2. Blockchain introduction
This session introduces blockchain technology to nonfinancial people. It highlights the architecture, history, and technical solutions. It also investigates what blockchain means in fintech (the financial technology industry) and how this can be applied to healthcare (electronic patient files) and general case management involving many stakeholders. The session concludes with some code examples from open source projects to help developers who want to get started with this architectural style.
For Developers
Lonneke Dikmans
eProseed
Monday Oct 2nd
Highly Restricted

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Lonneke Dikmans
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Co-Author of SOA Made Simple
blog.vennster.nl
Twitter: lonnekedikmans

4. Agenda Introduction Blockchain architecture Blockchain in FinTech1
Introduction
Blockchain architecture
Blockchain in FinTech
Blockchain applied in other industries
Getting started with blockchain 2 3 4 5

5. Introduction to BLockchain
Chain of blocks
Peer-to-peer
Validation of new blocks
Block
Digital signature
Pointer to previous block
Timestamp
Transaction Data
Immutable

6. Agenda Introduction Blockchain architecture Blockchain in FinTech1
Introduction
Blockchain architecture
Blockchain in FinTech
Blockchain applied in other industries
Getting started with blockchain 2 3 4 5

7. Architecture overview | The concepts
Chain of blocks
Storing transactions
Peer to Peer
Distributed architecture
Validation
Trust

8. Architecture Storing transactions
Relational database store state
Blockchain stores transactions
Current balance
Transfer of 100 units
Current owner of a piece of land
Sale of land from A-B
Address with family living there
A, B, C moved in at address X
Difficult when the object changes
Expensive to calculate state
Land register splits property
What is my balance?
Two people move from one address to two different addresses
Who lives at address X?
Relational databases now have features to also access the transactions. For example an oracle database has this option called Flashback archive. It allows you to retrieve the previous situations of the table and ‘timetravel’ by keeping track of the transactions (that are also used for rollback etc)

9. architecture | distributed
MDM
SOA
BlockChain
Middleware
App1 1
App1
App2
App3
MDM
App1
App2
App3
In financial services there is a man in the middle who will determine that your money is not counterfeited. The same is true for transactions: There is a trusted man in the middle (Bank) plus rules and regulation
In SOA the architecture expects there be one source of truth for service (“CustomerService”, “HR Service”). This is very hard when spanning multiple organisations: who has the source of data.
In comes master data management; we offer one centralized registry.
== peer-to-peer
Storing transactions not state
This is relevant in rules (I bought a house versus I own a house)
I have 100 dollars in the bank versus I just withdrew 100 dollars from the ATM
== chaining of blocks
Trust
The 1
App2 3 1
1,2,3 1’
App3 2

10. Blockchain architecture | Trust
Compare: partner agreements in B2B
Trust is based on
Immutable blocks
Hashes (SHA-256)
Proof of work (in public chain)
Consensus process
Consensus process: he process for determining what blocks get added to the chain and what the current state is
Source:

11. Example | find SHA-256 starting with 000
"Hello, world!0" => 1312af178c253f84028d480a6adc1e25e81caa44c749ec e2ec934c64
"Hello, world!1" => e9afc424b79e4f6ab42d99c81156d3a17228d6e1eef4139be78e948a9332a7d8
"Hello, world!2" => ae37343a357a e7134cbea22f5928be8ca2a32aa475cf05fd4266b7
...
"Hello, world!4248" => 6e110d98b388e77e9c6f042ac6b497cec46660deef75a55ebc7cfdf65cc0b965
"Hello, world!4249" => c004190b822f1669cac8dc37e761cb73652e7832fb cf26ebb9e6
"Hello, world!4250" => 0000c3af42fc31103f1fdc0151fa747ff87349a4714df7cc52ea464e12dcd4e9
A proof of work is a piece of data which is difficult (costly, time-consuming) to produce but easy for others to verify and which satisfies certain requirements. Producing a proof of work can be a random process with low probability so that a lot of trial and error is required on average before a valid proof of work is generated. Bitcoin uses the Hashcash proof of work system.
One application of this idea is using Hashcash as a method to preventing spam, requiring a proof of work on the 's contents (including the To address), on every . Legitimate s will be able to do the work to generate the proof easily (not much work is required for a single ), but mass spam ers will have difficulty generating the required proofs (which would require huge computational resources).
Let's say the base string that we are going to do work on is "Hello, world!". Our target is to find a variation of it that SHA-256 hashes to a value beginning with '000'. We vary the string by adding an integer value to the end called a nonce and incrementing it each time. Finding a match for "Hello, world!" takes us tries (but happens to have zeroes in the first four digits):
"Hello, world!0" => 1312af178c253f84028d480a6adc1e25e81caa44c749ec e2ec934c64 "Hello, world!1" => e9afc424b79e4f6ab42d99c81156d3a17228d6e1eef4139be78e948a9332a7d8 "Hello, world!2" => ae37343a357a e7134cbea22f5928be8ca2a32aa475cf05fd4266b7 ... "Hello, world!4248" => 6e110d98b388e77e9c6f042ac6b497cec46660deef75a55ebc7cfdf65cc0b965 "Hello, world!4249" => c004190b822f1669cac8dc37e761cb73652e7832fb cf26ebb9e6 "Hello, world!4250" => 0000c3af42fc31103f1fdc0151fa747ff87349a4714df7cc52ea464e12dcd4e hashes on a modern computer is not very much work (most computers can achieve at least 4 million hashes per second). Bitcoin automatically varies the difficulty (and thus the amount of work required to generate a block) to keep a roughly constant rate of block generation.
In Bitcoin things are a bit more complex, especially since the header contains the Merkle tree which depends on the included transactions. This includes the generation transaction, a transaction "out of nowhere" to our own address, which in addition to providing the miner with incentive to do the work, also ensures that every miner hashes a unique data set.
Source:

12. Introduction to BLockchain
Chain of blocks
Peer-to-peer
Validation of new blocks
Block
Digital signature
Pointer to previous block
Timestamp
Transaction Data
Immutable

13. Private versus public blockchains
Anyone can read
Anyone can be part of the consensus process
Anyone can send transactions
Fully decentralized
Example: bitcoin
Private
Read can be public or restricted
One organization determines validity
Only one institution can add blocks
Fully centralized
Example: land registry
Consortium
Read can be public or restricted
Consensus is restricted to a predefined set of nodes
Partially decentralized
Examples: youth care institutions
Private: no need for Merkle tree roots.
Needed for land register; it is important that the land registry is allowed to
Private: no attacks from “China” or other groups of attackers
Private; higher level of privacy
Public:
Less cost of operation (domain selling. Sending the money first, you don’t get the domain. Sending the domain: you don’t get the money. In comes the man in the middle and the fee)

14. Agenda Introduction Blockchain architecture Blockchain in FinTech1
Introduction
Blockchain architecture
Blockchain in FinTech
Blockchain applied in other industries
Getting started with blockchain 2 3 4 5

15. Blockchain in fintech Bitcoin: a peer-to-peer electronic cash system
KYC (know your customer): prevent money laundering, terrorism.
Payments
Smart contracts
Trading platforms
Source: blockchains-are-used-in-banking-and-the-financial-services-sector/#290abea41a11
KYC: once a client is verified, this can be shared between institutions.
Payments:
Blockchain disruption could be highly transformative in the payments process. It would enable higher security and lower costs for banks to process payment between organizations and their clients and even between banks themselves. In the current reality, there are a lot of intermediaries in the payment processing system, but blockchain would eliminate the need for a lot of them.
Smart contracts:
Because blockchains can store any kind of digital information, including computer code that can be executed once two or more parties enter their keys, blockchains enable us to have smart contracts. This code could be programmed to create contracts or execute financial transactions once a certain set of criteria has been achieved—delivery of products could signal an invoice to be paid for example.
Trading platforms
It’s exciting to contemplate the changes that might occur with our trading platforms if they relied on blockchain-based technology. There’s no doubt that the risk of operational errors and fraud would be dramatically reduced. NASDAQ and the Australian Securities Exchange are already exploring blockchain solutions to reduce costs and improve efficiencies.

16. Agenda Introduction Blockchain architecture Blockchain in FinTech1
Introduction
Blockchain architecture
Blockchain in FinTech
Blockchain applied in other industries
Getting started with blockchain 2 3 4 5

17. Blockchain in other industries
When do we consider it a blockchain?
Storing a sequence of transactions: a chain of immutable blocks
Peer to peer. Distributed architecture (decentralized)
Trust. Level of trust depends on type of blockchain (public, consortium, private)

18. Blockchain in other industries
Youth services
Currently:
Information scattered
Unverified
Lack of ownership
Project
Information exchange using state
Several nodes to verify
Restricted access (privacy)
Stored centrally
Public transport data
Currently
One central file that every company sends to the consortium
Delays
Solution
Keep transaction in records (versions of routes)
No verification
Centralized
transactions
Consortium

19. Block chain in other industries
Land registries
Electronic patient file
Supply Chain
Voting HR ….

20. Agenda Introduction Blockchain architecture Blockchain in FinTech1
Introduction
Blockchain architecture
Blockchain in FinTech
Blockchain applied in other industries
Getting started with blockchain 2 3 4 5

21. Getting started with blockchain
Read about some of the concepts
Proof of work
Peer-to-peer networking
Public versus consortium versus private blockchain
Select a platform: Ethereum, MultiChain, Open Chain.
Pick a free one to experiment
Or build your own:
A blockchain in 200 lines of code (see references)
Happy coding!

22. resources Oracle cloud: oracle.cloud.com
My first blockchain in the Oracle Cloud: oracle-cloud.html
A blockchain 200 lines of code: 963cc1cc0e54
MultiChain:
Bitcoin:
Select a platform:
BlockChain in Fintech: examples-of-how-blockchains-are-used-in-banking-and-the-financial-services- sector/#290abea41a11