Blockchain Technology

Visvesvaraya Technological University (VTU)

Subject Code: BCS601

Subject: Cloud Computing

Created By:

Hanumanthu

Dedicated To.
All CSE Engineering Students

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BCS613A

Model Question Paper-1 with effect from 2022 (CBCS Scheme)

USN

Sixth Semester B.E. Degree Examination

Blockchain Technology

TIME: 03 Hours Max. Marks: 100

Note: 01. Answer any FIVE full questions, choosing at least ONE question from each MODULE.

Bloom’ Marks
Module -1 sTaxon
omy
Level

Q.01 a Define Blockchain. Explain the network view of Blockchain with a

neat diagram.
• A blockchain is a decentralized, distributed, and often public digital
ledger.
• It records transactions grouped into blocks that are cryptographically
linked
• This chronological linking and cryptographic security make it difficult to
alter past records without network consensus.
Explanation of the Network View of Blockchain
• The blockchain operates as a peer-to-peer (P2P) network, where
multiple participants (nodes) maintain copies of the ledger.
• When a transaction occurs, it is broadcast to these nodes for
validation.
• Nodes follow consensus mechanisms to verify the legitimacy of the
transaction. L2 10

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• Validated transactions are bundled into a new block, which is added to
the chain and then distributed across the network, updating each
node's copy.

Neat Diagram of Blockchain Network

b List and explain the generic elements of Blockchain.

Blocks: Digital containers holding groups of transactions. Think of them like
pages in a digital record book.

Transactions: Records of activity, like sending money or data. These are the
entries written into the blocks.
L2 10

Cryptographic Hash: A unique code for each block's content. If the content
changes, the code changes completely. It's like a digital fingerprint.

Previous Hash: Each new block contains the fingerprint of the block before
it. This links the blocks together in a chain.

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Timestamp: A record of when a block was created. This shows the order of
events.

Nonce (in some blockchains): A special number that miners try to find to
create a new block. It's like solving a puzzle to add a new page.

Consensus Mechanism: Rules that the network follows to agree that

transactions are valid and new blocks can be added. It's how everyone
decides what's true.

Network (Decentralized): The blockchain runs on many computers, not

just one. This makes it harder to control or shut down by a single entity.

OR
Q.02 a Define Consensus. List the requirements and types of Consensus
mechanism.
consensus is the critical process by which all participating nodes (computers)
within a decentralized network achieve a shared agreement on the validity of
transactions and the sequential order in which they are added to the
blockchain.

Requirements of a Consensus Mechanism

Agreement (Safety):
L2 10
• All honest nodes within the network must eventually agree on the
same state of the blockchain.
• This prevents conflicting versions of the ledger and ensures data
consistency.

Integrity (Immutability and Validity):

• The mechanism must guarantee the integrity of the blockchain by

making it computationally infeasible for malicious actors to tamper
with historical records or validate fraudulent transactions.

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• Only valid transactions, adhering to the network's established rules,
should be accepted.

Liveness (Progress):

The blockchain network should maintain the ability to process new

transactions and add new blocks to the chain in a timely manner, even in the
presence of network latency or some non-malicious node failures.

Fault Tolerance (Resilience):

• A well-designed consensus mechanism should be resilient to a certain

degree of faulty or malicious behavior from participating nodes.
• Mechanisms like Byzantine Fault Tolerance (BFT) are specifically
designed to handle nodes that may act arbitrarily or with malicious
intent.

Types of Consensus Mechanisms

Proof-of-Work (PoW):

• Nodes (miners) compete to solve a complex computational puzzle.

• The first to find the solution proposes the new block, and the network
verifies the work. (e.g., Bitcoin)

Proof-of-Stake (PoS):

Validators are chosen to propose and validate new blocks based on the
amount of cryptocurrency they "stake" (hold and lock up). (e.g., Cardano)

Delegated Proof-of-Stake (DPoS):

Token holders vote for a set of delegates who are then responsible for
validating transactions and creating new blocks. (e.g., EOS)

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Proof-of-Authority (PoA):

A limited number of trusted and pre-approved authorities are responsible for

validating transactions and creating new blocks. (Often used in private
blockchains)

Byzantine Fault Tolerance (BFT):

A family of algorithms designed to reach consensus even when some nodes

in the network are faulty or malicious. (e.g., PBFT, Tendermint)

Proof-of-Elapsed-Time (PoET):

Uses secure hardware to randomly select block leaders based on a waiting

time. (Developed by Intel)

b List and explain the Consensus Algorithms or mechanisms L2 10

Consensus algorithms are the fundamental rules and protocols that enable all
participating nodes (computers) in a decentralized blockchain network to
reach a common agreement on the validity of transactions and the state of
the distributed ledger.

Requirements of a Consensus Mechanism

A robust consensus mechanism should ideally satisfy the following key

requirements:

Agreement (Safety):

All honest nodes must eventually agree on the same value or the same state
of the blockchain. This prevents forks and ensures a single, unified history.

Integrity (Validity and Immutability):

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The mechanism should ensure that only valid transactions, following the
network's rules, are added to the blockchain, and once added, they are
extremely difficult to alter.

Liveness (Progress):

The network should continue to operate and process new transactions, even
in the presence of some faulty or malicious nodes.

Fault Tolerance (Resilience):

The system should be able to reach consensus and function correctly even if
a certain percentage of nodes fail or act maliciously (Byzantine Fault
Tolerance is a key aspect for handling malicious actors).

Types of Consensus Mechanisms

Here are some of the prominent consensus algorithms used in blockchain

technology:

Proof-of-Work (PoW):

o Explanation: Miners compete to solve complex computational

puzzles. The first miner to find the solution gets to propose the
next block. The network then verifies this work.
o Examples: Bitcoin, Ethereum (prior to the Merge).

Proof-of-Stake (PoS):

o Explanation: Validators are chosen to create new blocks based on

the amount of cryptocurrency they "stake" (hold and lock up) in
the network.
o Examples: Cardano, Solana, Ethereum (post-Merge).

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Delegated Proof-of-Stake (DPoS):

o Explanation: Token holders vote for a set of delegates who are

then responsible for validating transactions and creating new
blocks.
o Examples: EOS, Steem.

Proof-of-Authority (PoA):

o Explanation: A limited number of trusted and pre-approved

authorities (validators) are responsible for validating transactions
and creating new blocks.
o Use Cases: Often used in private or consortium blockchains.

Byzantine Fault Tolerance (BFT):

o Explanation: A family of consensus algorithms designed to

achieve agreement even when some nodes in the network are
faulty or malicious. Nodes communicate and vote on the state.
o Examples: Practical Byzantine Fault Tolerance (PBFT),
Tendermint.

Proof-of-Elapsed-Time (PoET):

o Explanation: Uses a lottery system based on a trusted execution

environment (like Intel SGX) to randomly select block leaders.
o Use Cases: Hyperledger Sawtooth.

Proof-of-Capacity (PoC) / Proof-of-Space:

o Explanation: Miners prove they have dedicated a certain amount

of hard drive space for mining. The more space allocated, the
higher the chance of mining a block.
o Examples: Burstcoin, Chia.

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Proof-of-Burn (PoB):

o Explanation: Participants "burn" (permanently destroy) a certain

amount of cryptocurrency to gain the right to mine new blocks
proportionally to the coins burned.
o Examples: Slimcoin.

c Explain benefits and limitations of blockchain.

Benefits of Blockchain

1. Enhanced Security: Cryptographic hashing and the distributed

nature make it extremely difficult to tamper with data once recorded
on the blockchain. Every block is linked and secured, requiring
consensus to alter.
2. Increased Transparency: In many blockchain networks, all
transactions are publicly viewable on the distributed ledger. This
fosters trust and accountability among participants.
3. Improved Efficiency: By removing intermediaries, blockchain can
streamline processes and reduce transaction times and costs in various
applications like payments and supply chain management.
4. Greater Trust: The decentralized nature reduces the need to trust a
single entity. Trust is established through the network and the
inherent security of the technology.

Limitations of Blockchain

1. Scalability Issues: Many blockchain networks face challenges in

processing a high volume of transactions quickly compared to
traditional systems.
2. High Energy Consumption (for some types): Consensus
mechanisms like Proof-of-Work (used by Bitcoin) require significant
computational power and energy, raising environmental concerns. 1, 2 10

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3. Immutability Challenges: While a benefit for security, immutability
can be a limitation when errors need to be corrected; this often
requires complex workarounds.

Module-2
Q. a What are the methods of decentralization? Discuss.
03
Methods of Decentralization

Decentralization in blockchain aims to distribute control and decision-making

away from a single entity.

Here are key methods

Disintermediation

o Blockchain removes the need for traditional intermediaries like banks

or centralized platforms.
o Transactions and interactions occur directly between participants
(peer-to-peer).
o Smart contracts automate agreements, further reducing reliance on
intermediaries.

Distributed Network

o The blockchain ledger is replicated across numerous independent

computers (nodes) globally.
o This eliminates a single point of failure and makes the network
resilient to attacks or shutdowns.
o A larger and more geographically diverse network of nodes increases
decentralization.

Open and Permissionless Participation

L2 7

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o Public blockchains allow anyone to join, view the ledger, and
participate in transaction validation (depending on the consensus
mechanism).
o This broad participation distributes control and reduces the influence
of any single entity.

Decentralized Governance

o Many blockchain projects implement mechanisms for the community

of stakeholders (e.g., token holders) to propose and vote on changes
to the protocol.
o This distributes decision-making power regarding the network's
evolution.

Consensus Mechanisms

o Algorithms like Proof-of-Work (PoW) and Proof-of-Stake (PoS)

distribute the responsibility of validating transactions across many
participants.
o These mechanisms ensure agreement on the blockchain's state
without relying on a central authority to dictate truth.

b Give the different Platforms for decentralization. L1 7

Various platforms and technologies contribute to a more distributed and less
centrally controlled digital landscape.
Here are some key categories and examples:

Decentralized Infrastructure Platforms

o Blockchain Platforms: These are the foundational layer for many

decentralized applications (dApps).
o Examples include Ethereum, Cardano, Solana, and Polkadot.
They provide the underlying network and tools for building
decentralized services.

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o Each platform has different architectures and focuses, but they all aim
to distribute transaction processing and data storage.
o Decentralized Storage: Platforms like IPFS (InterPlanetary File
System) and Filecoin aim to replace centralized cloud storage with a
peer-to-peer network where data is distributed across many nodes.
This enhances censorship resistance and data availability.

Decentralized Finance (DeFi) Platforms

o DeFi platforms leverage blockchain technology to offer financial

services without traditional intermediaries.
o Examples include Uniswap (decentralized exchange), Aave (lending
and borrowing), and MakerDAO (decentralized stablecoin).
o These platforms use smart contracts to automate financial functions
and allow users to interact directly with each other.

Decentralized Social Media and Content Platforms

o These platforms aim to give users more control over their data and
content, resisting censorship from central authorities.
o Examples include Mastodon (microblogging), Peepeth (Ethereum-
based social network), and LBRY/Odysee (content sharing).
o They often use blockchain or federated systems to distribute content
and user data.

Decentralized Autonomous Organizations (DAOs)

o DAOs are online organizations governed by rules encoded in smart

contracts and controlled by their members (often through token
ownership).
o Platforms like Aragon and DAOstack provide tools and frameworks
for creating and managing DAOs, distributing decision-making power
within a community.

Decentralized Identity Platforms

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o Projects focused on self-sovereign identity aim to give individuals
control over their digital identities without relying on centralized
identity providers. While still evolving, platforms exploring this include
solutions built on various blockchains.

c Explain full ecosystem decentralization of blockchain with a neat L2 8

diagram.
Achieving full ecosystem decentralization in blockchain goes beyond just the
decentralized ledger itself.
It involves decentralizing the surrounding infrastructure, governance, and
applications to create a truly resilient, transparent, and censorship-resistant
system.
Here's a breakdown with a conceptual diagram:

Explanation of the Full Ecosystem:

Decentralized Blockchain Network

o Distributed Ledger: Data is spread across numerous nodes,

ensuring no single point of failure and enhancing security.
o Decentralized Consensus: Mechanisms like Proof-of-Work (PoW)
or Proof-of-Stake (PoS) distribute the power to validate transactions
and secure the network among many participants.
o Open Participation: Public blockchains allow anyone to run a node,
further decentralizing control and access.

Decentralized Infrastructure :True decentralization extends to the

underlying infrastructure that supports the blockchain:

o Decentralized Internet: Projects aiming for a more distributed

internet infrastructure (though still nascent) would reduce reliance on
centralized servers and ISPs.

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o Decentralized Hardware: Efforts towards open-source and
community-owned hardware could further minimize centralized
control over the physical infrastructure.

Decentralized Governance: How the blockchain evolves should also be

decentralized:

o On-Chain Governance: Rules for proposing and voting on protocol

changes are directly encoded in the blockchain.
o Decentralized Autonomous Organizations (DAOs): Communities
manage and govern projects through smart contracts and token-
based voting, distributing decision-making power.

Decentralized Applications (dApps) : The applications built on top of the

blockchain should also embrace decentralization:

o Decentralized Finance (DeFi): Financial services built without

traditional intermediaries.
o Decentralized Social Media: Platforms where users control their
data and content.
o Decentralized Marketplaces: Platforms for peer-to-peer exchange
without central authorities.

Supporting Decentralized Services : Various other decentralized services

contribute to the overall ecosystem:

o Decentralized Identity: Self-sovereign identity solutions give users

control over their digital identities.
o Decentralized Storage: Platforms for distributed file storage
enhance censorship resistance and data availability.
o Decentralized Computation: Distributed computing power for
running tasks without centralized servers.
o Interoperability Protocols: Solutions that allow different
blockchains to communicate and exchange value, fostering a more
interconnected decentralized web.

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OR
Q.04 a Explain Asymmetric cryptography with suitable diagrams. L2 10

Asymmetric cryptography, also known as public-key cryptography, is a

system that uses two distinct but mathematically related keys: a public key
for encryption and verification, and a private key for decryption and signing.

Feature: The crucial aspect is that it is computationally infeasible to derive

the private key from the public key.

Cryptography with Suitable Diagrams

(a) Encryption Process Explanation:

• To send a secret message to Bob, Alice first obtains Bob's public key.
• Alice then uses Bob's public key to encrypt her message.

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• This encrypted message can only be decrypted by Bob using his
corresponding private key.

Diagram 1: Encryption

(b) Digital Signature Process Explanation:

• To create a digital signature, Bob uses his private key to generate a

unique hash (a digital fingerprint) of his message and then encrypts
this hash with his private key.
• Anyone with Bob's public key can then decrypt the signature and
compare the resulting hash with a newly generated hash of the
received message.
• If the hashes match, it verifies Bob as the sender and confirms the
message's integrity.

Diagram 2: Digital Signature

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b Explain Elliptic Curve Digital signature algorithm (ECDSA) with a L3 10

practical example.
Elliptic Curve Digital Signature Algorithm (ECDSA)

ECDSA is a public key cryptographic algorithm used for digital signatures.

It is based on the mathematics of elliptic curves over finite fields and is

widely used in blockchain (e.g., Bitcoin, Ethereum), secure communications
(TLS), and more.

Some Key Components:

1. Elliptic Curve Parameters:

o P: A large prime (field size)
o G: Generator point on the curve
o n: Order of the generator point
o d: Private key (random number)
o Q = dG: Public key (point on the curve)

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2. Hash Function: A cryptographic hash (e.g., SHA-256) is used to
create a message digest.

Steps in ECDSA:
Key Generation:

• Choose a private key d (random number between 1 and n–1)

• Compute public key: Q = dG

Signature Generation:

Given message m:

• Hash the message: e = HASH(m)

• Choose random number k (1 < k < n)
• Compute point (x1, y1) = kG, set r = x1 mod n
• Compute s = k⁻¹(e + dr) mod n
• Signature is the pair (r, s)

Signature Verification:

To verify (r, s):

• Check if r and s are in the correct range (1 to n–1)

• Compute e = HASH(m)
• Compute w = s⁻¹ mod n
• Compute u1 = ew mod n and u2 = rw mod n
• Compute point (x1, y1) = u1G + u2Q
• Signature is valid if r ≡ x1 mod n

Practical Example:

Suppose Alice wants to sign a message:

Key Generation:

• Choose private key d = 7

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• Calculate public key Q = 7G (assume G is known)

Signature:

• Message: “VTU Exam”

• Hash the message: e = HASH(“VTU Exam”) → assume e = 45
• Choose k = 3, compute r = x1 mod n from 3G
• Compute s = 3⁻¹(45 + 7r) mod n

Verification:

• Use Alice's public key Q

• Recalculate values and confirm if r ≡ x1 mod n

Advantages of ECDSA:

• Smaller key size provides the same security as larger RSA keys.
• Faster computations in key generation and signing.
• Efficient for mobile and IoT devices with limited resources.
• Widely used in blockchain (e.g., Bitcoin, Ethereum).

Disadvantages of ECDSA:

• Complex to implement due to advanced math.

• Security depends heavily on a good random number (k).
• Slower verification compared to RSA.
• Vulnerable to side-channel attacks if not properly protected.

Module-3
Q. a Define Bitcoin. Explain the generation of public key and private key L2 10
05 in detail.

Bitcoin is a decentralized digital currency, created in 2009 by an anonymous

person or group known as Satoshi Nakamoto.

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It operates without a central bank or single administrator, using a peer-to-
peer network to facilitate secure and transparent transactions recorded on a
public ledger called the blockchain.

Generation of Private Key

Random Number Generation:

• The foundation of a Bitcoin private key is a cryptographically secure

random number.
• This number must be within a specific range (between 1 and just
under 2&lt;sup>256&lt;/sup>).
• The randomness is crucial for security; a predictable private key would
allow anyone to access the associated Bitcoin.

Entropy Source:

Bitcoin software relies on the operating system's random number generator,

which ideally uses various sources of entropy (randomness) from the
computer's environment (e.g., mouse movements, keyboard input, system
noise) to create a truly unpredictable seed.

Hashing (Often Implicit):

The generated random bits are often fed into a cryptographic hash function
(like SHA-256) to ensure the output is a 256-bit number within the valid
private key range.

Private Key Format:

• The 256-bit private key is typically represented in hexadecimal format

(64 characters).
• It can also be encoded in other formats like Wallet Import Format
(WIF) for easier handling by wallets.

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Generation of Public Key

Elliptic Curve Cryptography (ECC):

• Bitcoin uses a specific type of ECC called secp256k1.

• This involves mathematical operations on an elliptic curve defined by a
specific equation and parameters.

Generator Point (G):

• The secp256k1 curve has a predefined "generator point" (G), which is

a fixed point on the curve.

Scalar Multiplication:

• To generate the public key, the private key (a number) is multiplied by

the generator point (G) using elliptic curve point multiplication.
• This operation involves complex mathematical steps but essentially
involves repeatedly "adding" the generator point to itself a number of
times equal to the private key, following the rules of elliptic curve
arithmetic.

Public Key Format:

• The result of this multiplication is another point on the elliptic curve,

which constitutes the public key.
• This public key is a pair of coordinates (x, y) and is often represented
in a compressed format (starting with '02' or '03' indicating the parity
of the y-coordinate, followed by the x-coordinate) or an uncompressed
format (starting with '04' followed by both the x and y coordinates).

b What is a Transaction? Explain the structure and life cycle of the

transactions.

• In the context of blockchain, a transaction represents a transfer of

value or data between participants on the network. L2 10

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• This could involve the movement of cryptocurrency, the execution of a
smart contract, or the recording of any other type of digital asset or
information, depending on the specific blockchain's capabilities.
• Transactions are the fundamental building blocks that cause changes
in the state of the blockchain's distributed ledger.

Structure of a Transaction

The exact structure of a transaction can vary between different blockchain

platforms, but generally includes the following key components:

Inputs:

• These specify the source of the assets or data being transferred. In

cryptocurrency transactions, inputs typically reference previous,
unspent transaction outputs (UTXOs) from the sender's address.
• For other types of transactions, inputs might identify the current state
or data being acted upon.

Outputs:

• These define the destination of the assets or data being transferred. In

cryptocurrency transactions, outputs specify the recipient's address
and the amount of cryptocurrency being sent.
• For smart contract interactions, outputs might trigger functions or
modify the contract's storage.

Amount/Data:

This field specifies the quantity of the digital asset being transferred or the
data being recorded or exchanged.

Sender's Signature:

• To ensure authenticity and prevent unauthorized transactions, the

sender cryptographically signs the transaction using their private key.

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• This signature proves that the transaction originated from the owner
of the corresponding public key.

Recipient's Address (Optional but common):

This specifies the destination address for the transfer of value or data.

Transaction Fee (Optional but common):

In many blockchains, a fee is included with the transaction to incentivize

miners or validators to include it in a block.

Nonce (Number Used Once):

A unique number used to prevent replay attacks, ensuring that the same
transaction cannot be broadcast multiple times.

Timestamp (Often at the block level):

While individual transactions might not always have a precise timestamp, the
block containing the transaction will have a timestamp, indicating the
approximate time of the transaction's confirmation.

Life Cycle of a Transaction

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A blockchain transaction goes through several stages from its creation to its
final confirmation on the distributed ledger:

1. Initiation: A user creates a transaction using their wallet or

application, specifying the details of the transfer or action they want to
perform.
2. Signing: The user's wallet signs the transaction with their private key,
creating a digital signature that proves their ownership and intent.
3. Broadcasting: The signed transaction is broadcast to the peer-to-
peer network of nodes that participate in the blockchain.
4. Validation: Nodes on the network receive the transaction and verify
its validity. This involves checking the sender's signature, ensuring
they have sufficient funds (for cryptocurrency transactions), and
confirming that the transaction adheres to the blockchain's rules.
5. Mempool (Transaction Pool): Valid transactions are stored in a
temporary holding area called the mempool (memory pool) or
transaction pool, where they await inclusion in a new block.
6. Block Creation (Mining/Validation): Miners (in Proof-of-Work
systems) or validators (in Proof-of-Stake systems) select pending
transactions from the mempool and bundle them into a new block.
They then perform the necessary work (e.g., solving a cryptographic
puzzle in PoW) or stake their assets (in PoS) to propose the new block
to the network.
7. Consensus: The network nodes follow a consensus mechanism to
agree on the validity of the new block and its addition to the existing
blockchain.
8. Block Addition: Once consensus is reached, the new block
containing the transaction is added to the blockchain, making the
transaction a permanent and immutable part of the ledger.
9. Confirmation: As more blocks are added to the chain after the block
containing the transaction, the transaction receives more
"confirmations." A higher number of confirmations increases the

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security and finality of the transaction, making it increasingly difficult
to reverse.
10. Settlement: The transaction is considered settled once it has
received a sufficient number of confirmations, and the transfer of
value or data is considered complete and irreversible on the
blockchain.

OR
Q. a Explain a simplified model of an oracle interacting with smart L2 10
06 contract on blockchain.
• Imagine a smart contract on a blockchain as a digital, automated
agreement.
• This contract can do many things, but it lives entirely within the
blockchain's digital world and can't directly see or know what's
happening in the real world outside the blockchain.
• This is where an oracle comes in. Think of an oracle as a reliable
messenger or data provider that bridges this gap.
• It goes out into the real world, gets specific information, and then
brings that information onto the blockchain so the smart contract can
use it.

The Smart Contract Needs Real-World Info

A smart contract is often designed to do something based on real-world

events or data. For example:

• A betting contract needs to know the result of a sports match.

• A crop insurance contract needs to know if there was a drought in
a specific area.
• A stablecoin contract might need the current price of a fiat currency
like the US dollar.

The smart contract itself has no built-in way to find out this information.

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The Smart Contract Asks the Oracle

• When the smart contract reaches a point where it needs this real-
world information, it sends out a request.
• This request is like saying, "Hey Oracle, please tell me the result of the
Lakers vs. Celtics game!" This request is recorded on the blockchain
for oracles to see.

The Oracle Gets the Information

• An oracle (which could be a company, a piece of software, or even a

community of people) sees the smart contract's request.
• It then goes out and gathers the requested information from the real
world. For the sports result, it might check a reliable sports news
website.
• For the weather, it might consult a weather API.

The Oracle Reports the Information to the Smart Contract

• Once the oracle has the information, it needs to get it onto the
blockchain so the smart contract can use it.
• The oracle does this by sending a special "report" transaction to the
blockchain.
• This report contains the answer to the smart contract's question (e.g.,
"Lakers won 105-100").

The Smart Contract Uses the Information

• The smart contract can now read the information that the oracle has
put onto the blockchain.
• Based on this information, the smart contract can automatically
execute its rules. In the betting example, it would pay out the winners
based on the game result provided by the oracle.

b Briefly discuss about smart contracts on a blockchain. L2 7

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• Smart contracts are self-executing agreements written in code and
stored on a blockchain.
• Their terms are directly embedded into the code, making them
transparent and immutable.
• Once deployed, they automatically execute predefined actions when
specific conditions are met, without the need for intermediaries.

Here's a breakdown of their key aspects:

Code as Law:

The terms of the agreement are defined in the code itself, making them clear
and unambiguous.

Self-Executing:

Once the conditions written in the code are satisfied, the contract
automatically executes the agreed-upon actions.

Decentralized:

Being stored on a blockchain, smart contracts are distributed across many

nodes, making them resistant to censorship and single points of failure.

Immutable:

Once deployed, the code of a smart contract cannot be easily changed,

ensuring the agreement remains as intended.

Transparent:

The code and transaction history of a smart contract are typically visible on
the public blockchain, fostering trust.

Trustless Interactions:

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Smart contracts enable parties to transact with each other without needing to
fully trust each other, as the contract's code enforces the terms.

Applications:

They have a wide range of applications, including decentralized finance

(DeFi), supply chain management, voting systems, digital identity, and more.

c What is DAO? Discuss. L2 7

A Decentralized Autonomous Organization (DAO) is an organization whose

rules and governance are encoded on a blockchain as transparent and
immutable smart contracts.

Instead of relying on a traditional hierarchical structure with a central

authority like a CEO or board of directors, decision-making power is
distributed among the DAO's members, who typically hold governance
tokens.

These tokens grant voting rights, allowing members to collectively determine

the organization's direction through proposals and voting mechanisms.

Discussion:

Decentralization:

A core tenet of DAOs is the distribution of control. No single entity has

ultimate authority; instead, it's spread across the community of token
holders. This aims to prevent censorship and single points of failure.

Autonomy:

• The rules governing the DAO's operations, including how funds are
managed and decisions are made, are embedded in smart contracts.

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• These contracts automatically execute when predefined conditions are
met, reducing the need for human intervention in routine processes.

Transparency:

• All transactions, proposals, and voting records within a DAO are

typically publicly viewable on the blockchain.
• This radical transparency fosters trust and accountability among
members.

Community-Driven Governance:

• DAOs empower their communities to shape their future.

• Members can propose changes, and those holding governance tokens
can vote on these proposals, often proportionally to their stake.
• This can lead to more democratic and inclusive decision-making.

Some Key Components: DAOs rely on smart contracts to define their rules
and execute actions, governance tokens to distribute voting power, and often
a treasury managed by the community through voting.

However, DAOs also face several challenges:

Security Vulnerabilities:

Smart contract code, while intended to be secure, can contain bugs or be

exploited, leading to significant financial losses, as seen in early DAO hacks.

Governance Issues:

• Achieving effective and efficient governance in a decentralized setting

can be difficult.
• Low voter turnout, the concentration of voting power in the hands of a
few large token holders ("whales"), and slow decision-making
processes can hinder a DAO's progress.

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Legal and Regulatory Uncertainty:

The legal status of DAOs remains unclear in many jurisdictions, creating

potential risks and complexities for their operations and the liability of their
members.

Coordination and Communication:

Effectively coordinating actions and ensuring clear communication among a

potentially large and distributed community can be challenging.

Module-4
Q. a Explain the Ethereum Stack with a suitable diagram.
07
The Ethereum stack can be visualized as a series of interconnected layers
that enable the functionality of the Ethereum blockchain and its applications.
Here's a simplified breakdown:

User/dApp Layer (Top):

• This is where users interact with the Ethereum network through

Decentralized Applications (dApps) and wallets.
• They initiate transactions to transfer Ether or interact with smart
L2 7
contracts.

Ethereum Client Layer:

This layer consists of software implementations (like Geth, Nethermind, etc.)

that allow nodes to connect to the Ethereum network.

The client is responsible for:

o Networking: Communicating with other Ethereum nodes to

share transaction and block data.

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o Transaction Pool (Mempool): Holding pending transactions
before they are included in a block.
o State Management: Maintaining the current state of the
Ethereum blockchain (account balances, smart contract code
and storage).
o EVM Execution: Running the bytecode of smart contracts.
o Consensus Participation: Participating in the chosen
consensus mechanism (currently Proof-of-Stake).

Ethereum Virtual Machine (EVM):

This is the core execution environment for smart contracts on Ethereum. It's
a sandboxed, Turing-complete virtual machine that executes bytecode.

The EVM reads from and writes to the World State.

World State:

This is a massive key-value store that holds the entire state of the Ethereum
network.

It includes:

o Account Balances: The Ether held by each account.

o Smart Contract Code: The compiled bytecode of deployed
smart contracts.
o Storage: Persistent data storage for each smart contract.
o Non-fungible Tokens (NFTs) and other assets: Tracked
through smart contract state.

Networking Layer:

This layer defines how Ethereum nodes discover and communicate with each
other to propagate transactions and blocks across the decentralized peer-to-
peer network.

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Consensus Layer:

• This layer is responsible for ensuring that all nodes on the network
agree on the validity of new transactions and the state of the
blockchain.
• Currently, Ethereum uses Proof-of-Stake (PoS), where validators stake
their Ether to participate in block production and attestation.
• Previously, it used Proof-of-Work (PoW).

b What is Ethereum Blockchain? Discuss with a state transition L1 7

diagram.

The Ethereum blockchain is a decentralized, open-source platform that

functions as a programmable global computer.

Its primary purpose, beyond being a digital currency ledger, is to provide an

infrastructure for smart contracts and decentralized applications (dApps).

The Ethereum Virtual Machine (EVM) is the core of this functionality,

executing the code of smart contracts and enabling complex, automated
agreements to be enforced on the blockchain.

State Transition Diagram Steps

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Here are the simplified steps of Ethereum's state transition as a transaction is

processed:

1. Transaction Submission: A user or smart contract initiates a

transaction.
2. Validation: Network nodes verify the transaction's validity (signature,
sufficient gas, etc.).
3. EVM Execution: Valid transactions are executed by the Ethereum
Virtual Machine, potentially altering the World State (account
balances, contract storage).
4. State Update (Potential): If the transaction executes successfully, a
new state is computed. If it fails (e.g., out of gas), the state may
revert.
5. Block Inclusion: Valid transactions and their resulting state changes
are grouped into a new block.
6. Consensus: The network (using Proof-of-Stake) agrees on the validity
of the new block.
7. State Persistence: Once the block is accepted, the new state is
permanently recorded on the blockchain.

c Give the different types of Transactions in Ethereum and also L2 10

explain the fields included in these transactions.
Different Types of Transactions in Ethereum

Broadly speaking, there are three main types of transactions on the Ethereum
blockchain:

Value Transfers:

• These are simple transactions where Ether (ETH) is sent from one
Externally Owned Account (EOA) to another EOA.

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• They primarily involve updating the balance of the sender and receiver
accounts.

Smart Contract Creation:

• A special type of transaction initiated by an EOA to deploy a new smart

contract to the Ethereum blockchain.
• This transaction creates a new contract account, stores the contract's
bytecode on the blockchain, and assigns it a unique address.

Smart Contract Interaction (Message Calls):

• Transactions initiated by an EOA to interact with an already deployed

smart contract account.
• These transactions can trigger the execution of specific functions
within the smart contract, potentially updating the contract's storage
or triggering further value transfers or events.

Fields Included in Ethereum Transactions

All Ethereum transactions, regardless of their type, share a common set of

fields:

nonce:

• A scalar value representing the number of transactions sent by the

sender prior to this one.
• It's used to prevent replay attacks and ensures the correct order of
transactions from a specific account.

gasPrice:

• The price per unit of gas (in Wei) that the sender is willing to pay for
the transaction to be executed.
• Higher gas prices incentivize miners/validators to include the
transaction in a block sooner during network congestion.

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gasLimit:

• The maximum amount of gas units that the sender is willing to

consume for the transaction.
• This limit prevents runaway computations, especially during smart
contract execution. The sender pays for the actual gas consumed, up
to this limit.

to:

• The address of the recipient. For value transfer transactions, this is the
EOA receiving the Ether.
• For smart contract creation transactions, this field is typically empty or
set to the zero address.
• For smart contract interaction, this is the address of the target smart
contract.

value:

• The amount of Ether (in Wei) to be transferred from the sender to the
recipient.
• This field is zero for most smart contract interaction transactions that
don't involve a direct Ether transfer.

data (or input):

• An optional field containing arbitrary data. For simple Ether transfers,

this field is usually empty.
• For smart contract creation, this field contains the compiled bytecode
of the smart contract.
• For smart contract interaction, this field contains the function selector
and encoded arguments of the function to be called.

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v, r, s:

• These three fields constitute the digital signature of the sender,

generated using their private key.
• They are used to verify the authenticity of the transaction and ensure
that it was indeed signed by the owner of the from address.

Additional Fields Introduced with EIP-1559 (Transaction Type 2):

To improve transaction fee predictability and network congestion

management, EIP-1559 introduced new transaction types with the following
additional fields:

maxPriorityFeePerGas:

The maximum fee (in Wei per gas) the sender is willing to pay directly to the
miner/validator as a tip to incentivize them to include the transaction.

maxFeePerGas:

The maximum total fee (in Wei per gas) the sender is willing to pay for the
transaction, including the baseFeePerGas (determined by the network based
on congestion) and the maxPriorityFeePerGas.

The actual fee paid will be baseFeePerGas + min(maxPriorityFeePerGas,

effectivePriorityFeePerGas).

OR
Q. a Briefly discuss about the operation of Ethereum Virtual Machine
L2 10
08 (EVM) with the help of a neat diagram.

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The Ethereum Virtual Machine (EVM) is the runtime environment for smart
contracts on the Ethereum blockchain.

It's a decentralized computation engine that executes smart contract code.

The EVM enables developers to build and deploy decentralized applications
(dApps).

Some Key Components:

• World State: Represents the entire Ethereum network, including all

accounts and their storage.
• Accounts: Entities that interact with the Ethereum network.
• Storage: A key-value store associated with each contract account,
containing the contract's data.
• Gas: A mechanism for measuring the cost of executing operations,
protecting the network from spam.
• Opcodes: Low-level instructions that the EVM executes.
• Execution Stack: A data structure for temporarily storing values
during opcode execution.
• Memory: Runtime memory used by smart contracts during
execution.
• Program Counter: Keeps track of the next opcode to be executed.
• Logs: Events emitted by smart contracts.

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Operation:

1. Smart contracts are written in high-level languages like Solidity and

then compiled into bytecode.
2. When a transaction involving a smart contract is submitted, the EVM
verifies its validity.
3. If valid, the EVM establishes an execution context and processes the
contract's bytecode using opcodes.
4. The EVM modifies the blockchain's world state and consumes gas
accordingly.
5. The EVM uses a stack-based architecture to execute instructions.

b What are Contract creation transaction and Message call

transaction? Explain with a suitable diagram.
Contract Creation Transaction

A contract creation transaction is a special type of transaction on the

Ethereum blockchain initiated by an Externally Owned Account (EOA) with
the purpose of deploying a new smart contract.

When an EOA wants to make a smart contract's code and data accessible and
executable on the blockchain, they send a contract creation transaction.

L2 10
Characteristics:

to field is empty (or the zero address):

This signifies that the transaction is not directed towards an existing account
but rather intends to create a new one (the contract account).

data field contains the compiled bytecode:

The data field of the transaction holds the compiled bytecode of the smart
contract written in a high-level language like Solidity.

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Creation of a new contract account:

Upon successful execution, this transaction results in the creation of a new

account on the Ethereum blockchain specifically for the smart contract.

This new account has a unique address and associated storage.

Initial state setup:

The constructor function (if any) within the smart contract's bytecode is
executed during the contract creation process, which can set up the initial
state of the contract's storage.

Gas consumption:

Deploying a smart contract requires a significant amount of gas to cover the

computational cost of storing the bytecode on the blockchain and executing
the constructor.

Message Call Transaction

A message call transaction (often simply called a "transaction" when

interacting with a smart contract) is initiated by an EOA to interact with an
already deployed smart contract.

It triggers the execution of a specific function within that smart contract.

Characteristics:

to field contains the address of the target smart contract:

This field specifies the address of the smart contract that the EOA wants to
interact with.

data field contains the function selector and encoded arguments:

The data field contains information that tells the EVM which function within

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the target smart contract to execute and the specific parameters to pass to
that function.

This data is typically encoded using the Application Binary Interface (ABI) of
the smart contract.

Execution of smart contract logic:

When this transaction is processed, the EVM executes the specified function
within the target smart contract, potentially reading from and writing to the
contract's storage, performing calculations, emitting events, or even
triggering further value transfers or message calls to other contracts.

Gas consumption:

Executing functions within a smart contract consumes gas based on the

complexity of the operations performed.

State changes:

Message calls can lead to changes in the state of the smart contract's storage
and potentially trigger state changes in other accounts or contracts.

Suitable Diagram:

While a single diagram can be used to illustrate both, let's represent them
conceptually:

Contract Creation Transaction:

Message Call Transaction:

Module-5
Q. a Give the architecture of Hyperledger as a protocol and explain.
L2 10
09

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Hyperledger, as an umbrella project hosted by the Linux Foundation, isn't a

single blockchain protocol but rather a collection of open-source blockchain
frameworks and related tools.

Its architectural philosophy emphasizes modularity, interoperability, security,

and a permissioned nature suitable for enterprise-grade solutions.

Instead of a monolithic protocol, Hyperledger provides a framework for

building protocols tailored to specific business needs.

Here's a architectural concepts that define Hyperledger as a protocol-building

framework:

Modular Architecture:

• This is a core principle. Hyperledger projects are designed with

pluggable and interchangeable components.
• This allows developers to select and customize specific modules for
consensus, identity management, smart contracts, and data storage,
rather than being locked into a predefined protocol.
• This modularity enables the creation of diverse blockchain solutions
optimized for various use cases.

Permissioned Networks:

• Unlike public, permissionless blockchains (like Ethereum or Bitcoin),

Hyperledger focuses on permissioned networks where participants are
known and authenticated.
• This control over network access is crucial for enterprise environments
where privacy and regulatory compliance are paramount. The
architecture incorporates robust Identity Management Services (e.g.,
using Membership Service Providers - MSPs in Hyperledger Fabric) to
manage and authenticate participants.

Pluggable Consensus Mechanisms:

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• Hyperledger doesn't mandate a single consensus algorithm. Its
architecture allows for the implementation and swapping of different
consensus protocols (e.g., Raft, PBFT, Solo).
• This flexibility enables businesses to choose a consensus mechanism
that aligns with their trust model, performance requirements, and fault
tolerance needs.

Smart Contract Layer Abstraction:

• Hyperledger provides frameworks (like Chaincode in Hyperledger Fabric)

for developing and executing smart contracts.
• These frameworks abstract away the underlying blockchain
complexities, allowing developers to focus on business logic.
• The architecture often separates the endorsement (execution and
validation) of smart contracts from the ordering and committing of
transactions, enhancing performance and scalability.

Data Store Abstraction:

• The architecture allows for the use of different underlying data stores
for the ledger's state (e.g., LevelDB, CouchDB).
• This flexibility enables optimization based on the specific data handling
requirements of the application.

Communication Layer:

• Hyperledger frameworks define protocols for secure and reliable peer-

to-peer communication between nodes in the network.
• This layer ensures that transaction proposals, endorsements, and
committed blocks are efficiently propagated across the network.

Policy Services:

• Hyperledger architectures incorporate mechanisms for defining and

enforcing various policies, such as endorsement policies (which specify

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how many and which organizations need to approve a transaction) and
access control policies.
• This ensures that the network operates according to the agreed-upon
rules.

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b Discuss about the organization and categories of Hyperledger fabric L2 10
architecture.

The Hyperledger Fabric architecture is organized into several key components

that work together to provide a secure, scalable, and permissioned distributed
ledger.

These components can be broadly categorized by their function within the

network.

Organization

• Peers: The fundamental nodes that maintain the ledger and execute
chaincode (smart contracts).
o Endorsing Peers: Execute chaincode and endorse transaction
proposals.
o Committing Peers: Validate endorsed transactions and commit
blocks to the ledger.
o Anchor Peers: Facilitate cross-organizational communication.
• Orderer: The service that orders transactions into blocks, forming the
basis of the consensus. Supports pluggable consensus mechanisms
(e.g., Raft, Kafka).
• Clients: Applications or users that interact with the network by
submitting transactions and querying the ledger.
• Ledger: The distributed, immutable record of transactions, consisting
of the Blockchain (transaction log) and the World State (current asset
values).
• Chaincode: Smart contracts that define the business logic of the
network, executed by peers.
• Membership Service Provider (MSP): Manages identities,
permissions, and organizational affiliations within the network.
• Certificate Authority (CA): Issues digital certificates for network
participants.

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• Channels: Private subnetworks for data isolation and confidential
transactions between specific participants.

Categories

• Identity and Membership Services: (MSP, CA) - Responsible for

managing authorized participants within the permissioned network.
• Transaction Processing: (Clients, Endorsing Peers, Orderer,
Committing Peers) - Encompasses the entire lifecycle of a transaction
from proposal to commitment on the ledger.
• Data and Ledger Management: (Peers, Ledger) - Focuses on the
storage, maintenance, and retrieval of the blockchain and the current
state of assets.
• Smart Contract Execution: (Peers running Chaincode) - Involves the
deployment and execution of business logic defined in chaincode.
• Network and Communication: (All Components, Channels) - Defines
how components interact and how data is shared and isolated within
the network.

Architecture Block Diagram:

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OR
Q. a Define Sawtooth lake. Explain the novel concepts of Sawtooth lake.
10
• While "Sawtooth Lake" might evoke images of a picturesque body of
water, in the context of blockchain, Hyperledger Sawtooth (often
referred to simply as Sawtooth) is an open-source, modular blockchain
framework developed by the Hyperledger project.
• It's designed for building, deploying, and running distributed ledgers for
enterprise use cases.
• Sawtooth emphasizes modularity and the separation of core system
functionalities from application logic (transaction families).
• It aims to make blockchain technology more accessible and adaptable
to diverse industry needs.

Novel Concepts of Sawtooth Lake

Hyperledger Sawtooth introduces several novel concepts that distinguish it

from other blockchain frameworks:
L2 10
1.Proof of Elapsed Time (PoET) Consensus Algorithm:

This is arguably Sawtooth's most innovative feature. PoET is a leader election

consensus algorithm that aims for fairness and efficiency without the high
energy consumption associated with Proof-of-Work (PoW).

How it works:

• PoET leverages Trusted Execution Environments (TEEs), such as Intel's

Software Guard Extensions (SGX), to ensure a fair lottery process. Each
participating node requests a wait timer from the TEE.
• The node with the shortest wait timer for a given round is elected as
the leader and proposes the next block.

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Novelty:

• Unlike PoW, which requires significant computational resources to solve

cryptographic puzzles, PoET relies on a trusted, verifiable source of
randomness (the TEE) to select leaders based on the time they've
waited.
• This makes it more energy-efficient and potentially more scalable for
large, permissioned networks.

Fairness: The use of a trusted hardware enclave helps ensure that no single
participant can unduly influence the leader election process.

2.Transaction Families:

Sawtooth introduces the concept of Transaction Families to modularize the

business logic of the blockchain.

How it works:

• A transaction family defines the data model, transaction format, and the
rules for validating and processing transactions for a specific application
or asset type.
• Different applications on the same Sawtooth network can utilize
different transaction families.

Novelty:

• This approach cleanly separates the core blockchain functionalities (like

consensus, networking, and state management) from the specific
business rules.
• Developers can create custom transaction families tailored to their
needs without having to modify the underlying blockchain engine.
• This enhances flexibility, maintainability, and allows for the co-existence
of diverse applications on a single ledger.

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Example:

Sawtooth provides built-in transaction families like "IntegerKey" for basic key-
value storage and "Marketplace" for managing digital assets.

Developers could create families for supply chain tracking, healthcare records,
or any other domain-specific application.

3.Pluggable Consensus:

• While PoET is a key innovation, Sawtooth's architecture is designed to

be consensus-agnostic.
• It allows for the implementation and plugging in of other consensus
algorithms besides PoET.
• This provides flexibility for different deployment scenarios and trust
models.

4.Simplified Development:

• By abstracting the core blockchain complexities and providing a clear

framework for defining transaction families, Sawtooth aims to simplify
the development of distributed ledger applications.
• Developers can focus on their specific business logic rather than the
intricacies of blockchain infrastructure.

b What is Corda. List and explain the components of the Corda.

• Corda is an open-source, permissioned Distributed Ledger Technology
(DLT) platform designed specifically for businesses.
• Developed by R3, it enables direct, private, and legally binding
transactions between parties, reducing friction and costs in business L2 10
operations.
• Unlike traditional blockchains, Corda ensures data is shared only with
the involved parties, prioritizing privacy and security for regulated
industries.

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Components of Corda

Nodes:

• Represent individual participants in the Corda network.

• Each node has a unique identity (legal name and cryptographic keys).
• They host CorDapps and Corda services.
• Maintain a local database called a Vault.
• Communicate directly with other nodes in a peer-to-peer manner.
• Use secure communication protocols.

CorDapps (Corda Distributed Applications):

• Distributed applications that run on the Corda platform.

• Contain the business logic and shared rules for ledger updates.
• Composed of States representing shared facts or agreements.
• Include Contracts defining the rules for state transitions and their
validity.
• Automate agreement processes through Flows (sequences of steps and
interactions).
• Can also include Services for long-lived utilities within a node.

Ledger:

• A distributed record of agreed-upon facts (States).

• Not a single, global chain like some blockchains.
• Exists as a collection of individual Vaults held by each participant.
• A node's Vault contains only the states relevant to that node.
• Agreements between parties result in updates to these shared states.

Vault:

• The local, on-node database for storing relevant ledger states.

• Tracks both consumed (historical) and unconsumed (current) states.
• Provides a specific node's view of its involvement in agreements.

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• Allows nodes to query and manage their relevant ledger data.

Notary Service:

• A trusted third party or a distributed cluster.

• Provides transaction uniqueness and prevents double-spending.
• Timestamps transactions and records their existence.
• Does not necessarily see the content of the transactions.
• The network can have multiple notary services with different consensus
mechanisms.

Network Map Service:

• A directory service for discovering other nodes.

• Maintains a list of all participating nodes and their network addresses.
• Allows nodes to learn about the identities of other participants.
• Facilitates initial connections between nodes.

Flow Framework:

• Provides the infrastructure for building and managing inter-node

interactions.
• Automates the process of reaching agreement on ledger updates.
• Defines the sequence of steps and communication protocols for
transactions.
• Handles signing and verification processes within transactions.

Corda Firewall:

• A security component isolating a node's internal operations.

• Manages inbound and outbound communication securely.
• Typically includes a Bridge (internal zone) and a Float (DMZ).
• Enhances the overall security of the Corda node.

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