Link: https://emn178.github.io/online-tools/sha256.

html

Please write random text in INPUT so that the OUTPUT has one leading ‘0’ (Zero at
the start of OUTPUT).

Now try for an OUTPUT which has two leading ‘0’ (Zero at the start of OUTPUT).

Slide no. 11
Moving on.. let’s now see the concepts of proof of work, proof of stake and proof of
Authority.
Commonly used terms when we talk about blockchain transactions.
These are basically mechanisms which are used to validate transactions and confirm the
blocks on the blockchain.

In proof of work – all miners compete against each other to resolve the mathematical puzzle.
Whomsoever does it first, wins the coins.
The miner with higher computational power has the advantage in this case.
Bitcoin uses this.
A problem with this mechanism is the enormous amount of energy used. It is estimated that
the total amount of energy used for mining is more than the total energy demand of New
Zealand!
Also, if miners combine to share resources and solve, this defeats the purpose of
decentralisation.

Proof of stake – developed to counter the potential drawbacks of PoW.

Here, the person solving the puzzle is called a validator.
The task is randomly assigned to a validator who validates the transaction and adds it to the
blockchain. The chances of a validator being assigned the task depends on the amount of
coins or the ‘stake’ that the validator has in the blockchain.
Ethereum is developing this.

Proof of Authority
In this type, one of a fixed number of actors are given the task of validating transactions.
Who gets the authority depends on the reputation of the validator.

Slide no. 12
So lets understand the two different types of blockchains
We would try and explain it with an analogy of a mango tree.
Suppose you are roaming around in a jungle and see a mango tree, full of ripe mangoes. As it
is located in a jungle, any one can climb the mango tree and pluck mangoes for their
consumption.
On the other hand if the mango tree is located in someone’s garden or in the backyard of their
homes, not everyone can get access to the mangoes. Only the owners and others who are
given specific access to the garden by the owners can pluck mangoes from the tree.
So, the mango tree in the jungle is similar to a public or a permissionless blockchain and a
mango tree in the garden is a private or a permissioned blockchain.
Permissionless blockchains are decentralised in nature, while permissioned blockchains have
some amount of centralisation.
Slide no. 13
So these are few of the popular private blockchains
Enterprise Ethereum was a private blockchain created based on the public Ethereum
blockchain for organisations for their daily operations.
Hyperledger is an open-source project hosted by the Linux Foundation and backed by big
tech firms. Hyperledger is building products for companies that want to work with smart
contracts but are hesitant to embrace open blockchains like Ethereum and Bitcoin.
Corda is a private blockchain created by an alliance of financial institutions—including
Barclays, Goldman Sachs, and J.P. Morgan— called R3

Slide no. 14
WE will now discuss some of the use cases of blockchain in various industries.
Blockchain adoption has the potential to transform operations in a lot of industries. Here we
consider a few examples.
In telecom industry, use of blockchain can help streamline a lot of internal operations.
In KYC for example, it can help create a common global KYC pool, in which each KYC
record is added as a new block.
Anyone who wishes to use KYC can do so without seeking all documents from the customer
again. This pool of KYC can be shared by all telecom companies.
Other fields wherein blckchain has uses include, billing, digital transactions, network
function management, mobile money and identity as a service.

In healthcare, blockchain can be used to maintain electronic medical records. It also has
applications in medical facility and medical supply tracking. It can help in maintaining a
centralised public health scheme maintenance system which can have all vaccination records
of citizens.
In the pharma sector, it has the power to facilitate faster drug development and medical
innovation.

In banking and financial services – retail banking can be eased by easier access to KYC
records as mentioned above in telecom. It also has huge potential to simplify interbank
transactions and remittances and also to increase security of financial data stored with the
banks.
It can also be used for derivative trading, by bringing potential buyers and sellers together on
a decentralised network.
It can also greatly simplify share trading by improving settlement and reconciliation process
and increasing transparency.

Slide no. 15
Media – Blockchain can help maintain a ledger of digital rights which can greatly reduce the
incidence of copyright infringements.
Smart contracts can be used to implement decentralised Payments coming from ad revenues
or royalty payments. Usage/subscription of music and OTT can be greatly simplified.

Retail –
Blockchain can help the end users of products track the entire product life history right from
the sourcing to its delivery to the store.
With greater focus on sustainability, this can help ensure that the sourcing confirms to laid
out norms and also prevent other issues like animal cruelty, deforestation and safe storage
practices.
Automotive
Entire product life cycle of an automobile can be tracked using a blockchain, right from the
pre-production stage to its sale. This can help the manufacturers, dealers as well as insurance
companies get accurate data about each vehicle, thus vastly improving their pricing and
operations.
It can also help in tracking and proper disposal of hazardous and residual waste ensuring
reduced wastage and environmental compliance

Apart from various industries, blockchain has huge potential to improve governance.
Currently, maintenance of databases of various services and public distribution systems are
currently on legacy systems. There is hugely inaccurate data which is not linked to one other
which not only increases inefficiency but also incentivises corruption and litigation.
Blockchain can streamline many services like
1. Birth & Death Certificates
2. Caste Certificates
3. Income Certificates
4. Educational Certificates
5. Ration Cards
6. Driving License
7. Land record registry management
This will ultimately help in greater transparency in budgeting and govt expenditure and
reduce corruption.

Slide no. 16
We will now take a specific example of how blockchain can help in making trade finance
more efficient.
This is a normal operational flow of a letter of credit which is an instrument used by
importers to import goods from another country.
*Explain process briefly*
LC is one of the most riskiest instruments in banking. It not only adds to the cost and time of
doing business, but there is also a chance of Payment Disputes Due To Contractual
Ambiguities.
There is also the Possibility of Misuse: A letter of credit poses a material fraud risk to the
importer. The bank will pay the exporter upon looking at the shipping documents and not the
actual quality of goods. Disputes can arise if the quality is different from what was agreed
upon.
Currency Risk: A letter of credit also carries forex risk.

Use of blockchain in Trade finance

transparency and consensus will help mitigate the ever-present risk of documentary fraud and
hopefully reduce the cost of transaction reconciliation between and within banks
The traceability associated with blockchain would provide assurance and authenticity of
products in the supply chain
The immutability and digital uniqueness inherent in this technology also offers the potential
to provide a secure transfer of value
Smart contracts offer the possibility of self-executing contracts triggered by the efficient
exchange of digital data, potentially revolutionising the long-serving Letter of Credit.

Let’s look at how blockchain will be used in trade finance

1: The importer creates an LC application for the importer bank to review and stores it on the
blockchain.
2: The importer bank receives notification to review the LC and can approve or reject it based
on the data provided. Once checked and approved, access is then provided to the exporter
bank automatically for approval.
3: The exporter bank approves or rejects the LC. If approved, the exporter is able to view the
LC requirements and is prompted to view through the application.
4: The exporter completes the shipment, adds invoice and export application data and
attaches a photo image of any other required documents. Once validated, these documents are
stored on the blockchain.
5: The documents are viewed by the exporter bank, which approves or rejects the application.
6: The importer bank reviews the data and images against the LC requirements, marking any
discrepancies for review by the importer. When approved, the LC goes straight to completed
status or is sent to the importer for settlement.
7: If required due to a discrepancy, the importer can review the export documents and
approve or reject them.