Understanding Blockchain Concepts
Asset Tokenizations
Non-Fungible Tokens (NFTs)
Central Bank Digital Currency
Stablecoin
Hyperledger Fabric
Write Smart Contracts
Case Studies
Bank Records Regulators Records Auditors Records Merchant A Records Expensive, Vulnerable & Inefficient Source: Building Blockchain Apps for Node.JS developers with HyperLedger Composer – Simon Stone IBM
Records Insurer Records Bank Records Regulators Records Auditors Records Merchant A Records Blockchain Ledger A shared, replicated, permissioned ledger ✓ Consensus ✓ Immutability ✓ Provenance ✓ Finality Source: Building Blockchain Apps for Node.JS developers with HyperLedger Composer – Simon Stone IBM
Node B Node C Node D Trust Boundary User Access Control Data Validations “In Distributed DB we trust” Node 1 Node 1 Node 1 Node 1 Trust Boundary Org A Org B Org C Org D Org A o Shared Distributed Ledger o Mostly Immutable Data Sets o Medium Performance / Scalable o HyperLedger Fabric, Ethereum, Ripple o Distributed Database centrally managed o Mutable / Immutable Data Sets o High Performance / Scalable o SQL and No-SQL Databases
that is distributed across multiple nodes or servers, allowing data to be stored and accessed from different locations. A decentralized system where all participants maintain a shared and synchronized record of transactions across a network. Structure Data is stored in structured tables and can be edited or updated. Data is stored as a series of transactions (often immutable) in blocks or records. Centralization Typically managed by a central authority or administrator. Decentralized, with no single authority controlling the ledger. Immutability Data can be edited, updated, or deleted by authorized users. Transactions are immutable once recorded (especially in blockchain-based ledgers). Consensus Mechanism No consensus mechanism is required; trust is managed through access control. Requires consensus mechanisms (e.g., Proof of Work, Proof of Stake) to validate transactions. Use of Cryptography Minimal use of cryptography (primarily for securing access). Heavy use of cryptography for transaction validation, integrity, and security. Data Validation Central or distributed authorities manage validation based on business rules. Validation is distributed among participants using pre- defined consensus protocols. Performance High performance for large-scale data processing. Medium performance due to consensus requirements and cryptographic computations. Examples SQL-based systems, MongoDB, Apache Cassandra. Blockchain, Hyperledger Fabric, Ethereum, Ripple. Distributed Database Vs. Distributed Ledger 7
controlling the system like Bank, Govt, Corporate Trust & Transparent Transactions are final and trusted via Consensus protocol Permanent Immutable Safe & Guaranteed storage and transfer of Digital Value Smart Contracts Executable Business Contracts IFTTT –Smart Contracts Guaranteed Execution IFTTT – If This Then That
database shared across the business network. Business logic is embedded within the database and executed to validate and store the transactions. Smart Contract Transactions are secure, authenticated and access controls are enabled for granular access. Privacy Trust All the transactions are verified and endorsed by the trusted relevant parties
replicated across many participants, each of whom collaborate in its maintenance. o Information recorded is append-only. Immutable. o Immutability makes it simple to determine the provenance of the information. o These properties makes it called as “Systems of Proof” 1 - - - - - - - - - - - n
2. Immutable Transactions in Append Only mode inside a Block 3. Maintained by a Peer to Peer Distributed System 4. Secured by Cryptographic Hashing 5. Supported by Smart Contracts to Support Transaction Processing Across Organization.
is Broadcasted to Blockchain Cluster Transactions will be validated by any node in the network using Consensus Algorithms & Smart Contract Multiples Nodes in the Cluster will verify the transaction and after the verification the new block is added to the chain and replicated across all the nodes. Client request completed
Blockchain - Ethereum Private Blockchain – Hyperledger Fabric 1 Blockchain Generic Blockchain Platform Modular Blockchain Platform 2 Network Public & Permissioned Private & Permissioned 3 Consensus Mining based on Proof of Work (POW) – All participants need to agree. Ledger Level Selective Endorsement. Consensus can be even within a channel with select parties instead of everyone. Transaction Level 4 Currency Ether / Tokens (Usage, Work) via Smart Contract None Currency and Tokens via Chaincode 5 Smart Contract Solidity Go Lang, Java, Node JS 6 When to Choose If the transactions are public in nature If the transactions needs privacy, confidentiality and identity 7 Governance Ethereum is developed by developers across the world Enterprise Ethereum Alliance IBM handed over the development and management of Hyperledger to Linux Foundation 8 State Account Data Key-value Database Transaction Log, World State
Bitcoin Provides Identity Anonymity Selective Endorsement Proof of Work Assets Cryptocurrency Bitcoin is a specific implementation of Blockchain technology
method by which one party (the prover) can prove to another party (the verifier) that a given statement is true while the prover avoids conveying any additional information apart from the fact that the statement is indeed true. Source: https://www.geeksforgeeks.org/zero-knowledge-proof/ Karishma randomly takes a path while Vivek waits outside Vivek Chooses an Exit Path Karishma reliably appears at the Exit Vivek decides
blockchain is one that anyone can join and participate in, such as Bitcoin Private blockchain networks A private blockchain network, similar to a public blockchain network, is a decentralized peer-to-peer network. However, one organization governs the network, controlling who is allowed to participate, execute a consensus protocol and maintain the shared ledger. Permissioned blockchain networks Businesses who set up a private blockchain will generally set up a permissioned blockchain network. It is important to note that public blockchain networks can also be permissioned. Consortium blockchains Multiple organizations can share the responsibilities of maintaining a blockchain. These pre-selected organizations determine who may submit transactions or access the data. Source: https://www.ibm.com/topics/what-is-blockchain 17
18 Reconciliation Issues in a Multi Party environment. o Expensive o Vulnerable o Inefficient Problem Statement o Consensus among the Parties before a transaction is committed. o Provenance – Origin of the asset can be easily Tracked. o Immutable – Transactions are tamper proof o Finality – Single Source of Truth Solution
Immutable transaction across parties done at the same time. Remove Cost Overheads on maintaining and synchronizing silos. Increases Trust Through shared process and unified Systems of Record. For end consumers it’s a System of Proof. Reduces Risk Tampering of data, fraud and cyber crime is avoided. 19
@ Media Content Producer / Artist Aggregator Consumer Current Scenario Content Producer / Artist Distributed Ledger Consumer After Introduction of Blockchain Benefits • Direct Customer Artist relationship. • Easy to measure marketing and performance. Challenges • Content Aggregators and Advertising networks to loose their dominant position. • Blockchain has the potential to make DRM systems obsolete or at least to reduce it’s complexity 23
Scenario Music Publisher Distributor Artist User After Introduction of Blockchain Distributed Ledger Distributor Source: Deloitte : Blockchain @ Media Benefits • Near Real-time distribution of Royalty payments based on Smart Contracts • Every usage and consumption is tracked in Blockchain Challenges • Handling large amount of Data • All the parties agreeing to common Blockchain Platform. 24
high value property (real estate, cars, art) it is important to have accurate records which identify the current owner and provide a proof that he is indeed the owner. These records can be used to • Protect owners' rights (e.g. in case of theft) • Resolve disputes • Make sure ownership is correctly transferred to a new owner after sale • Prevent sale fraud Source: https://chromaway.com/papers/A-blockchain-based-property-registry.pdf 25
Seller Property Tax Dept • Buyers and Seller are Cryptographically identified. • Ledger is distributed across all the districts in the state to ensure that forging the record is extremely difficult. Blockchain Ledger A shared, replicated, permissioned ledger 26
has a monetary value. Fungible Assets These are Assets that can be interchangeable with same kind. For Ex Currency, Gold, Financial Instruments like Commodities, Shares etc. Non Fungible Assets They are unique Assets that cant be interchanged. For Ex. Real Estate property, Painting, Diamond etc. 30
buying and selling process by connecting the buyers and sellers. Entry Barrier Removed Easy to invest in Expensive Real Estate. Transparency & Security Blockchains are decentralized, immutable and secured 33
Behave like physical currencies like US Dollar, British Pound, Euros, Indian Rupee. Popular Currency token is Bitcoin. Asset Backed Tokens They are based on real world Assets like Real Estates, Gold, Diamonds etc. Stablecoin is an Asset backed Token. Reward Tokens Reward users based on their behaviour. Governance Tokens Allows users to vote on various subjects. 34
specific purpose and served as a payment option and also used as a Crowd Funding mechanism to buy coins during ICO (Initial Coin Offering). Security Tokens Used to invest in a Company and as these tokens as part of “Securities” trading these tokens will regulated by the Government. Values of these tokens will fluctuate similar to the Stocks. Equity Tokens These tokens represents a share of an Asset. 35
digital version of the Non-Fungible Assets. NFTs are unique cant be interchanged. It started with Digital Art, Music etc. Non-Fungible Assets They are unique Assets that cant be interchanged. For Ex. Real Estate property, Painting, Diamond etc. Americana’s chip turns Physical objects into NFTs Source: https://techcrunch.com/2022/05/03/americana-chip- turns-objects-nfts-funding-ohanian/ 36
and selling process by connecting the buyers and sellers. Entry Barrier Removed Easy to invest in Expensive Real Estate. Transparency & Security Blockchains are decentralized, immutable and secured 37
Fiat Currency is not backed by any physical asset like Gold, Silver, or any other precious metals. o Popular Fiat Currency includes US Dollar, Euro, Pound, Yen, and Indian Rupee. o Almost all the currency issued by the Govt fall under the Fiat Currency. o As it is not backed by any physical good or commodity, the Govt can print any number of currencies. o Fiat currency got introduced after the collapse of the Bretton Woods Agreement in the 1970s. o Bretton Wood Agreement is all about US Dollar backed by Gold (the US had the largest Gold reserve after World War 2) agreed after delegates from 44 countries met in Bretton Wood in New Hampshire in the USA.
Internal Nostro Clearing Account Debits $ Credits £ US Bank US Bank Nostro Account Receivers (Bob) Bank Account Debits £ Credits £ UK Bank Alice New York Bob London 1 2 3 4 SWIFT Tx is an electronic message between banks SWIFT is designed to move messages, not money, between institutions 2-Party SWIFT Transaction SWIFT Message Release • In this example, both banks are part of the SWIFT network SWIFT Message Send Abort Release / Abort Copy $101 £80 • Nostro = “our account” with you • Vostro = “your account” with us Dollar $100 = GBP £80
Internal Nostro Clearing Account Debits $ Credits £ US Bank US Bank Nostro Account UK Bank Nostro Account Debits £ Credits £ Lloyds Bank Alice New York Bob London 1 2 3 4 SWIFT Tx is an electronic message between banks SWIFT is designed to move messages, not money, between institutions 3-Party SWIFT Transaction SWIFT Message Release • In this example, both banks are part of the SWIFT network SWIFT Message Send Abort Release / Abort Copy $101 £80 • Nostro = “our account” with you • Vostro = “your account” with us Dollar $100 = GBP £80 UK Bank Nostro Account Receivers (Bob) Bank Account Debits £ Credits £ UK Bank 5 6 AAAA CC DDDD Bank Code Branch Code Location Code BB Country Code SWIFT / BIC Code or SWIFT ID / ISO 9362 Code BIC = Bank Identifier Code GBP = Great Britain Pound
version of the Central Banks for Govts across the world. Instead of Printing Money, CBDC will issue Digital Tokens that represent Fiat Currency. Source: https://101blockchains.com/central-bank-digital-currency-on-corda/ Types of CBDC Wholesale CBDC Retail CBDC 45
digital payment system across Banks. This exchange happens based on Tokens without intermediaries. The transfer between Banks are atomic in nature. Retail CBDC These are General Purpose CBDC issued to the public as an alternative for Physical Currency. 1. To promote Financial Inclusion 2. Facilitating Monetary Policy 3. Cash alternative 4. Modernize Payments 46
An initiative by the Bank of Canada which explored the use of distributed ledger technology (DLT) for clearing and settling payments securely and efficiently among financial institutions. o Project Ubin (Singapore): Led by the Monetary Authority of Singapore, this project used blockchain and DLT to facilitate interbank payments and improve the efficiency of the securities settlement process. Wholesale CBDC o Digital Yuan (China): Also known as e-CNY, it is one of the most advanced retail CBDC projects currently in pilot stages across various Chinese cities. It's designed to be used by the general public for daily transactions, directly competing with other digital payment platforms like Alipay and WeChat Pay. o Sand Dollar (Bahamas): The Central Bank of The Bahamas launched the Sand Dollar to promote more inclusive access to regulated payments and other financial services for its residents across all the islands, including those areas with less physical banking infrastructure. Retail CBDC
Source: https://www.imf.org/-/media/Files/Publications/FTN063/2022/English/FTNEA2022004.ashx Behind the Scenes of Central Bank Digital Currency 1. Financial Inclusion 2. Access to Payments 3. Making Payments more efficient 4. Ensuring Resilience of Payments 5. Reducing Illicit use of Money 6. Monetary Sovereignty
CBDC 2. Retail CBDC 18 Countries linked via UPI for Cross Border Payments RBI – PPI Prepaid Payment Instrument • Customer Wallet • Direct Transactions Types of PPI • Small PPI • Gift Card • Metro Transit Systems • Full KYC 9 Banks linked to the Wholesale CBDC 1. State Bank of India 2. Bank of Baroda 3. Union Bank of India 4. HDFC Bank 5. ICICI Bank 6. Kotak Mahindra Bank 7. Yes Bank 8. IDFC First Bank 9. HSBC RBI CBDC Concept Note
International Trade 1. International Trade Settlement 2. Programmable Trade Finance 3. Supply Chain Financing 4. Interoperability with Digital Finance Trade Platforms Capital Market Transactions 1. Atomic Settlement of tokenized Corporate Bonds 2. Securitized FX Spot, Futures and Derivatives 3. Wealth Management Connect 4. Digital Native Corporate Bond Issuance 5. Dual Currency FX Derivative Other Use Cases 1. Insurance Payments 2. Commercial Payments 3. Cross Border Low-Value Payments Aggregation Service 4. Cross Border e-Commerce Billion Dollars $730+ Pilot Program successfully conducted between Aug 15 – Sept 23, 2022 FX – Foreign Exchange
Project Ubin: An initiative by the Monetary Authority of Singapore (MAS), Project Ubin explores the use of blockchain technology for the clearing and settlement of payments and securities. It focuses on the development of a tokenized version of the Singapore Dollar (SGD) to enable more efficient cross-border transactions. 2. Project Stella: A joint research project by the European Central Bank (ECB) and the Bank of Japan (BOJ), Project Stella explores the potential of DLT for financial market infrastructures. The project has conducted several phases of research, including the evaluation of DLT for the settlement of securities and cross-border payments. 3. Project Jasper: A collaborative research initiative by the Bank of Canada, Payments Canada, and several Canadian banks, Project Jasper aims to investigate the potential of DLT for the clearing and settlement of high-value interbank payments. 4. Project Khokha: Led by the South African Reserve Bank (SARB), Project Khokha explores the use of DLT for the wholesale interbank payment system in South Africa. It aims to enhance the resilience and efficiency of the payment system while maintaining the necessary privacy and security requirements.
BRICS Bridge mBridge Purpose Unified payment system for consumers and businesses in BRICS nations. Cross-border settlement and depository platform for securities and financial transactions. Multilateral digital settlement and payment platform for BRICS members. Cross-border CBDC payment and settlement system. Key Objective Facilitate cross-border payments in local currencies, reducing reliance on Western networks. Reduce reliance on the U.S. dollar for international settlements within BRICS. Enable local currency trade settlement and investment integration across BRICS countries. Enhance cross-border payment efficiency using Central Bank Digital Currencies (CBDCs). Currency Support Local currencies of BRICS nations (e.g., INR, RMB, RUB). Primarily supports local BRICS currencies; potential for CBDCs. Local BRICS currencies and potential integration of CBDCs. CBDCs of participating central banks (e.g., China, Hong Kong, UAE, Thailand). Technology Used Blockchain, QR code systems, digital wallets, mobile apps. Distributed ledger technology (DLT) and secure messaging systems for cross- border settlement. Distributed ledger systems (likely blockchain-based) for digital settlement. CBDCs and blockchain technology facilitated by the BIS Innovation Hub. Institutions Involved Central banks and national payment systems in BRICS countries. Central banks and financial institutions in BRICS nations. BRICS nations’ central banks and financial institutions. BIS Innovation Hub and central banks of China, Hong Kong, Thailand, and UAE.
BRICS Bridge mBridge Key Benefits • Cost-effective, secure, and fast transactions. • Promotes financial sovereignty. • Streamlined securities settlement. • Reduces currency conversion costs. • Facilitates intra-BRICS trade. • Reduces dependency on Western-dominated systems like SWIFT. • Enhanced speed and cost- efficiency for cross-border CBDC payments. • Eliminates intermediaries in traditional cross-border transactions. Challenges Integration of diverse national payment systems. Establishing trust and interoperability among BRICS nations. Developing standards and governance for multilateral collaboration. Regulatory compliance and coordination between central banks. Status Early-stage development with pilot projects (e.g., Russia's Mir, India's UPI integration). Proposed during the 2024 BRICS Summit; details still emerging. Early-stage discussions with potential alignment to BRICS financial goals. Pilot projects completed; mBridge platform operational with participating countries. Connection to SWIFT Aims to provide an alternative to SWIFT for retail payments. Alternative infrastructure to SWIFT for securities settlement. Alternative settlement system for intra-BRICS transactions. Independent from SWIFT; focuses on CBDC-based payment rails. Distinctive Feature Consumer-facing payment system integrating existing national platforms like UPI and Mir. Focuses on cross-border securities settlement rather than payments. Settlement and payment system tailored for BRICS financial and trade integration. Dedicated to exploring the use of CBDCs for cross-border transactions with BIS backing.
2 Source: Byzantine Generals Problem: Leslie Lamport, Robert Shostak & Marshall Pease 1982 “attack” “attack” He said “retreat” Lieutenant 2 is a traitor Lieutenant 1 Commander Lieutenant 2 “retreat” “attack” He said “retreat” Commander is a traitor Byzantine Generals Problem • By Lamport, Shostak, & Pease in 1982 • Commander defines the correct action • Lieutenant Follows & Relays information
Lieutenant 2 “attack” “attack” He said “retreat” Lieutenant 2 is a traitor Lieutenant 1 Commander Lieutenant 2 “retreat” “attack” He said “retreat” Commander is a traitor • By Miguel Castro & Barbara Liskov in 1999 • Fast • Handles f Byzantine faults in a system with 3f + 1 Node
2 Node 3 Node 4 Request Pre-Prepare Prepare Commit Reply X • By Miguel Castro & Barbara Liskov in 1999 • Fast • Handles f Byzantine faults in a system with 3f + 1 Node 73
take data from a block header as an input & • Continuously run it through a cryptographic hash function. • Validators hash slight variations of the input data by including an arbitrary number called a nonce every time the input data is run through the cryptographic hash function. • PoW needs high levels of electricity of processing power to decide what data gets added to the next block in a blockchain. Source: https://analyticsindiamag.com/blockchain-consensus-algorithms/
was created in 2011 as an alternative to PoW. • Validators stake resources primarily in the form of digital money or tokens. • The validator of every block is then randomly selected from the stakeholders based on the amount of computational power allocated. Source: https://analyticsindiamag.com/blockchain-consensus-algorithms/
delegated Proof-of-Stake (DPoS), which is based on voting systems where “delegates” vote for their favorite validators to help in the consensus state of new blocks. • Delegates votes for Favorite Validators • These validators will also be responsible for validating transactions, maintaining the blockchain network, and will get rewarded in return in doing so with transaction fees. • Each voter’s power is proportional to the size of the stake in the network. • A Democratic version of the Proof of Stake Algorithm Source: https://analyticsindiamag.com/blockchain-consensus-algorithms/ 77
developed by Intel to solve the computing challenge of “random leader election.” It was released as part of the Software Guard Extensions (SGX) programming reference manual. PoET is now utilized by many private blockchains, including Hyperledger Sawtooth. • It relies on randomized timer system for network participants rather than using mining hardware as in the case of Proof of Work (PoW). • Each participating blockchain node in the network is needed to wait for a randomly chosen period, and • whoever with finished time wins the new block and validates it. Source: https://analyticsindiamag.com/blockchain-consensus-algorithms/ 78
reputation of trusted parties in a blockchain network. An efficient mechanism for private blockchains and created by Ethereum co-founder and former CTO Gavin Wood in 2017. • PoA consensus algorithm is based on the value of identities within a network- and in a system block, • validators do not stake resources but their own identities and reputation. • So, PoA blockchain networks are secured by the validating nodes that are arbitrarily chosen as trustworthy parties. • The Proof of Authority model works on a fixed number of block validators, making it an easily scalable blockchain system because transactions are checked by already-approved network participants. • PoA consensus algorithm can be utilized in applications such as supply chains or trade networks because the real identities of nodes are known and trusted. Source: https://analyticsindiamag.com/blockchain-consensus-algorithms/ 79
It is private and permission based o Members of HyperLedger Fabric enrolls thru MSP - Membership Service Provider o Different MSPs are supported o Ledger data can be stored in multiple formats. o Consensus mechanisms can be switched in and out o Ability to create channels - Allowing a group of participants to create a separate ledger of transactions. o Provides Membership Identity Service that manages User IDs and authenticates all participants on the network. o Access control lists can be used to Provide additional layers of permission. o A Specific user ID could be permitted to invoke a Chaincode application but blocked from deploying a Chaincode. Identity Management
Transaction execution is separated from transaction ordering and commitment. o Division of labor un burdens ordering nodes from the demands of transaction execution and ledger maintenance, o while peer nodes are freed from ordering (consensus) workloads. Efficient Processing o Chaincode Applications encode logic that is invoked by specific types of transactions on the channel. o System Chaincode is distinguish as Chaincode that defines operating params for the entire channel. Chaincode Functionality o Private channels are restricted messaging paths that can be used to provide transaction privacy and confidentiality for specific subset of network members. o All data including transaction, member and channel information, on a channel are invisible and inaccessible to any network members not explicitly access to that channel. Privacy & Confidentiality
• Creates Blocks CA • Registration of identities • Manage Certificates Peer • Endorses Tx • Simulates Tx • Commits Tx All these components can be clustered for scalability and to avoid Single Point of Failure 3 Components of Fabric Ledger Blockchain & World State Smart Contract • createCar • queryAllCars • queryCarProperties • changeCarColor • changeCarOwner Other Concepts • Endorsement Policies • Tokens • Assets : Anything that’s valuable for the Organization • Transactions (State changes of Assets) • Gossip Protocol : The glue that keeps the peers in healthy state. Channels • Private subnet for a set of parties based on Smart contract • Ledger / Channel • Peers can have multiple Channels • Private Data 1 2
A Merchant B Bank Insurer RESTful Services Two Roles = Endorser & Committer Smart Contracts (Chaincode) – Programmable Ledger Persistence Layer - Ledger Get Put Blockchain Events Block Peer Gossip Protocol for P2P Communication Orderer • Consensus Verification • Creates Blocks CA • Registration of identities. • Certificate Management Blockchain & World State Multiple Channels Blockchain & World State 85
is one ledger per channel. Couch DB As well as a state database to maintain current fabric state. This is auto derived by the Peers. Each transaction results in a set of asset key- value pairs that are committed to the ledger as creates, updates, or deletes. o The ledger is the sequenced, tamper- resistant record of all state transitions in the fabric. o State transitions are a result of Chaincode invocations (‘transactions’) submitted by participating parties. Blockchain Tx Tx Tx Tx Blocks Tx Ledger
of identities, or connects to LDAP as the user registry o Issuance of Enrollment Certificates (ECerts) o Certificate renewal and revocation o Every Single operation MUST be signed with a Certificate. o Certificates are per user. Certificate Authority o Before anything is committed to the Ledger it must pass thru Orderer Service. o Provides Order of Transactions. o It creates the Blocks for the Blockchain. o Block size can be based on no. of transactions and / or timeout value. o Orderer in two modes - Solo for the Dev environment and Raft for the Production environment. Orderer o Can update or Query the ledger. o One Peer can be part of multiple channels. o Peer Endorse the transaction. o All the Peers find each other and synchronizes automatically. o Peer manages the Ledger which consists of the Transaction Log (Blockchain) and World State. o Peer has two roles Endorser and Committer. Peer Source: https://hyperledger- fabric.readthedocs.io/en/release-2.2/blockchain.html
Proxy Peer Network Cluster REST API CA Cluster with HA Proxy Load balancer Fabric CA Server can be connected using 1. Fabric CA Client 2. Fabric CA SDK (REST API Calls) Fabric CA servers in a cluster share the same database for keeping track of identities and certificates. If LDAP is configured, the identity information is kept in LDAP rather than the database. This ensures that there is NO Single Point of Failure for CA. No Single Point of Failure for Peers.
Tx Tx Tx Tx Block Peer Query ledger history for a key, enabling data provenance scenarios. Peer CouchDB Read-only queries using a rich query language (if using CouchDB as state database) Transactions contain signatures of every endorsing peer and are submitted to ordering service. Peer Tx Peer Peers validate transactions against endorsement policies and enforce the policies. Endorsement Policies Peer Peers can have multiple Channels Peer Prior to appending a block, a versioning check is performed to ensure that states for assets that were read have not changed since Chaincode execution time. Tx $ docker run -it hyperledger/fabric-peer bash # peer chaincode --help
o The exchange of almost anything with monetary value over the network, from whole foods to antique cars to currency futures. o Represented as a collection of key-value pairs, with state changes recorded as transactions on a Channel ledger. o Assets can be represented in binary and/or JSON form. Assets o It defines an asset or assets, and the transaction instructions for modifying the asset(s). Its the business logic. o It enforces the rules for reading or altering key value pairs or other state database information. o It execute against the ledger’s current state database & are initiated through a transaction proposal. o It’s execution results in a set of key value writes (write set) that can be submitted to the network and applied to the ledger on all peers. Chaincode / Smart Contract
channel is a private “subnet” of communication between two or more specific network members, for the purpose of conducting private and confidential transactions. o Channel is a completely separate instance of HyperLedger Fabric. Every Channel is completely isolated and will never talk to each other. o To create a new channel, the client SDK calls configuration system Chaincode and references properties such as anchor peer**s, and members (organizations). This request creates a **genesis block for the channel ledger, which stores configuration information about the channel policies, members and anchor peers. o The consensus service orders transactions and delivers them, in a block, to each leading peer, which then distributes the block to its member peers, and across the channel, using the gossip protocol. Why Channel is unique to Fabric? Source: http://hyperledger-fabric.readthedocs.io/en/release-1.0/channels.html
channel membership, by continually identifying available member peers, and eventually detecting peers that have gone offline. o Disseminates ledger data across all peers on a channel. Any peer with data that is out of sync with the rest of the channel identifies the missing blocks and syncs itself by copying the correct data. A state reconciliation process synchronizes world state across peers on each channel. Each peer continually pulls blocks from other peers on the channel, in order to repair its own state if discrepancies are identified o Bring newly connected peers up to speed by allowing peer-to-peer state transfer update of ledger data. Source: https://hyperledger-fabric.readthedocs.io/en/release-2.2/gossip.html
Consensus verification • Creates Blocks CA • Registration of identities • Manage Certificates Peer • Endorses Tx • Simulates Tx • Commits Tx All these components can be clustered for scalability and to avoid Single Point of Failure 3 Components of Fabric Ledger Blockchain & World State Smart Contract • createCar • queryAllCars • queryCarProperties • changeCarColor • changeCarOwner Other Concepts • Endorsement Policies • Tokens • Assets : Anything that’s valuable for the Organization • Transactions (State changes of Assets) • Gossip Protocol : The glue that keeps the peers in healthy state. Channels • Private subnet for a set of parties based on Smart contract • Ledger / Channel • Peers can have multiple Channels • Private Data 1 2
and World State W. • Blockchain B determines World State W. • Also expressed as: World state W is derived from blockchain B. Source: https://hyperledger-fabric.readthedocs.io/en/release-2.2/ledger/ledger.html
can see that block B2 has a block data D2 which contains all its transactions: T5, T6, T7. Most importantly, B2 has a block header H2, which contains a cryptographic hash of all the transactions in D2 as well as with the equivalent hash from the previous block B1. In this way, blocks are inextricably and immutably linked to each other, which the term blockchain so neatly captures! Source: https://hyperledger-fabric.readthedocs.io/en/release-2.2/ledger/ledger.html
three fields, written when a block is created. • Block number: An integer starting at 0 (the genesis block), and increased by 1 for every new block appended to the blockchain. • Current Block Hash: The hash of all the transactions contained in the current block. • Previous Block Hash: A copy of the hash from the previous block in the blockchain. Source: https://hyperledger-fabric.readthedocs.io/en/release-2.2/ledger/ledger.html
o Chaincode handles the Business Logic agreed by the Members of the Network. o Chaincode can be written in Java, Go & Node.js o Chaincode runs in a secured Docker Container isolated from the endorsing Peer process. o Chaincode initializes and manages the Ledger State through transactions submitted by the Applications. o Chaincodes are scoped exclusively for a specific Ledger. o However, a Chaincode can invoke another Chaincode to query a ledger with appropriate permissions.
typically represents a query to retrieve information about the current state of a business object. o A put typically creates a new business object or modifies an existing one in the ledger world state. o A delete typically represents the removal of a business object from the current state of the ledger, but not its history. A smart contract programmatically accesses two distinct pieces of the ledger – a blockchain, which immutably records the history of all transactions, and a world state that holds a cache of the current value of these states. Smart contracts primarily put, get and delete states in the world state, and can also query the immutable blockchain record of transactions.
Contracts contains 1. Concept Definition 2. Data Models 3. Business Rules 4. Processes Chaincode generate transactions that’s recorded in the ledger (Blockchain & World State). Smart Contract contains business rules between 2 or more organizations and is converted into a machine- readable code aka Chaincode.
endorsement policy identifies which organizations must approve transactions generated by the smart contract before those transactions can be identified as valid. Endorsement policies are what make Hyperledger Fabric different to other blockchains like Ethereum or Bitcoin. In these systems valid transactions can be generated by any node in the network. Hyperledger Fabric more realistically models the real world; transactions must be validated by trusted organizations in a network. Every smart contract has an endorsement policy associated with it.
smart contract executes, it 1. runs on a peer node owned by an organization in the blockchain network. 2. It takes a set of input parameters called the transaction proposal 3. and uses them in combination with its program logic to read and write the ledger. 4. Changes to the world state are captured as a transaction proposal response (or just transaction response) which contains a read- write set with both the states that have been read, and the new states that are to be written if the transaction is valid. Notice that the world state is not updated when the smart contract is executed! All transactions have an identifier, a proposal, and a response signed by a set of organizations. All transactions are recorded on the blockchain, whether valid or invalid, but only valid transactions contribute to the world state. 118
Fabric allows an organization 1. to simultaneously participate in multiple, separate blockchain networks via channels. 2. By joining multiple channels, an organization can participate in a so- called network of networks. 3. Channels provide an efficient sharing of infrastructure while maintaining data and communications privacy. 4. The smart contract code is installed inside a chaincode package on an organization's peers, channel members can only execute a smart contract after the chaincode has been defined on a channel. o The chaincode definition is a struct that contains the parameters that govern how a chaincode operates. These parameters include the chaincode name, version, and the endorsement policy. o Each channel member agrees to the parameters of a chaincode by approving a chaincode definition for their organization. o When a sufficient number of organizations (a majority by default) have approved to the same chaincode definition, the definition can be committed to the channel. 119
Endorsement policies to decide if the transaction is properly Endorsed. • Peer invokes VSCC (Validation System Chaincode) associated with transaction’s Chaincode • VSCC is tasked to do the following • All Endorsements are valid (Valid signatures from Valid Certificates) • There is an appropriate number of Endorsements. • Endorsement came from expected Source(s) Source: http://hyperledger-fabric.readthedocs.io/en/release-1.0/endorsement-policies.html Examples • Org1.admin • Org2.member • Org3.peer Roles (of the Signer) are supported 1. Member 2. Admin 3. Client 4. Peer 4 07 December 2024
Endorsement Policy has two Components P A Principal (P) identifies the entity whose signature is expected T A Threshold Gate <T> takes two inputs: • <t> an integer : threshold • [n] a list of: principals or gates This Gate essentially captures the expectation that: • out of those [n] principals or gates, • <t> are requested to be satisfied T(2, ‘A’, ‘B’, ‘C’) Requests a signature from any 2 Principals out of A,B,C T(1, ‘A’, T(1, ‘B’, ‘C’)) Requests 1 signature from A or 1 from Principal B and C each. 07 December 2024
are described as MSP.ROLE Examples • Org1.admin • Org2.member • Org3.peer EXPR(E[, E...]) where EXPR is either AND or OR, representing the two Boolean expressions and E is either a principal (with the syntax described above) or another nested call to EXPR. For example: • AND ('Org1.member', 'Org2.member', 'Org3.member') requests 1 signature from each of the three principals • OR ('Org1.member', 'Org2.member') requests 1 signature from either one of the two principals • OR ('Org1.member', AND('Org2.member', 'Org3.member')) requests either one signature from a member of the Org1 MSP or 1 signature from a member of the Org2 MSP and 1 signature from a member of the Org3 MSP. Roles (of the Signer) are supported 1. Member 2. Admin 3. Client 4. Peer 4 The policy can be specified at instantiate time using the -P switch, followed by the policy. For example: $ peer chaincode instantiate -C <channelid> -n mycc -P "AND('Org1.member', 'Org2.member')"
https://hyperledger-fabric.readthedocs.io/en/release-2.2/access_control.html ImplicitMeta Policies • They aggregate the result of policies deeper in the configuration hierarchy that are ultimately defined by Signature policies. • They support default rules like “A majority of the organization admins”. • These policies use a different but still very simple syntax as compared to Signature Policies: <ALL|ANY|MAJORITY> <sub_policy> Signature policies These policies identify specific users who must sign in order for a policy to be satisfied. Policies: MyPolicy: Type: Signature Rule: "OR('Org1.peer', 'Org2.peer')"
https://hyperledger-fabric.readthedocs.io/en/latest/chaincode_lifecycle.html o The chaincode needs to be packaged in a tar file, ending with a .tar.gz extn. o The tar file needs to contain two files (no directory): o a metadata file “metadata.json” o “code.tar.gz” containing the chaincode files. “metadata.json” contains JSON that specifies the chaincode language, code path, and package label. You can see an example of a metadata file below: It is not necessary for organizations to use the same package label. $ peer lifecycle chaincode package pkg.tar.gz - -lang java - -path src - -label p0
127 Source: https://hyperledger-fabric.readthedocs.io/en/latest/chaincode_lifecycle.html You need to install the chaincode package on every peer that will execute and endorse transactions. A peer administrator from Org1 and Org2 installs the chaincode package MYCC_1 on the peers joined to the channel. Installing the chaincode package builds the chaincode and creates a package identifier of MYCC_1:hash. $ peer lifecycle chaincode install pkg.tar.gz
Source: https://hyperledger-fabric.readthedocs.io/en/latest/chaincode_lifecycle.html An organization administrator from Org1 and Org2 approve the chaincode definition of MYCC for their organization. The chaincode definition includes the chaincode name, version, and the endorsement policy, among other fields. Since both organizations will use the chaincode to endorse transactions, the approved definitions for both organizations need to include the packageID. $ peer lifecycle chaincode queryinstalled $ peer lifecycle chaincode approveformyorg - -orderer host:port …. - -package-id $PKG-ID Returns Package ID
CA Orderer Peer CRUD Execute Smart Contracts Get Ledger Updates Ledger Application Users Gateway Network Config Path Wallet Network Smart Contract 1. Evaluate Transaction 2. Submit Transaction Client Code Fabric Gateway Implementation Application Channel Name Chaincode Name Set Set Get Network By Get Contract By • Compare to previous SDK calls a single SubmitTransaction() function is required to submit a transaction. • Advanced Apps can leverage the gateway’s individual Endorse, Submit, and CommitStatus services for transaction submission, and the Evaluate service for queries. • You can delegate transaction endorsement entirely to the gateway, or if needed, specify the endorsing organizations and the gateway will utilize a peer from each organization. 134
https://hyperledger-fabric.readthedocs.io/en/latest/gateway.html Evaluate Tx Proposal 1. By invoking chaincode in Clients Org Peer & return the result to client 2. Gateway chooses the Peer with Highest Ledger Block Height. 3. If No Peer available, then choose from another Org. Endorse Tx Proposal 1. Gather enough Endorsement responses to satisfy combined Signature Policies 2. Return a prepared transaction to client for Signing. Submit a Tx 1. Send a signed Tx envelope to Ordering Service to commit to Ledger. Commit Status 1. Wait for Commit Status events like valid or invalid transaction. Chaincode Events 1. Allow client Apps to respond to events that are emitted by Smart Contracts Functions
service running on peer nodes that manages transaction submission and processing for client applications, with the following benefits: • Simplifies client applications and SDKs - Your client application can simply delegate transaction submission to a trusted peer. There is no need for your application to open connections to peer nodes and ordering service nodes from other organizations. • Fabric Gateway manages the collection of transaction endorsements from other organizations and submission to the ordering service on behalf of client applications. • Fabric Gateway has intelligence to determine what endorsements are required for a given transaction, even if your solution utilizes a combination of chaincode-level endorsement policies, private data collection endorsement policies, and state- based endorsement policies. Source: https://hyperledger-fabric.readthedocs.io/en/latest/whatsnew.html#what-s-new-in-hyperledger-fabric-v2-4 136
Customer wants to order Red Roses from Merchant for a new price. Scenario Customer Merchant Customer Peer B Peer A Tx Proposal • Endorsement Policy in the Chaincode states proposal must be accepted by all parties. • Proposal includes the function of the Chaincode that needs to be triggered and other params. • The SDK packages the transaction proposal into the properly architected format (protocol buffer over gRPC) and takes the user’s cryptographic credentials to produce a unique signature for this transaction proposal. Endorsing Peers 2.1 The Endorsing Peers : Verification 1. The transaction Proposal is well formed 2. It has not been submitted already in the past (replay attack protection) 3. The signature is valid using (MSP) and the 4. Submitter (Customer) is properly authorized to perform the proposed operation on the Channel. 07 December 2024
The Endorsing Peers : Execute 1. The endorsing peers take the transaction proposal inputs as arguments to the invoked chaincode’s function It has not been submitted already in the past (replay attack protection) 2. The chaincode is then executed against the current state database to produce transaction results including a response value, read set, and write set. • No updates are made to the ledger at this point. Signed Proposal 3 Proposal Responses are inspected 1. App verifies the endorsing peer signatures. 2. Checks if the Endorsement policy is fulfilled (ie. Customer and the Merchant Peer both endorse the proposal). 07 December 2024
Endorsement to transaction 1. The App “broadcasts” the transaction proposal and response within a “transaction message” to the Ordering Service 2. The transaction will contain the read/write sets. The endorsement signatures and Channel ID. 3. The ordering service doesn't need to inspect the content of the transaction. 4. It receives transactions from all the channels from the network and orders them chronologically by the Channel and 5. Creates blocks of transactions per channel. 4 Ordering Service Channels
Validated and Committed 1. The blocks of transactions are delivered to all Peers in the network based on the Channel ID. 2. Validate the transaction based on Endorsement policy. 3. Ensure that no change in the Ledger state based on the Read-set variables since the read-set was generated by the transaction execution. 4. Transactions in the block are tagged as being Valid or Invalid. 5 Ordering Service Peers
Ledger Updated 1. Each Peer appends the Block to the Channels chain. 2. For Each VALID transactions the write-set is committed to the World State Database. 3. An Event is emitted to Notify the Client Application. 4. Transactions in the block are tagged as being Valid or Invalid. Block appended to Tx Chain Sends Notification
Farmer selling his goods abroad • A Distributor moving goods abroad • A Shipper moving goods between parties • A Wholesaler purchasing goods from distributors • A Retailer purchasing goods from shippers and wholesalers Source: https://hyperledger-fabric.readthedocs.io/en/release-2.2/private-data/private-data.html
client application submits a proposal request to invoke a chaincode. 2. The endorsing peers simulate the transaction and store the private data in a transient data store (a temporary storage local to the peer). They distribute the private data, based on the collection policy, to authorized peers via gossip protocol. 3. The endorsing peer sends the proposal response back to the client with public data, including a hash of the private data key and value. No private data is sent back to the client. 4. The client application submits the transaction to the ordering service (with hashes of the private data) which gets distributed into blocks as normal. The block with the hashed values is distributed to all the peers. 5. At block-committal time, authorized peers use the collection policy to determine if they are authorized to have access to the private data. If they do, they will first check their local transient data store to determine if they have already received the private data at chaincode endorsement time. If not, they will attempt to pull the private data from another peer. Then they will validate the private data against the hashes in the public block and commit the transaction and the block. Upon validation/commit, the private data is moved to their copy of the private state database and private writeset storage. Source: https://hyperledger-fabric.readthedocs.io/en/release-2.2/private-data/private-data.html
Git $ sudo apt-get install curl cURL $ sudo apt-get -y install docker-compose Docker Pre-requisites – Windows Install Docker Desktop Docker Install WSL2 & Ubuntu (on WSL2) from Microsoft Store Windows Sub System for Linux (WSL2) Install Microsoft Visual Studio Code Microsoft Visual Studio Code Install Git for Windows Git Source: https://hyperledger-fabric.readthedocs.io/en/latest/prereqs.html $ sudo apt install build-essential Build Essentials 151
December 2024 156 Source: http://hyperledger-fabric.readthedocs.io/en/latest/write_first_app.html We will show the process for interacting with a Certificate Authority and generating enrollment certificates, after which we will leverage these generated identities (user objects) to query and update a ledger. 1. Set up the Development Environment 2. Learn the parameters of Smart Contract 3. Develop Apps that can Query and Update the Ledger Smart Contract Blockchain Network CA Orderer Query Execute Smart Contracts Get Ledger Updates Ledger
A session for a given client identity is established by building and connecting to a Fabric Gateway using a gRPC connection to the Gateway endpoint, client identity, and client signing implementation. 2. The returned Gateway enables interaction with any of the blockchain Networks (channels) accessible through the Fabric Gateway. 3. This in turn provides access to Smart Contracts within chaincode deployed to that blockchain network, and to which transactions can be submitted or queries can be evaluated. Source: https://hyperledger.github.io/fabric-gateway/main/api/java/
December 2024 166 Source: http://hyperledger-fabric.readthedocs.io/en/latest/write_first_app.html We will show the process for interacting with a Certificate Authority and generating enrollment certificates, after which we will leverage these generated identities (user objects) to query and update a ledger. 1. Set up the Development Environment 2. Learn the parameters of Smart Contract 3. Develop Apps that can Query and Update the Ledger Smart Contract Blockchain Network CA Orderer Query Execute Smart Contracts Get Ledger Updates Ledger
167 $ cd fabric-samples/fabcar && ls *.js enrollAdmin. js Invoke.js query.js registerUser.js You will see for Node JS Programs as follows Do a cleanup before u start installing the Sample App in the Ledger $ docker rm -f $(docker ps -aq) $ docker network prune $ docker rmi dev-peer0.org1.example.com-fabcar-1.0-5c906e402ed29f20260ae42283216aa75549c571e2e380f3615826365d8269ba $ npm install $ ./startFabric.sh Source: http://hyperledger-fabric.readthedocs.io/en/latest/write_first_app.html 07 December 2024
2024 168 Source: http://hyperledger-fabric.readthedocs.io/en/latest/write_first_app.html $ node enrollAdmin.js An admin user - admin - was registered with our Certificate Authority. Now we need to send an enroll call to the CA server and retrieve the enrollment certificate (eCert) for this user. This program will invoke a certificate signing request (CSR) and ultimately output an eCert and key material into a newly created folder - hfc-key-store - at the root of this project. $ node registerUser.js Newly generated admin eCert, we will now communicate with the CA server once more to register and enroll a new user. This user - user1 - will be the identity we use when querying and updating the ledger. Similar to the admin enrollment, this program invokes a CSR and outputs the keys and eCert into the hfc-key-store subdirectory. So now we have identity material for two separate users - admin & user1
December 2024 172 $ node query.js Similar to the admin enrollment, this program invokes a CSR and outputs the keys and eCert into the hfc-key-store subdirectory. So now we have identity material for two separate users - admin & user1 Source: http://hyperledger-fabric.readthedocs.io/en/latest/write_first_app.html Smart Contract Blockchain Network CA Orderer Query Run the query Return Query Results Queries are how you read data from the ledger. This data is stored as a series of key-value pairs, and you can query for the value of a single key, multiple keys, or – if the ledger is written in a rich data storage format like JSON – perform complex searches against it (looking for all assets that contain certain keywords, for example) fabric_client.getUserContext('user1', true); Ledger
Source: http://hyperledger-fabric.readthedocs.io/en/release-1.0/write_first_app.html 1. Initialize the Client API 2. Create a Channel 3. Create a Peer 4. Add Peer to the Channel Query ChainCode: fabcar Query Function: queryAllCars $ node query.js GetHistoryForKey() GetHistoryForKey() 07 December 2024
December 2024 174 1. Get a Transaction ID based on the user assigned to the client. 2. Send Transaction Proposal for 3. createCar() function in the Chaincode creates a new transaction 4. changeCarOwner() function in the Chaincode updates the owner. Update function doesn't update the Blockchain instead it will have a new record with the latest status of the Asset. $ node invoke.js
December 2024 175 Reconciliation Issues in a Multi Party environment. o Expensive o Vulnerable o Inefficient Problem Statement o Consensus among the Parties before a transaction is committed. o Provenance – Origin of the asset can be easily Tracked. o Immutable – Transactions are tamper proof o Finality – Single Source of Truth Solution
Immutable transaction across parties done at the same time. Remove Cost Overheads on maintaining and synchronizing silos. Increases Trust Through shared process and unified Systems of Record. For end consumers it’s a System of Proof. Reduces Risk Tampering of data, fraud and cyber crime is avoided. 176
Characteristics Ethereum HyperLedger Fabric R3 Corda Description of the Platform Generic Blockchain Platform Modular Blockchain Platform Specialized distributed ledger platform for Financial Industry Release History December 2021 v2.2.5 January 28, 2022 v4.8 April 21, 2021 Crypto Currency Ether / Tokens (Usage, Work) via Smart Contract None Currency and Tokens via Chaincode None Governance Ethereum Developers Enterprise Ethereum Alliance Linux Foundation IBM R3 Consensus Mining based on Proof of Work (POW) – All participants need to agree. Ledger Level Selective Endorsement. Consensus can be even within a channel with select parties instead of everyone. Transaction Level Specific understanding of Consensus. (Validity, Uniqueness) Transaction Level Network Permissionless, Public or Private Permissioned, Private Permissioned, Private State Account Data Key-value Database Transaction Log, World State Vault contains States Historic & Current State Smart Contracts Solidity Chaincode (GoLang, Node.JS, Java) Smart Contract (Kotlin, Java) Development Languages GoLang, C++, Python Java, Node.JS, Python (Post 1.0) Java, Kotlin 07 December 2024
in Hyperledger Fabric : https://github.com/Kunstmaan/hyperleder-fabric-kuma-token-example/ 3. Karame, Androulaki, & Capkun. (2012). Double spending fast payments in bitcoin. ACM Conference on Computer and communications security, (pp. 906-917). 4. King, N. (2012). PPCoin: Peer to peer cryptocurrency with proof of stake. 5. Kwon. (2014). Tendermint: Consensus without Mining. Cornell Edu. 6. Mazieres, D. (2015). The Stellar Consensus Protocol: Federated Model for Internet level consensus. Stellar Development Foundation. 7. Narayanan, B. F. (2016). Bitcoin and cryptocurrency technologies. Princeton: Princeton University Press. 8. O'Dwyer, & Malone. (2014). Bitcoin mining and its energy footprint. Irish Signals and Systems Conference, pp. 280-285 9. Byzantine Fault Tolerance : https://en.wikipedia.org/wiki/Byzantine_fault_tolerance 10. Building Blockchain Apps for Node.JS developers with HyperLedger Composer – Simon Stone IBM References 182
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