Let’s unlock the potential of Blockchain

Sunil Raj
Sunil Raj
May 13 · 12 min read

- The chain to be harnessed with…

Introduction:

Blockchain is an undeniably ingenious invention — the brainchild of a person or group of people known by the pseudonym, Satoshi Nakamoto. It has evolved into something greater. It is a type of digital ledger which maintains a record of transactions. It stores the information in regular batches, known as blocks, that are linked together in a chronological manner to form a continuous chain of blocks. A Blockchain is a tamper-proof distributed public ledger that manages transactions. It is basically an incorruptible ledger of data, which can be used to store informational assets ranging from managing cryptographic contracts to transferring value. Blockchain is decentralized and distributed. It creates trust in the data. It is used for the secure transfer of items like money, property, contracts, etc. without requiring a third-party intermediary like bank or government. Once data is recorded inside a blockchain, it is very difficult to change it. Blockchains can be complex, computationally intensive, and expensive to implement.

As a result, each block strengthens the previous block and the security of the entire blockchain means more blocks would need to be changed to tamper with any information. It is a time-stamped series of an immutable record of data that is managed by a cluster of computers not owned by any single entity. Any information that is added to a blockchain is packed into blocks. These blocks link together to form a chain. This is where blockchain gets its name from.

How Does Blockchain Work?

A Blockchain is a chain of blocks which contain information. The data which is stored inside a block depends on the type of blockchain. The first block in the chain is called the Genesis block. Each new block in the chain is linked to the previous block

When a block stores new data it is added to the blockchain. Blockchain consists of multiple blocks strung together. As each transaction occurs — and the parties agree to its details — it’s encoded into a block of digital data and uniquely signed or identified. After the first block has been created, each subsequent block in the ledger uses the previous block’s hash to calculate its own hash. Before a new block can be added to the chain, its authenticity must be verified by a computational process called validation or consensus. At this point in the blockchain process, most nodes in the network must agree the new block’s hash has been calculated correctly.

In a P2P network, the user utilizes and provides the foundation of the network at the same time, although providing the resources is entirely voluntary. Each peer is considered equal and is commonly referred to as nodes. A peer makes a portion of computing resources such as disk storage, processing power or network bandwidth, directly available to other participants without the need for any central coordination by servers or stable hosts. This method of transferring information is a huge improvement because data is not held in one centralized point, making it far less vulnerable to being hacked, exploited or lost.

Consensus ensures that all copies of the distributed ledger share the same state. A node has a file of transactions on a ledger. Blockchain allows for a new, trust-less world. Blockchain is cheaper, faster and more secure than any centralized system.

Types of Blockchain:

  • Public: Also called permission-less ledgers contain absolutely no restrictions. Public blockchains allow anyone to contribute data to the ledger with all participants possessing an identical copy of the ledger
  • Private: A private Blockchain allows entry for only selected individuals of verified participants, which is like a private business, one can choose for implementation of private Blockchain. The participant needs a verified invitation, or validation was done by the network operators to join a private network. It allows only specific people of the organization to verify and add transaction blocks. Sometimes called permissioned ledgers
  • Consortium: In this, only a group of organizations can verify and add transactions. Here, the ledger can be open or restricted to select groups. A consortium blockchain is used in cross-organizations. It is only controlled by pre-authorized nodes. A consortium blockchain is partly private. A consortium blockchain is often said to be semi-decentralized
  • Hybrid blockchains: It allows determining what information stays private and what information is made public. Depending on the hybrid blockchain its architecture, multi-cloud solutions allow storing data

Attributes, Properties, and Technicalities:

  • Decentralization: It is entirely decentralized, rather than stored in one central point. This removes the need for powerful central authorities and instead hands control back to the individual user
  • Transparency: It adds that extra, and much needed, level of accountability which is required by some of these biggest institutions
  • Immutability: It means once something has been entered the blockchain, it cannot be tampered with. No user in the blockchain network can modify a transaction after it has been recorded. To correct the error, a new transaction must be generated, which will reference the erroneous record
  • N2N: These systems are characterized by encrypted transactions where only the parties involved in a transaction have access to the data. Suitable for use cases where a high degree of transaction confidentiality is required
  • Nonces: A miner continues testing different unique values until a suitable one is produced
  • Cryptography: Cryptography means “secret writing which means that the data which makes up a blockchain is encoded. Cryptography is the method of disguising and revealing, otherwise known as encrypting and decrypting, information through complex mathematics. This means that the information can only be viewed by the intended recipients and nobody else
  • Digital Signature: These are one of the main aspects of ensuring the security and integrity of the data that is recorded onto a blockchain, in digital form. These are the key component in securing data on a blockchain, whereas nodes are the very foundations upon which the network itself is built
  • Multi-signature: It is a digital signature scheme with the requirement of more than one signee to approve a transaction or document transferral
  • Block time: It is the average time it takes for the network to generate one extra block in the blockchain
  • Blockchain Network: A blockchain is a network. A network is a group or system of connected people or things. The computers or devices on the network, known as nodes, make up a blockchain network
  • Node: Nodes are distributed across a widespread network and carry out a variety of tasks. Nodes are the individual parts of the larger data structure that is a blockchain. A node can either be a communication endpoint or a point of communication redistribution, linking to other nodes. Every node on the network is considered equal, however certain nodes have different roles in the way they support the network
  • Miners: Basically, miners are nodes that not only store all information about all transactions within the network but also record the transactions and form them into blocks by performing calculations
  • Hash: A block is also called has a hash. It identifies a block and all its contents, and it’s always unique, just like a fingerprint. So once a block is created, any change inside the block will cause the hash to change
  • Hashing: In the blockchain, hashes are used to represent the current state of the blockchain. So, every single transaction up to the point, combined with the new data that is being added is hashed
  • Hash pointers: These are where blockchain sets itself apart in terms of certainty as pointers not only contain the address of the previous block but also the hash data of that block too
  • Merkle Trees: A Merkle tree, otherwise called a hash tree, is a data structure of hashes used to record data onto a blockchain in a secure and efficient manner. Merkle trees and hashes are a key component in allowing blockchain technology to function whilst providing security, integrity and irrefutability and, alongside consensus protocols
  • Protocol: A protocol is a set of rules describing how the communication between electronic devices, such as nodes should work. These rules need to be structured and how each device will send or receive it
  • Consensus Protocols: Consensus protocols are designed to be difficult to imitate or replicate by being extremely costly to carry out, in terms of time, the computing resources required or the holdings of a cryptocurrency
  • Proof of Work: The most common consensus mechanism. When a transaction is initiated, the information is stored in a candidate block which is filled with the transaction’s information. Miners solve mathematical tasks to record operations within the network and build blocks. Afterward, the first solution that has been found and fits the parameters is verified by the other nodes. This type of consensus demands an increase in computational power when the network grows. Hashes are an excellent mechanism to prevent tampering Thus, hashing and proof-of-work mechanism make a blockchain secure. The lower a target is, the more difficult it is to generate a block
  • Proof of Stake: Proof of Stake is a type of consensus algorithm that considers a choice of the node that forms the next block based on a prescribed algorithm. Validation introduces randomness into the process, making the establishment of a validation monopoly more difficult, thereby enhancing network security
  • Delegated Proof of Stake: Delegated Proof of Stake uses a system of voting to decide who should be securing the network, so which nodes are validating blocks of transactions. It is the protocol of choice at Lisk and with very good reason. A DPoS network is self-governed and policed by all its participants ensuring the best interests of the network remain the priority
  • Proof of Authority: An authority can change the rules or cancel decisions. The authority in this is a validator — a node with special rights
  • Closed Consensus: Certain nodes are required to put up a security deposit in order to participate in updating the Blockchain
  • Round Robin: Utilizing a randomized approach, the round robin protocol requires each block to be digitally signed by the block-adder, which may be a defined set of participants
  • Federated Consensus: It’s where each participant knows all the other participants, and where small sets of parties who trust each other agree on each transaction and over time the transaction is deemed valid
  • Proprietary Distributed Ledger: A PDL is one where the ledger is controlled, or proprietary, to one central entity or consortium. The benefits of this protocol are that there is already a high degree of pre-existing trust between the network participants and agreed-upon security measures
  • PBFT: In this, each node publishes a public key and messages are signed by each node, and after enough identical responses the transaction is deemed valid
  • Byzantine Fault Tolerance: There is a list of faults that can be tolerated, and decisions on whether to verify transactions are made according to the results of the voting
  • Federated Byzantine Agreement: There should be a specified number of nodes that have voted for a decision to make it valid for the whole network. Unlike BFT, the number of nodes that need to agree can be less than ⅔
  • Currency: Also known as Blockchain 1.0. This allows financial transactions based on blockchain technology. Bitcoin is the most prominent example in this segment
  • Smart Contracts: Usually called as Blockchain 2.0. A Smart Contract is generally described as a set of algorithms recorded in a file. They are free computer programs that execute automatically and check conditions defined earlier like facilitation, verification or enforcement. It is used as a replacement for traditional contracts. These contracts are powered by the Ethereum Virtual Machine (EVM) and by Ether. In order to create an added layer of customization and security, Ethereum created some high-level languages that are used to create smart contracts for the EVM are Solidity, Serpent, and LLL
  • DApps: DApps is nothing but decentralized application. It has the backend code running on a decentralized P2P network. It can have front-end code and UI’s written in any language that can make a call to its back-end. They run on a P2P network of computers. Examples: BitTorrent, BitMessage, Tor. In short, a dApp is frontend + contracts called as Blockchain 3.0
  • Ethereum: It’s a blockchain system based on the concepts of bitcoin. It is considered as 2nd generation blockchain technology designed to develop and deploy their own decentralized applications on the Blockchain. Blockchain 2.0 able to program and perform, arbitrary and complex computations
  • Distributed Ledger Technology: The distributed ledger is a book or any computer file where the information is stored or written. It may contain any information like transactions or contracts supported by a network which is decentralized. It is a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, and institutions. Everyone gets information about what is happening within the network
  • Distributed Computation: Blockchain’s network resiliency is largely attributed to its distributed architecture. There is no central node processing and distributing the data, but every node can run independently and broadcast any work that is required
  • Information Storage: In the case of the bitcoin blockchain, information stored within the blocks
  • Provenance: Blockchains ensure provenance, in a pre-programmed way. In a blockchain transaction, each activity is tracked, recorded, and fully traceable without a third-party
  • Cryptocurrency: A cryptocurrency is one medium of exchange like traditional currencies such as USD, but it is designed to exchange digital information through a process made possible by certain principles of cryptography
  • Bitcoin: Bitcoin is a Peer-to-Peer technology which is not governed by any central authority or banks. Currently, issuing Bitcoins and managing transactions are carried out collectively in the network. It is presently the dominant cryptocurrency of the world. It is open source and designed for the general public means nobody owns the control of the Bitcoin. If you are handling Bitcoin, the sender and receiver transact directly without using a third party

Advantages:

  • Accuracy, Cost-effective, Efficiency, Privacy & Cryptographic Security
  • Real-time transactions are effective and take very little time
  • Decentralized, Unbreakable, Trust, Transparency, Resilience, Reliability, Fraud prevention, Collaboration
  • Faster operations, Availability & Simplifying Business to Business

Disadvantages:

  • Inefficiency, Privacy & Higher costs
  • Slower transactions, Smaller ledger, Network speed & Risk of error
  • Wasteful, Security & Susceptibility

Future of Blockchain:

With many practical applications, this technology has been already implemented and explored, blockchain is finally making a name for itself. As a buzzword on the tongue of every developer, blockchain stands to make business operations and solutions more accurate, safe, effective, accessible, available, efficient, and secure.

The current state of this technology is experimenting with the multi-dimensional problems to solve, but not adopting it on a wide scale. One of the major ones dealing with is interoperability.

Also, while many of the blockchains in existence are public, major companies are trailing a private version of the technology.

Applications:

  • Smart contracts, Cyber-security, Education, Marketing, Advertising, Music, Video sharing, E-commerce, Identity, Energy supply & the sharing economy
  • Crowdfunding, Banks, Cryptocurrency, Healthcare, Voting, Property Records, Governance, File storage & Supply Chain
  • Prediction markets & Protection of intellectual property
  • IoT, Neighborhood Micro-grids, Identity management, AML and KYC, Data management & Land title registration
  • Stock trading, Financial services, Games & Space

Developer Take-A-Ways!

Conclusion:

Blockchain has been one of the most awe-inspiring innovations since its inception. It allows everyone to hold and make transactions as strangers but in a completely transparent manner. There is no mediator between two people making the transaction, and the entire process becomes easier and cheaper. This concept can be applied to the entire digital world making any kind of exchange/transactions secure.

One thing is inevitable, it’s gonna be everywhere for a long time. Thanks to blockchain, now the world can become a good place.

I’m going to share a bunch of tools for developers at the Developer Take-A-Ways Section of the story, but feel free to comment, share or send me any other interesting videos or links you might have found. ✌ It’s a massive opportunity to work on. I hope you found this article useful.

If you feel like this story was useful or informative and think others should see it too, make sure you hit the ‘clap’👏 button. See you soon! 👋 Bubyee…

“The blockchain is an incorruptible digital ledger of transactions that can be programmed to record not just transactions but virtually everything of value.”

- Unknown