Blockchain Technology
An Overview:
Blockchain is a method of recording information that makes it impossible or difficult for the
system to be changed, hacked, or manipulated.
A blockchain is a distributed ledger that duplicates and distributes transactions across the network
of computers participating in the blockchain.
Blockchain technology is a structure that stores transactional records, also known as the block, of
the public in several databases, known as the “chain,” in a network connected through peer-to-
peer nodes. Typically, this storage is referred to as a ‘digital ledger.’
Every transaction in this ledger is authorized by the digital signature of the owner, which
authenticates the transaction and safeguards it from tampering. Hence, the information the digital
ledger contains is highly secure.
Blockchain is an emerging technology with many advantages in an increasingly digital world:
o Highly Secure- It uses a digital signature feature to conduct fraud-free transactions
o Decentralized System-Conventionally, you need the approval of regulatory authorities
like a government or bank for transactions.
o Automation Capability-It is programmable and can generate systematic actions, events,
and payments automatically.
Technology
Blockchain is a combination of three leading technologies:
1. Cryptographic keys
2. A peer-to-peer network containing a shared ledger
3. A means of computing, to store the transactions and records of the network
Cryptography keys consist of two keys – Private key and Public key. These keys help in
performing successful transactions between two parties.
Each individual has these two keys, which they use to produce a secure digital identity reference.
This secured identity is the most important aspect of Blockchain technology.
In the world of cryptocurrency, this identity is referred to as ‘digital signature’ and is used for
authorizing and controlling transactions.
The digital signature is merged with the peer-to-peer network; a large number of individuals who
act as authorities use the digital signature in order to reach a consensus on transactions, among
other issues.
When they authorize a deal, it is certified by a mathematical verification, which results in a
successful secured transaction between the two network-connected parties.
So to sum it up, Blockchain users employ cryptography keys to perform different types of digital
interactions over the peer-to-peer network.
Types of BlockChain
There are four types of Blockchain
Public BlockChain : A public blockchain is a non-restrictive, permission-less distributed ledger
system. A node or user which is a part of the public blockchain is authorized to access current and
past records, verify transactions or do proof-of-work for an incoming block and do mining.
Private BlockChain : A private blockchain is a restrictive or permission blockchain operative
only in a closed network. Private blockchains are usually used within an organization or
enterprises where only selected members are participants of a blockchain network. The level of
security, authorizations, permissions, accessibility is in the hands of the controlling organization.
Thus, private blockchains are similar in use as a public blockchain but have a small and
restrictive network.
Consortium BlockChain : A consortium blockchain is a semi-decentralized type where more
than one organization manages a blockchain network. More than one organization can act as a
node in this type of blockchain and exchange information or do mining.
Hybrid BlockChain : A hybrid blockchain is a combination of the private and public blockchain.
It uses the features of both types of blockchains that is one can have a private permission-based
system as well as a public permission-less system. With such a hybrid network, users can control
who gets access to which data stored in the blockchain. Only a selected section of data or records
from the blockchain can be allowed to go public keeping the rest as confidential in the private
network. The hybrid system of blockchain is flexible so that users can easily join a private
blockchain with multiple public blockchains. A transaction in a private network of a hybrid
blockchain is usually verified within that network.
Process of Transaction
It confirms and authorizes transactions if two individuals wish to perform a transaction with a private
and public key or conducting financial transactions, respectively, the first person party would attach
the transaction information to the public key of the second party. This total information is gathered
together into a block.
The block contains a digital signature, a timestamp, and other important, relevant information.
It should be noted that the block doesn’t include the identities of the individuals involved in the
transaction.
This block is then transmitted across all of the network's nodes, and when the right individual uses his
private key and matches it with the block, the transaction gets completed successfully.
Proof of Work
In a Blockchain, each block consists of 4 main headers.
Previous Hash: This hash address locates the previous block.
Transaction Details: Details of all the transactions that need to occur.
Nonce: An arbitrary number given in cryptography to differentiate the block’s hash address.
Hash Address of the Block: All of the above (i.e., preceding hash, transaction details, and nonce) are
transmitted through a hashing algorithm. This gives an output containing a 256-bit, 64 character length
value, which is called the unique ‘hash address.’ Consequently, it is referred to as the hash of the block.
Numerous people around the world try to figure out the right hash value to meet a predetermined
condition using computational algorithms.
The transaction completes when the predetermined condition is met.
To put it more plainly, Blockchain miners attempt to solve a mathematical puzzle, which is referred
to as a proof of work problem. Whoever solves it first gets a reward.
Mining
The process of adding transactional details to the present digital/public ledger is called ‘mining.’ Though
Mining
The process of adding transactional details to the present digital/public ledger is called ‘mining.’
Though the term is associated with Bitcoin, it is used to refer to other Blockchain technologies as
well.
Mining involves generating the hash of a block transaction, which is tough to forge, thereby
ensuring the safety of the entire Blockchain without needing a central system.
Advantages
Time-saving: No central Authority verification needed for settlements making the process faster and
cheaper.
Cost-saving: A Block chain network reduces expenses in several ways. No need for third-party
verification. Participants can share assets directly. Intermediaries are reduced. Transaction efforts
are minimized as every participant has a copy of shared ledger.
Tighter security: No one can temper with Block chain Data as it shared among millions of
Participant. The system is safe against cybercrimes and Fraud.
Collaboration: It permits every party to interact directly with one another while not requiring third
party negotiate.
Reliability: Block chain certifies and verifies identities of every interested party. This removes double
record, reducing rates and accelerates transactions.
Disadvantages
High energy dependence, the difficult process of integration and the implementation's high costs.
