Chapter 1 : DATA CONVERGENCE — BLOCKCHAIN TECHNOLOGY-INTRODUCTION TO BLOCKCHAIN
Chapter 1 :Welcome to the Introduction to Blockchain Part 1 of Blockchain technology — 101 . Here you will learn,
Distributed ledger technologies(DLT):
What is blockchain technology?
What blockchain is NOT?
Is blockchain similar to database?
Characteristics of blockchains:
Immutability of data
Transparency
Decentralisation
Security
Consensus mechanisms and types:
Blockchain Versions:
Blockchain vs Shared Database
Myths about Blockchain
Blockchain providers:
HyperLedger:
Openchain:
Ethereum project:
Distributed ledger technologies(DLT):
Distributed ledger technology includes blockchain technologies and smart contracts. While DLT existed prior to bitcoin or blockchain, it marks the convergence of a host of technologies, including the time-stamping of transactions, peer-to-peer (P2P) networks, cryptography, shared computational power, as well as a new consensus algorithm. In short, distributed ledger
technology is generally made up of three basic components:
What is blockchain technology?
Blockchain is a specific form or sub-set of distributed ledger technologies, which constructs a chronological chain of blocks; hence the name ‘blockchain’.
A block refers to a set of transactions that is bundled together and added to the chain at the same time. A blockchain is a peer-to-peer distributed ledger, forged by consensus, combined with a system for smart contracts and other assistive technologies. Together, these can be used to build a new generation of transactional applications that establish trust, accountability and transparency at their core, while streamlining business processes and legal constraints. The blockchain then tracks various assets, the transactions are grouped into blocks, and there can be any number of transactions per block. A block commonly consists of the following four pieces of metadata:
What blockchain is NOT?
• Blockchain is not bitcoin, but it is the technology behind bitcoin.
• One cannot have a bitcoin without blockchain(You got the point), but one can have blockchain without bitcoin.
• Blockchain is the ledger which keeps tracks of transactions and bitcoin is the digital token built on blockchain.
Is blockchain similar to database?
Blockchain technology is different from databases in some key aspects. In a
relational database, data can be easily modified or deleted. Typically, there are database administrators who may make changes to any part of the data or its structure and even to relational databases. A blockchain, however, is a write-only data structure, where new entries get appended onto the end
of the ledger. There are no administrator permissions within a blockchain that allow the editing or deleting of data. Also, the relational databases were originally designed for centralised applications, where a single entity controls the data. In contrast, blockchains were specifically designed for decentralised applications.
Characteristics of blockchains:
Here is a list of some of the well-known properties of blockchains.
Immutability of data
The immutability of the data which sits on the blockchain is perhaps the most powerful and convincing reason to deploy blockchain-based solutions for a variety of socio-economic processes that are currently recorded on centralised servers. This ‘unchanging over time’ feature makes the blockchain useful
for accounting and financial transactions, in identity management and in asset ownership, management and transfer, just to name a few examples.
Once a transaction is written onto the blockchain, no one can change it or, at least, it would be extremely difficult to do so.
Transparency
Transparency of data is embedded within the network as a whole. The blockchain network exists in a state of consensus, one that automatically checks in with itself. Due to the structure of a block, the data in a blockchain
cannot be corrupted; hence altering any unit of information in it is almost
impossible. Though, in theory, this can be done by using a huge amount of
computing power to override the entire network, this is not possible practically.
Decentralisation
By design, the blockchain is a decentralised technology. Anything that
happens on it is a function of the network, as a whole. A global network of
computers uses blockchain technology to jointly manage the database that
records transactions. The consensus mechanism discussed next ensures
the correctness of data stored on the blockchain.
Security
By storing data across its network, the blockchain eliminates the risks that
come with data being held centrally, and the network lacks centralised points
of vulnerability that are prone to being exploited. The blockchain ensures all
participants in the network use encryption technologies for the security of
the data. Primarily, it uses PKI (public key infrastructure), and it is up to the participants to select other encryption technologies as per their preference.
Consensus mechanisms and types:
Consensus is an agreement among the network peers; it refers to a system
of ensuring that participants agree to a certain state of the system as the
true state. It is a process whereby the peers synchronise the data on the
blockchain. There are a number of consensus mechanisms or algorithms.
One is Proof of Work. Others include Proof of Stake, Proof of Elapsed Time
and Simplified Byzantine Fault Tolerance. Bitcoin and Ethereum use Proof
of Work, though Ethereum is moving towards Proof of Stake.
Blockchain Versions:
Blockchain 1.0 : Currency
The implementation of DLT (distributed ledger technology) led to its first and obvious application: cryptocurrencies. This allows financial transactions based on blockchain technology. It is used in currency and payments. Bitcoin is the most prominent example in this segment.
Blockchain 2.0: Smart Contracts
The new key concepts are Smart Contracts, small computer programs that “live” in the blockchain. 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.
Blockchain 3.0: Dapps
DApps is an abbreviation of decentralized application. It has their backend code running on a decentralized peer-to-peer network. A DApp can have frontend code and user interfaces written in any language that can make a call to its backend, like a traditional Apps.
Blockchain vs Shared Database
Myths about Blockchain
Myth
Reality
Trustless technology
It can shift trust and also spreads trust
Smart contracts are always legal
It only executes parts of some legal contracts
Immutable
It only offers probabilistic immutability
Need to waste electricity
Emerging blockchains are efficient
It is inherently unscalable
Emerging blockchains are scalable
Blockchain providers:
Blockchain technology, with its unprecedented way of managing trust and
data and of executing procedures, can transform businesses. Here are some
open source blockchain platforms.
HyperLedger:
Hyperledger nurtures and endorses a wide array of
businesses around blockchain technologies, including distributed ledgers,
smart contracts, etc. Hyperledger encourages the re-use of common building
blocks and enables the speedy invention of distributed ledger technology
components.
Openchain:
Openchain is an open source distributed ledger technology.
It is ideal for enterprises, and deals in issuing and managing digital assets
in a robust, secure and scalable way.
Ethereum project:
This is a distributed framework that runs smart
contracts — applications that run exactly as programmed in a secured
virtual environment without downtime or the possibility of tampering, as
this platform leverages the custom built blockchain.
Stay tuned for next chapters!…
