Page 16 - U4SSC Blockchain for smart sustainable cities

The mechanism used to discernibly relate the blocks is called the hash functions, which consists of
cryptographic functions that map a bit string of arbitrary length to a fixed-length bit string in such a
way that:

(i) is computationally infeasible to find any data input that maps to any pre-specified output (i.e. digest);
(ii) is computationally infeasible to find any two distinct data inputs that map to the same output; and

(iii) the smallest change of input, even a single bit, will result in a completely different output. 8

For blockchain's technology, in addition to the data being stored, every new block added to the chain
(a process also referred to as anchoring) includes a header containing the result of a hash function
for which input is the entire previous block. It means that to change any data in an anchored block,
an update is required in all subsequent blocks, which would be computationally intensive. Even if a
malicious participant is able to update all blocks in a chain, the technology’s distributed and replicated
nature will imply that the tampered copy will diverge from all the remaining copies. The scenario is
one in which the consensus mechanism ensures that only the unchanged chain will prevail across the
network of participants, thereby securing the database against tampering attempts. It means that,
depending on the network size and the consensus mechanism adopted, data stored in a blockchain
are virtually immutable.

2.2 Blockchain technology process

In the blockchain system, the distributed ledger is replicated in a certain number of similar databases,
and each one of the copies is kept and maintained by one of the entities that are interested and involved
in writing data. When one of these entities is changing data in one copy of the DLT, all the other copies
are simultaneously and automatically updated. There is no need for a lawyer, a bank, the government
or any third party to verify, validate the occurrence of a transaction such as a transfer of ownership.

There are five principles that explain how blockchain works: 9

(1) The distributed database requires that each party on a blockchain has access to the entire database.
All the parties in the blockchain can verify the records of the parties involved in the transaction
without intermediaries. However, they do not control the data and the information recorded in
the transaction.

(2) The peer-to-peer transactions mean that communications occur directly between peers without
the intervention of a third party or through a central entity. Each of the nodes in the peer-to-peer
network stores the data and forwards the information to all the other nodes.

(3) The transparency with anonymity and pseudonymity provides information about the transactions
and the associated value to all the participants with access to the network. However, it gives the
actors the choice of remaining anonymous or revealing their identity and providing proof of it to
the network. The transactions occur using the blockchains’ addresses.

(4) The irreversibility of records entails the permanent character of the transaction recorded in the
database, their chronological order and their availability.

6 U4SSC: Blockchain for smart sustainable cities