What is Blockchain:
Using cryptographic hashes, a blockchain is a growing collection of documents (blocks) that are securely connected to one another. Each block includes transaction information, a timestamp, and a cryptographic hash of the preceding block (generally represented as a Merkle tree, where data nodes are represented by leaves). The timestamp demonstrates that the transaction data was there at the moment the block was produced. Each block links to the blocks before it, forming an effective chain (compare linked list data structure), since each block carries information about the blocks preceding it. Thus, once a transaction has been recorded, it cannot be undone without also undoing all the following blocks, making blockchain transactions irreversible.
Based on earlier work by Stuart Haber, W. Scott Stornetta, and Dave Bayer, a person (or group of individuals) going by the name (or pseudonym) Satoshi Nakamoto constructed a blockchain in 2008 to operate as the public distributed ledger for bitcoin cryptocurrency transactions. Bitcoin was the first digital money to eliminate double spending without the aid of a central server or trusted authority because of the blockchain technology inside it. Other applications and publicly accessible blockchains that are often employed by cryptocurrencies were influenced by the bitcoin architecture. One kind of payment rail may be thought of as the blockchain.
For corporate purposes, private blockchains have been suggested. Others have suggested that permissioned blockchains, if well-built, maybe more decentralized and consequently safer
in reality than permissionless ones. Computerworld referred to the marketing of such privatized blockchains without a sufficient security mechanism as "snake oil."
in reality than permissionless ones. Computerworld referred to the marketing of such privatized blockchains without a sufficient security mechanism as "snake oil."
How does it work?
Blockchain owes its name to the way it maintains transaction data—in blocks connected by links to create a chain—as stated in Blockchain for Dummies. The blockchain expands as more transactions are made. The timing and order of transactions are recorded and confirmed in blocks, which are subsequently added to the blockchain and regulated by the rules established by the network's users.
"Each block includes the hash of the previous block, timestamped batches of recent valid transactions, and a hash (a digital fingerprint or unique identification). A block cannot be changed or put between two existing blocks because of the prior block hash, which connects the blocks. The process makes the blockchain impervious to tampering, in principle.
The following are the four main ideas of blockchain:
- A joint ledger: An "append-only" distributed system of record that is shared across a corporate network is known as a shared ledger. "Transactions are recorded just once via a shared ledger, reducing the repetition of effort that is characteristic of conventional commercial networks,"
- Permissions: Transactions are safe, authenticated, and verifiable thanks to permissions. With the flexibility to limit network membership, enterprises may more easily adhere to data protection laws like those outlined in the EU General Data Protection Regulation and the Health Insurance Portability and Accountability Act (HIPAA) (GDPR).
- Digital contracts: An agreement or set of rules that regulate a business transaction is referred to as a smart contract. A smart contract is kept on the blockchain and executed automatically as part of a transaction.
- Consensus: All parties consent to the network-verified transaction by consensus. Blockchains contain a variety of consensus processes, including multi-signature, PBFT, and proof of stake (practical Byzantine fault tolerance).
Each blockchain network contains a variety of users who, among other things, fill the following roles:
- Bitcoin users: With authorization to join the blockchain network, users (usually corporate users) may transact with other network users.
- Regulators: Users of the blockchain with appropriate access rights may monitor the network's transactions.
- operators of blockchain networks: people with specific access rights and power to define, build, operate, and maintain the blockchain network.
- authority for certificates: people in charge of creating and maintaining the various kinds of certificates needed to operate a permissioned blockchain.
History:
In 1982, David Chaum, a cryptographer, published a dissertation titled "Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups," which included a proposal for a blockchain-like system. Stuart Haber and W. Scott Stornetta provided a description of more work on a chain of blocks that was cryptographically protected in 1991. They sought to put in place a mechanism that would prevent tampering with document timestamps. Merkle trees were included in the design in 1992 by Haber, Stornetta, and Dave Bayer, which increased its effectiveness by enabling several document certificates to be gathered into a single block. Since 1995, The New York Times has released the document certificate hashes under their firm Surety each week.
The idea for the first decentralized blockchain was developed in 2008 by Satoshi Nakamoto, an individual (or group of individuals). By timestamping blocks without needing them to be signed by a third party and stabilizing the pace at which blocks are added to the chain using a difficulty parameter, Nakamoto significantly enhanced the concept. The idea was put into effect the following year by Nakamoto as a fundamental part of the cryptocurrency bitcoin, serving as the network's central public record for all transactions.
The size of the Bitcoin blockchain file, which contains a history of every transaction that has ever taken place on the network, hit 20 GB in August 2014. (gigabytes). The size of the bitcoin blockchain increased from roughly 30 GB in January 2015 to 50 GB and 100 GB from January 2016 to 2017. By the start of 2020, the ledger size had surpassed 200 GB.
In Satoshi Nakamoto's initial paper, the phrases "block" and "chain" were used independently, but by 2016, the term "blockchain" had gained popularity.
Blockchains reportedly reached the early adopter's phase in 2016 with a 13.5% acceptance rate within the financial services sector, according to Accenture's application of the diffusion of innovations theory. In 2016, the Chamber of Digital Commerce launched the Global Blockchain Forum, an effort by industry trade organizations.
Only 8% of CIOs were in the immediate term "planning or [looking at] active experimentation with blockchain," according to a May 2018 Gartner study. Only 1% of CIOs reported any type of blockchain implementation inside their firms. According to a 2019 Gartner research, 5% of CIOs said blockchain technology will "change the game" for their company.
Structure and design:
A blockchain is a decentralized, distributed, and often public digital ledger made up of entries called blocks that are used to log transactions across several computers such that any associated block cannot be changed retrospectively without changing all succeeding blocks. This makes it possible for participants to independently and reasonably audit transactions. A distributed timestamping server and a peer-to-peer network are used to administer a blockchain database independently. They are verified by widespread cooperation propelled by group self-interest. A robust process is made possible by such a design where participants' uncertainty about data security is minimal. A digital asset loses the property of unlimited replication when a blockchain is used. By proving that each unit of value was only ever transferred once, the long-standing issue of duplicate spending is resolved. A mechanism for value exchange has been used to define a blockchain. Because it produces a record that compelled offer and acceptance when it is correctly configured to specify the trade agreement, a blockchain may preserve title rights. [Reference required]
- Logically, a blockchain may be thought of as having several layers:
- infrastructure (hardware) (hardware)
- networking (node finding, information propagation, and verification) (node discovery, information propagation, and verification)
- consensus (proof of work, proof of stake) (proof of work, proof of stake)
- Application (smart contracts/decentralized apps, if appropriate) Data (blocks, transactions)
Blocks:
Batches of legitimate transactions are hashed and encoded into a Merkle tree and stored in blocks. The cryptographic hash of the previous block in the blockchain is included in each block, connecting the two. A chain is created by the joined blocks. All the way back to the first block, known as the genesis block, this iterative process ensures the consistency of the previous blocks (Block 0). A block is typically digitally signed to ensure the integrity of the block and the data it contains.
A temporary fork can occasionally be produced when different blocks are generated concurrently. Any blockchain has a specific algorithm for scoring various versions of the history so that one with a higher score can be chosen over others, in addition to a secure hash-based history. Orphan blocks are those that weren't chosen for the chain. There are occasionally different versions of the history among the peers supporting the database. They only retain the database version with the best score that they are aware of. Peers extend or overwrite their own databases whenever they receive a higher-scoring version, which is typically the old version with one new block added, and then they retransmit the improvement to their fellow peers. There is never a 100% guarantee that any given entry will always be included in the most accurate version of history. Blockchains are frequently designed to stack new blocks on top of older ones, and they are given incentives to do so rather than to replace older blocks. As more blocks are added on top of an entry, the likelihood that it will be superseded decreases exponentially, eventually becoming very low. ch. 08 For instance, the proof-of-work method used by bitcoin determines which chain is authentic by accumulating the most proofs of work. A sufficient amount of computation may be shown using a variety of techniques. Instead of doing the calculation traditionally in a segregated and parallel fashion, a blockchain does it redundantly.
Block period:
The block time measures how long it typically takes for the network to create a new block for the blockchain. The included data becomes verifiable at block completion. A shorter block time results in faster transactions because in cryptocurrencies, this is essentially when the transaction happens. Ethereum's block time is set to be between 14 and 15 seconds, compared to bitcoin's average block time of 10 minutes.
stony forks:
An excerpt from Fork (blockchain): Hard fork can be found here.
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A hard fork is a modification to the blockchain protocol that is not backward-compatible and necessitates software upgrades from all users for them to continue using the network. A hard fork causes the network to split into two distinct versions: one that abides by the new rules and one that abides by the previous ones.
As an illustration, Ethereum underwent a hard fork in 2016 to "make whole" the investors in The DAO, which had been compromised by a flaw in its code. In this instance, the fork led to a split, resulting in the chains Ethereum and Ethereum Classic. A hard fork that would have resulted in a rollback of the blockchain records was proposed to the Nxt community in 2014 to counter the effects of the theft of 50 million NXT from a significant cryptocurrency exchange. After negotiations and a ransom payment, the hard fork proposal was rejected, and some of the funds were obtained. As happened when Bitcoin split on March 12, 2013, a majority of nodes running the new software may instead opt to revert to the previous set of regulations to avert a permanent split.
A more recent example of a hard fork is the split that produced Bitcoin Cash in 2017 as part of the Bitcoin network. The network split primarily as a result of disagreements over how to increase the number of transactions per second to meet demand.
Decentralization:
The peer-to-peer network of the blockchain eliminates some risks associated with central data storage by storing data across its peers. The decentralized blockchain may make use of distributed networking and ad hoc message passing.
In a so-called "51% attack," a central actor seizes more than 50% of a network and has complete control over a single blockchain record, enabling double-spending.
Peer-to-peer blockchain networks don't have any centralized points of failure or vulnerability that hackers could take advantage of. Public-key cryptography is one of the security measures used for blockchains.: 5 An address on the blockchain is a public key, which is a long string of numbers that appear random. The address is noted as the owner of value tokens sent throughout the network. Similar to a password, a private key provides its owner with access to its digital assets or other means of interacting with the many features that blockchains now support. The blockchain is widely regarded as having incorruptible data.
A decentralized system has a copy of the blockchain on each node. Computational trust and massive database replication maintain data quality. No single user is "trusted" more than any other, and there is no centralized "official" copy. Using the program, transactions are broadcast to the network. All efforts are made to deliver messages. Early blockchains depend on power-hungry mining nodes to verify transactions, include them in the block they are creating, and then broadcast the finished block to other nodes.: ch. 08 Blockchains serialize updates using a variety of time-stamping techniques, including proof-of-work. Proof of stake is a component of later consensus techniques. A decentralized blockchain's expansion comes with the danger of centralization due to the rising cost of the computing resources needed to handle bigger volumes of data.
Finality:
The degree of certainty that a newly added well-formed block won't be revoked in the future (that it is "finalized") and can, thus, be trusted. Most distributed blockchain systems, whether proof of work or proof of stake, depend on "probabilistic finality" instead of being able to ensure the finality of a newly committed block. As a block moves further into a blockchain, it becomes less likely to be changed or reversed by a new consensus.
Byzantine Mistake A block is proposed by a validator at random, the other validators vote on it, and if a supermajority decision accepts it, the block is irrevocably committed to the blockchain. Tolerance-based proof-of-stake protocols claim to deliver this so-called "absolute finality." Practical methods, like the Casper protocol used in Ethereum, employ a variation of this mechanism called "economic finality": validators who sign two distinct blocks at the same location in the blockchain are vulnerable to "slashing," where their leveraged stake is lost.
Openness:
Compared to certain conventional ownership records, which are accessible to the public but still need physical access to examine, open blockchains are easier to use. There is debate over the concept of a blockchain since all early blockchains were permissionless. Whether a private system with verifiers assigned and permitted (permissioned) by a central authority should be regarded as a blockchain is a topic of continuing discussion. The word "blockchain," according to proponents of permissioned or private chains, may refer to any data structure that groups data into time-stamped blocks. These blockchains function as a distributed adaptation of databases' multi-version concurrency control (MVCC). Blockchains prohibit two transactions from using the same single output simultaneously, just as MVCC prevents two transactions from concurrently changing the same single object in a database.: 30-31 Opponents claim that permissioned systems are unhardened against operator manipulation and amendment and are similar to typical corporate databases in that they do not provide decentralized data verification. According to Nikolai Hampton of Computerworld, "many in-house blockchain systems will be little more than burdensome databases," and "proprietary blockchains should be looked at with mistrust without a defined security architecture."
Public, permission-free blockchain:
A benefit of an open, permissionless, or public blockchain network is that access management and security against malicious actors are not necessary. This implies that by leveraging the blockchain as a transport layer, apps may be introduced to the network without needing the consent or confidence of others.
Currently, proof of work is a requirement for new entries in Bitcoin and other cryptocurrencies to protect their blockchain. Hashcash puzzles are a method used by bitcoin to extend the blockchain. Although Adam Back created hash cash in 1997, Cynthia Dwork, Moni Naor, and Eli Ponyatovski first put out the concept in their 1992 article "Pricing through Processing or Combatting Junk Mail."
2016 saw a decline in venture capital funding for blockchain-related startups in the USA while rising in China. Blockchains that are open (public) are used by Bitcoin and many other cryptocurrencies. The market capitalization of bitcoin is the greatest as of April 2018.
Private (permissioned) blockchain:
Associated term: distributed ledger Access control layers are used by permissioned blockchains to regulate who has access to the network. In contrast to permissionless blockchains, which are often centralized in reality, it has been proposed that permissioned blockchains, if correctly structured, may ensure a certain amount of decentralization.
Permissioned blockchain drawbacks:
In Computerworld, Nikolai Hampton stated that "The private blockchain (presumably) already has complete control over all resources for creating blocks, hence there is no need for a "51 percent" assault on it. A private corporate server's blockchain generation tools might be attacked or damaged, giving you complete control over the network and the ability to change transactions whatever you pleased." This has several very serious negative ramifications, especially during a financial or debt crisis like the one in 2007–2008, when politically strong players may decide to favor certain organizations over others "The extensive collective mining effort defends the bitcoin network. Given how time-consuming and costly it is, it seems doubtful that any private blockchain would attempt to safeguard data using gigawatts of computer power." Also from him: "Additionally, there is no "race" inside a private blockchain; there is no incentive to consume more resources or find blocks more quickly than rivals. This implies that many internal blockchain solutions will just be bulky databases."
cryptocurrency analysis:
The popularity of cryptocurrencies like bitcoin, Ethereum, litecoin, and others has made it more crucial than ever to analyze public blockchains. If a blockchain is open to the public, anybody with the necessary skills may see and examine the chain's data. For many cryptocurrencies, crypto exchanges, and institutions, the process of comprehending and accessing the flow of cryptocurrency has proved problematic. This is due to claims that cryptocurrencies with blockchain support facilitate illegal trade in narcotics, firearms, and other goods as well as money laundering. Because it is often believed that cryptocurrencies are private and untraceable, many users have turned to use them for criminal activities. This is altering as specialist tech firms increasingly provide blockchain monitoring services, increasing awareness among banks, law enforcement, and crypto exchanges about the activities of crypto money and fiat-crypto transactions. Some claim that this development has encouraged criminals to prioritize the usage of emerging cryptos like Monero. The debate is on whether blockchain data is accessible to the general public while yet maintaining individual privacy. It is a crucial topic of discussion for cryptocurrencies and, eventually, blockchain.
Standardization:
Standards Australia proposed to the International Organization for Standardization in April 2016 that they take into account creating standards to accommodate blockchain technology. The ISO Technical Committee 307, Blockchain and Distributed Ledger Technologies, was established as a consequence of this proposal. The technical committee is divided into working groups that focus on terms related to blockchain, reference architecture, security and privacy, identity, smart contracts, governance, and interoperability for blockchain and DLT, as well as industry-specific standards and general government requirements. [needs non-primary source] Along with external liaisons like the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the European Commission, the International Federation of Surveyors, the International Telecommunication Union (ITU), and the United Nations Economic Commission for Europe, more than 50 countries are taking part in the standardization process (UNECE).
Working on blockchain standards are several additional national and open standards organizations. These organizations and individuals include the National Institute of Standards and Technology (NIST), the European Committee for Electrotechnical Standardization (CENELEC), the Institute of Electrical and Electronics Engineers (IEEE), the Organization for the Advancement of Structured Information Standards (OASIS), as well as some members of the Internet Engineering Task Force (IETF).
Blockchain centralized:
Oracle included a controlled blockchain table functionality in its Oracle 21c database, even though the majority of blockchain implementations are distributed and decentralized. A centralized blockchain with immutable properties is the Blockchain Table in the Oracle 21c database. Centralized blockchains often have better throughput and shorter latency of transactions than consensus-based distributed blockchains as compared to decentralized blockchains.
