
Introduction Chevron down icon Chevron up icon
A Bit of Cryptography Chevron down icon Chevron up icon
Cryptography in Blockchain Chevron down icon Chevron up icon
Networking in Blockchain Chevron down icon Chevron up icon
Cryptocurrency Chevron down icon Chevron up icon
Diving into Blockchain - Proof of Existence Chevron down icon Chevron up icon
Diving into Blockchain - Proof of Ownership Chevron down icon Chevron up icon
Blockchain Projects Chevron down icon Chevron up icon
Blockchain Optimizations and Enhancements Chevron down icon Chevron up icon
Blockchain Security Chevron down icon Chevron up icon
When Shouldn't We Use Blockchain? Chevron down icon Chevron up icon
Blockchain Use Cases Chevron down icon Chevron up icon
Other Books You May Enjoy Chevron down icon Chevron up icon
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