Networked Applications: Blockchain Analysis of Bitcoin and Ethereum

This report provides a comprehensive analysis of Bitcoin and Ethereum, two prominent applications of blockchain technology. It begins with an introduction to blockchain and its decentralized platform, highlighting the report's focus on these two applications. The report delves into the field and purpose of Bitcoin as an innovative payment network and Ethereum as an open-source software platform for building decentralized applications and smart contracts. It then explores the working models of both applications, emphasizing the use of cryptographic keys in Bitcoin transactions and the automated execution of smart contracts in Ethereum. The report also addresses the scalability issues associated with both applications, such as the transaction limits in Bitcoin and the challenges in scaling Ethereum due to its decentralized nature. Furthermore, it examines the features and weaknesses of each application, including Bitcoin's anonymity and fast transaction processing versus potential for money loss, and Ethereum's decentralized platform and custom-built blockchain versus the cost of implementation. Finally, the report discusses the socio-technical aspects of Bitcoin and Ethereum, considering the increasing adoption of smart contracts and the potential impact on various sectors. The report concludes by summarizing the key findings and emphasizing the decentralized nature of blockchain and its impact on these applications.

Running head: NETWORKED APPLICATIONS
Networked Applications
Name of the Student
Name of the University
Author Note

1
NETWORKED APPLICATIONS
Table of Contents
Task 1: Blockchain Applications: Bitcoin and Ethereum.................................................................1
Introduction...............................................................................................................................1
1. Field and Purpose of the application......................................................................................1
2. Working model of the application..........................................................................................2
3. Scalability issues.....................................................................................................................2
4. Features and Weaknesses of the application.........................................................................3
5. Socio-Technical aspects..........................................................................................................4
Conclusion..................................................................................................................................4
Task 2: Main Features of Decentralized Architecture of Blockchain...............................................4
References....................................................................................................................................17

2
NETWORKED APPLICATIONS
Task 1: Blockchain Applications: Bitcoin and Ethereum
Introduction
Blockchain is a new and emerging technology that is designed on a decentralized platform. The
main purpose of the report is to analyze the two different applications of blockchain technology. The
two blockchain applications that are chosen for this report are bitcoin and Ethereum. The field and
purpose both the applications are discussed in the report along with the working model of the
application. The report further provides an overview of the different scalability issues, features and
weaknesses of the applications. The report further summaries the different socio technical aspects
associated with Bitcoin and Ethereum. Since the backbone of both blockchain and Ethereum is
blockchain, these applications are not needed to be validated or controlled by any centralized authority
[9]. The detailed overview of the two selected application of blockchain is discussed in the following
sections.
1. Field and Purpose of the application
Bitcoin
Bitcoin is one of the most widely used applications of blockchain that provides an innovative
payment network. Since it is based on blockchain, the platform of bitcoin is an open platform with a
public access. Like blockchain, the bitcoin is not controlled by any central authority and it is a payment
network that operates worldwide. It is therefore an example of cryptocurrency that can be traded with
the vendors (who accepts bitcoin as a payment) for availing different services.
Ethereum
Ethereum is another application of blockchain and is an open source software platform. It
enables the developers in building and deploying decentralized applications like smart contracts. The
Ethereum can therefore be programmed without any chance of fraud as it is based on a decentralized
platform. Smart contracts are strings of computer code that is capable executing automatically.
Therefore it is seen that both Ethereum and bitcoin does not need any centralized control and
therefore is two advanced applications of blockchain technology.
2. Working model of the application

3
NETWORKED APPLICATIONS
Both bitcoin and Ethereum application is based on the decentralized platform of blockchain. The
working principle of bitcoin and Ethereum is discussed below-
Bitcoin
The Bitcoin application is mainly based in the transactions using cryptocurrencies. The working
principle of Bitcoins there includes a valid transaction between two bitcoin wallets. A transaction is
bitcoin includes a transfer of value between the two different bitcoin wallets [1]. These bitcoin wallets
keep a secret piece of data, which is called a private key. This key is very necessary to sign the
transaction associated with the bitcoin transaction. The details of the transaction are recorded in the
blocks of blockchain [8]. It provides a safe and secure platform for carrying out a transaction.
Bitcoin transactions are similar to the transactions including digital currency. The use of
cryptographic key ensures that a secure transaction is made.
Ethereum
Ethereum provides a platform for the creation and deployment of the smart contracts. With the
help of the Ethereum, the developers are able to program their smart contracts. Smart contracts are
capable of running all the clauses of a particular contract automatically without the need of any lawyer
[10]. Smart contracts are therefore made in order to exclude the chances of frauds in the smart
contract. The goal of Ethereum is therefore to allow the developers in writing more programs for
governing and automating specific outcomes. The structure of Ethereum is very similar to bitcioin. It is
basically a transaction based state machine that stores and records the different transactions in blocks.
This is a platform based on the technology of blockchain that allows the people in writing and running
different decentralized applications.
3. Scalability issues
Although the use and adoption of the different applications of blockchain such as bitcoin and
Ethereum has been increasing with a steady pace, there is certain scalability issues associated with the
use of such application. The scalability issues associated with bitcoin and Ethereum are as follows-
Bitcoin
One of the main scalability issues associated with the use of bitcoin is the limit of transaction.
The processing speed of bitcoin transactions is quite low as it is able to process only seven transactions

4
NETWORKED APPLICATIONS
per second. The speed of transaction in a blockchain network mainly depends on the size of the block
along with the size of the transaction [2]. The block size limit associated with bitcoin might create a
bottleneck in the bitcoin that delays the processing of the transactions. The transaction speed is
therefore one significant scalability issue associated with the use of bitcoin.
Ethereum
Ethereum has significantly less scalability issues in comparison to the use of bitcoin. The
transactions is bitcoin is limited while in Ethereum, the transaction limit is not yet known, which can be
considered as a major scalability issues associated with the use of the ethereum [5]. Difficulty in scaling
the ethereum mainly arises because it depends on the network of the nodes and a decentralized
platform that does not have a central authority.
4. Features and Weaknesses of the application
In order to understand the working principle of bitcoin and ethereum in a more appropriate
way, it is essential to understand the features and weaknesses of both the applications. The different
features and weaknesses of the application are discussed in the following sections.
Bitcoin
The different features of bitcoin are as follows [7]-
1. Bitcoin bypasses the need of management by any central authority and therefore can work
independently.
2. Anonymity is one of the significant features of blockchain transaction and offers the
advantages of anonymous transactions.
3. Since no central authority is responsible for managing the transactions associated with the
use of bitcoin, and therefore, no fraud is possible.
4. The transactions associated with the use of bitcoin cannot be reversed.
5. The transactional processing speed of bitcoin is very fast.
The weaknesses of using bitcoin are as follows [4]-

5
NETWORKED APPLICATIONS
1. Since the transaction associated with bitcoin cannot be reversed, there is high chance s of
money loss in fraudulent transaction
Ethereum
The different features of Ethereum are as follows-
1. It provides a decentralized platform for execution of the smart contracts
2. A custom built blockchain is used to run this application
The weaknesses associated with Ethereum are as follows [6]-
1. Every transaction involves a number of computers and this transaction cannot be done
offline.
2. Implementation of Ethereum is quite costly as the storage is expensive.
5. Socio-Technical aspects
Bitcoin and ethereum are two most widely adopted application of smart contract. The use of
bitcoin has increased over the years while the adoption of ethereum is gradually increasing as well.
However, since the entire transaction process is done online and there is no chance of reversing the
transaction, a large group of people do not find the use of smart contracts as safe and secure [3]. The
use of ethereum and smart contracts is capable of eliminating the need of lawyers and therefore it is
expected that use of ehereum will increase along with bitcoin.
Conclusion
The report gave an overview of two applications of blockchain, which are bitcoin and ethereum.
The decentralized nature of blockchain has made it extremely popular in the recent years, irrespective
of the fact that it is an emerging technology. The report discusses that the main features and
weaknesses of bitcoin and ethereum. The scalability issues of both the applications of blockchain, which
are ethereum and bitcoin is discussed in the report as well. Blockchain being the backbone of these
applications, the decentralized nature of these applications eliminates the need of any central authority.
Task 2: Main Features of Decentralized Architecture of Blockchain

6
NETWORKED APPLICATIONS

7
NETWORKED APPLICATIONS

8
NETWORKED APPLICATIONS

9
NETWORKED APPLICATIONS

10
NETWORKED APPLICATIONS

11
NETWORKED APPLICATIONS

12
NETWORKED APPLICATIONS

13
NETWORKED APPLICATIONS

14
NETWORKED APPLICATIONS

15
NETWORKED APPLICATIONS

16
NETWORKED APPLICATIONS

17
NETWORKED APPLICATIONS

18
NETWORKED APPLICATIONS
References
[1]. Grinberg, Reuben. "Bitcoin: An innovative alternative digital currency." Hastings Sci. & Tech. LJ 4
(2012): 159.
[2]. Yermack, David. "Is Bitcoin a real currency? An economic appraisal." In Handbook of digital currency,
pp. 31-43. 2015.
[3]. Eyal, Ittay, and Emin Gün Sirer. "Majority is not enough: Bitcoin mining is vulnerable."
In International conference on financial cryptography and data security, pp. 436-454. Springer, Berlin,
Heidelberg, 2014.
[4]. Reid, Fergal, and Martin Harrigan. "An analysis of anonymity in the bitcoin system." In Security and
privacy in social networks, pp. 197-223. Springer, New York, NY, 2013.
[5]. Wood, Gavin. "Ethereum: A secure decentralised generalised transaction ledger." Ethereum Project
Yellow Paper 151 (2014): 1-32.
[6]. Atzei, Nicola, Massimo Bartoletti, and Tiziana Cimoli. "A survey of attacks on Ethereum smart
contracts (SoK)." In International Conference on Principles of Security and Trust, pp. 164-186. Springer,
Berlin, Heidelberg, 2017.
[7]. Androulaki, Elli, Ghassan O. Karame, Marc Roeschlin, Tobias Scherer, and Srdjan Capkun. "Evaluating
user privacy in bitcoin." In International Conference on Financial Cryptography and Data Security, pp. 34-
51. Springer, Berlin, Heidelberg, 2013.
[8]. Swan, Melanie. "Blockchain thinking: The brain as a dac (decentralized autonomous organization)."
In Texas Bitcoin Conference, pp. 27-29. 2015.
[9]. Xu, Xiwei, Ingo Weber, Mark Staples, Liming Zhu, Jan Bosch, Len Bass, Cesare Pautasso, and Paul
Rimba. "A taxonomy of blockchain-based systems for architecture design." In Software Architecture
(ICSA), 2017 IEEE International Conference on, pp. 243-252. IEEE, 2017.
[10]. Dannen, Chris. Introducing Ethereum and Solidity. Apress, 2017.
[11]. Zheng, Zibin, Shaoan Xie, Hongning Dai, Xiangping Chen, and Huaimin Wang. "An overview of
blockchain technology: Architecture, consensus, and future trends." In Big Data (BigData Congress),
2017 IEEE International Congress on, pp. 557-564. IEEE, 2017.