Assignnment 2-1600 - Assignment 2 PDF

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Yash Patel 7877419 Comp 1600 A2 Mr. Saulo Dos Santos 1/03/2021

Question 1: Blockchain Applications. A. What does she say is the one thing we should remember from her talk? What three examples does she give to lower uncertainty by using blockchains? She wanted us to remember that blockchain is new at her time and she mentioned that it is a continuation of a very human story and she mentions how as humans we always find new ways to reduce uncertainty to be able to trade. The three examples she provides and that blockchains would help resolve. The first is that we do not have to know who we are dealing with when using the blockchain. An example she provided was that how when you are buying something you will look for reviews on the site see how many people bought it see whether the user is verified or not just to attest that the product your buying is legit. While for blockchain it is more then a profile it means you can selectively reveal more then a profile which means that you selectively reveal the different attributes about the person example government issued id. This is using cryptographic proof that helps trade in a completely new way. The second uncertainty need of transparency or identity management in here example she talks about how if someone were to send a smartphone that you bought through eBay you would need some type of transparency that the phone you bought has not been tampered with and it is as mentioned thus implementation of an escrow blockchain payment would resolve all that problem as the customer would be able to use the chain for themselves to monitor and validate all the nodes themselves. The third uncertainty was that reneging on deals what happens when that phone does not come in a blockchain technology it allows us to write up code that is a binding contract between the individuals and then the guarantee of those contracts will carry out without having a third-party enforcer. This will lower uncertainty as following or abiding to the contract will work for both the individuals and if the contract is broken in some way then there will not be a deal carried forward. B. What examples does Warburg give as the closest analogy to a blockchain? In your own words explain why she chose this example and how it applies. She gives an example of blockchain to be something like Wikipedia. What she means was that everyone can see everything on Wikipedia and how we can see everything on Wikipedia, and it can be constantly changing and getting updated the changes can be tracked over time on Wikipedia and create each unique Wikis. She also mentions how the Wikipedia is an open platform that stores words and images and changes to that data over time. The reason she chose this example and why it applies is because the blockchain works the in a similar way in which it fully applies because the blockchain works on a way that is a decentralized database forever being updated and having changes and keeps records of all blocks

of data that is stored in a public registry across a peer-to-peer network and has records of everything in the network the network is then replicated on each computer that uses the network. This example completely applies as it is precisely what she used in her example but in the actuality, it works the same way, and it is completely transparent how the blockchain works and how transparent it is. C. Write an answer to a friend who does not know anything about blockchain who says to you “why would anyone use blockchain?” in your answer describe a real-world problem that was solved using blockchain. The way blockchain would help in a real-world scenario an example would be a bank this is by use of decentralization which means that there is no central main unit for the bank and elimination of the central unit of where the transactions go out from. There was a scenario on which there was a banking system in South Africa that processed payments using the Ethereum based network, and this broke records on many scales for the bank. This payment system scaled using new technologies which pushed the banking systems way more than the regular banking systems. The following are the examples from the article https://consensys.net/blockchain-use-cases/finance/project-khokha/ The article mentions the following were the solutions that excelled the banking system to a whole new level. 1. They exceeded 70,000 transactions in less than two hours. 2. They also maintained the privacy and security of the transaction while also meeting the required transaction volumes. 3. 95% of block propagation time in less than 1 second and 99% propagation in less than two seconds which proved the performance was achievable and that this kind of technology would make it better for the banks to use. 4. The project overall revealed that blockchain is scalable, resilient and payments are confidential. This means that real life problems are fixable using blockchain technology many blockchain technologies that are coming up have better security systems regarding that coins like Litecoin that have transactions that will be completely anonymous. This decentralization saves banks with not being able to get attacked by bad actors because there is no central unit of where the transactions will go out from. Question 2: How does Bitcoin Actually work? A. The video introduces main computer science concepts integral to bitcoin. List those five main concepts.

I.

II.

This means if example jane sends money to bob then everyone on the blockchain validates that transaction. The ledger also has the persons private key and public key on which each transaction is signed with the signature and the id is only meant for one transaction and cannot be replicated unless private key is leaked. The first concepts go over how each one on the bitcoin network or using bitcoin have a ledger in which the ledger contains all the account information. The ledger system works on when one wants to send money it is deducted from one person and added to the receiver’s ledger. This means that the ledger on its own is the part of the currency.

III.

The Ledger is decentralized and not controlled by any central entity but instead controlled and distributed to everyone on the blockchain.

IV.

The next concept is on the proof of work hash and how the hash is related to the ledger and when the ledger is a complete one and has a proof of work then the next ledger will start the ledger + proof of work = Hash using the sha256 this means that the next ledger will start on the previous has and if a new ledger is created it will use the previous hash and so on and if one thing is changed on that ledger then each and every hash should be changed and this is what is called the block chain. This proof of work is rewardable and keeps the work of the chain going.

V.

The next concept is that of the blockchain and what this does is that there are people in the chain waiting to listen to a ledger being transacted then they do the work of finding the unique hash that starts with 60 zeros for example once this is done the miner gets rewarded with a ledger dollar in this case a reward of bitcoin which keeps the proof of work going based on a reward for the person. This is blocks filled with ledgers and are chained and interconnected together this chain has all transaction details, proof of work and they are all linked to each other as the previous hash goes on the next transaction.

B. Now for each concept give an explanation – why that concept is necessary. I.

Digital Signatures – The importance on why digital signatures is necessary is because if there is digital signatures using the person private key it is very hard and reduces the risk of duplication of the signature. This feature enables each user for bitcoin to ensure that they are safe using the currency without having people to duplicate it and this security ensures signatures are not able to be used unless it is committed by the user or possibly the public and private key are stolen.

II.

The ledger is the currency – This is important because each person can record their own balances and a record of all the genuine transactions executed between network participators. The ledger is meant to be a currency that has a sense of security that what each person in the network is receiving equals to the amount in ledger dollars. This means there is no use of external currency to transact but instead the bitcoin is used. This maintains that a person has his/her own ledger with their own privacy and security.

III.

Decentralization – This is one of the main aspects when the whole currency is run by the people using it in network instead of the having a central unit like the government or a organization. That is why bitcoin is a winner and has no centralized control but instead a community driven currency where there is no restriction on trading and sending money over or doing pretty much anything without central authority and no central point of failure which means that it is safer.

IV.

The proof of work is necessary for the chain to run proper it is necessary for security, which furthermore enables trust and prevents frauds. The security comes when the miners cannot lie about a transaction the transactions on a proof of work-based sequence on the bitcoin network will make it difficulty on altering data over time this is because the hash wont match and as the chain expands the harder it becomes.

V.

Lastly the Blockchain is the most important need for the bitcoin the blockchain allows bitcoin to operate with no central authority and the trustless nature this can lead to easy traceability on every transaction since they are all recorded in the blockchain and open to the public to view them. The blockchain

C. You are a bitcoin thief explain exactly how you are going to steal some bitcoins explain exactly how you are going to steal some bitcoins (list the steps you would use) and then stop the victim from discovering your theft. •

The first step I would take is I would identify which exchanges hold the most private keys for the users. Once the target is found an example of that of a marketplace in the dark net.

•

My second step would be hiring a bunch of hackers to try hack into the websites server and get to the private key storage.

•

The third once private keys are gathered instantaneously would have a bitcoin or crypto tumbler to then launder all the bitcoins back into my original address. Distribute all the shares for the hackers and once that is done remove the bitcoin and store them in a cold storage like trezor (a usb based hard wallet).

•

The way the people whose private keys that are found will be kept as unknowing as possible is to also ddos the service of the market so that way the funds are not moved before we get to them.

•

Once the heat is off then enjoying the bitcoins. *note all this is imaginary.

3. Blockchain security

A. What is cryptography? To answer this question, you could 1) read widely about cryptography until you understand its purpose and common traits, and then define Cryptography in your own words or 2) quote a definition or part of a definition, using quote marks for direct quotes and including your source using a recognized reference format. The explanation provided are as far as understanding the full use of cryptography in blockchain and will explain in my own words. The meaning of cryptography in general terms is that it is a method of which it helps protection of the information and communicated codes. This is in the name crypt that means its vaulted information and only the person intended to receive it can view this information. The purpose of this cryptography in a bitcoin blockchain and the common traits are that bitcoin uses the cryptographic method of which it will dedicated into creating public and private keys for people which is used to communicate and store in the chain. The second one is used on the purpose of mining. The way cryptography works is how if a message is communicated between 2 people and they want no one to know in any way and want it anonymous between the two the way cryptography helps succeed in this is when one person sends the message to the other they share a key that only the 2 know and when let’s say Anne sends a message to David therefore Anne will use encryption to send a message and a key to a lock(cipher) to send to David and only David will be able to access the information this cipher is know of a lock to the box of the message in the cryptographic world.

B. How does the massively large number relate to security of the blockchain? The number relates to high security for bitcoin in a way if there was a way to guess the entire number there would be need of a way higher level of server that has the sole purpose of guessing the SHA 256 number. This would mean that there would be need of way too many computers and technology to just run the HASH to guess the number this comes back to the relation that the blockchain will be more secure as there is less likely chance for the large number to be guessed. This is that thinking of a die that how many times will it take for you to roll to a 6 but now replacing the number with 2^ {256} and how many times it will take for you to guess that numbers hash.

4. Altcoin A. List the people in your group and your group number. The group number is group 26 that consists of the following members.  

Yash Patel Johnson Rein

  

Nikon Moghadasian Devin Toews Kyle Ednalino

B. For Two Cryptocurrencies in your portfolio, describe: name of currency, reason why you found it interesting, description of how well it performed in your portfolio. 1. Ethereum- The reason Ethereum was found very interesting as this is one of the early adopters of the blockchain. The project is followed by one of the most experienced teams in the industry. The Ethereum blockchain is particularly interesting as this blockchain that is the home to digital money and global application based on their network. The Ethereum based project is an open based blockchain accessible to everyone with a need of just a connection to the internet. The Ethereum based is a financial system that is decentralized on which it is fair to everyone of which people can send, receive, earn interest and even stream their funds all around the world. The reason it was invested in the portfolio was because of their latest upgrade that will come to the blockchain of proof of stake from proof of work. The performance of the Ethereum coin on the portfolio was decent as it had increased by 11.31%. 2. Litecoin- The Litecoin is a good project too as this project is just like that of bitcoin but the Litecoin chain. Litecoin have the most interesting update that will change the blockchain of sending and receiving money the update is called the MimbleWimble update will provide more privacy and is a better network scalability. This update will mean that the transaction will be able to be verified and confirmed but for the outsider inspecting the block it wont show any address and will just show the amount of the transaction like one large transaction as opposed to being split up transactions. This means that the scalability of this De-Fi project will be a unique one as compared to any other. The Litecoin is a fork of bitcoin but it is considered faster, and it is even cheaper in transacting payments. The performance of Litecoin in the portfolio has done well since investing on it as it has gone up by 15.62%. The good fact is that also I had done some research on Litecoin and it is forecasted to at least go up to 350 by mid-April.

C. Paste 2 screenshots one showing profile name and the one showing your portfolio content.

5. Environmental effects A. How much energy does bitcoin use in a day? Find an estimate that compares this to a specific country and explain the usage in your own words. The amount of energy bitcoin consumes according to Cristina Criddle in BBC “Bitcoin consumes energy around 121.36 terawatt-hours (TWh- Terrawatt Hour ) a year - and is unlikely to fall unless the value of the currency slumps. The online tool has recorded that bitcoin electricity consumption is above Argentina (121 TWh) and is gradually creeping up to Norway (122.20 TWh) ” This means that 121.36/365 = 0.33 TWH per day is energy spent on bitcoin. The energy that is used is purely based on miners in the blockchain this is all using electricity and the hardware that is used to put up with mining the bitcoins or in short helping complete transactions in the blockchain. The usage is based with people more the hardware the more bitcoins is rewarded since there is more hashes getting completed and more proof of work reward is given back. B. In your own words explain the difference between proof of work and proof of stake? How will changing between them effect Ethereum’s energy usage and why? Proof of work is that of which the network works on a way where the miner must do computational algorithms this is the use of energy which means that they make the use of their hardware to make sure they have the algorithm right to get the block complete. While for the proof of stake is a network that is validating a capacity of input to the network depending the on stake in the network the validators in the block get a reward of the fee of the transaction as a reward. The difference on the 2 is that it is more expensive for a 51% attack on the proof of stake chain which is they must own 51% of all the crypto coin. While for a proof of work they would require a computer that is powerful then 51% of the network. The changing of the Ethereum network from proof of work to proof of stake will change the energy outputs by 99% this means the entire network will no more need miners for a proof of work network

which means that no more hardware. Thus, having said the benefits for Ethereum’s blockchain on how the switch to proof of stake will solve are the following. 1. There will be a less chance for a 51% attack on the network because the proof of stake will require one to have 51% of the supply of Ethereum which will make it very expensive to ever do that attack. 2. The network will see no more energy wastage on Ethereum which is because there will no more be a need of the miners for computational work needed. 3. Proof of stake will reduce fees to a very low since there will be no more network congestion for a proof of work meaning gas fees will be low due to the proof of stake is where the stake holders are ones which will validate new blocks by utilization of their share of the coins on the network.

6. Eliminate or Empower? > Thesis argued will be based on: Blockchain’s innate qualities of decentralization and immutability will always make it democratic. The thesis behind how blockchain will always remain democratic and decentralized is that it is very empowering for a regular person that is entering this technology either to earn more out of investments or as a business who is coming out with a project based on a way that will need the community to play a role into using that token. Now the points below will be on why the thesis empowers the use of blockchain. 

   

Any one and everyone can use the blockchain as a normal person he or she can get a valuable piece of the token that can go up or down in value but can-do way more without a centralized control of his/her funds. The second is that this technology will always be for the people and will not be controlled by a single entity thus this makes it fair for everyone on the chain. If a person wants to be a miner and could be able to afford the hardware, then it is possible and there is no requirement of any other need but that. Decentralization Finance is the best democratic explanation where anyone from anywhere can buy and sell, stake for a return, get decentralized loans and so o...