Block Chain

 Block Chain

A blockchain is a distributed database or ledger that is shared among the nodes of a computer network. As a database, a blockchain stores information electronically in digital format. Blockchains are best known for their crucial role in cryptocurrency systems, such as Bitcoin for maintaining a secure and decentralized record of transactions. The innovation with a blockchain is that it guarantees the fidelity and security of a record of data and generates trust without the need for a trusted third party.

Blockchain, sometimes referred to as distributed ledger technology (DLT), makes the history of any digital asset unalterable and transparent through the use of a decentralized network and cryptographic hashing.

A simple analogy for how blockchain technology operates can be compared to how a Google Docs document works. When you create a Google Doc and share it with a group of people, the document is simply distributed instead of copied or transferred. This creates a decentralized distribution chain that gives everyone access to the base document at the same time. No one is locked out awaiting changes from another party, while all modifications to the document are being recorded in real-time, making changes completely transparent. A significant gap to note however is that unlike Google Docs, original content and data on the blockchain cannot be modified once written, adding to its level of security

One key difference between a typical database and a blockchain is how the data is structured. A blockchain collects information together in groups, known as blocks, that hold sets of information. Blocks have certain storage capacities and, when filled, are closed and linked to the previously filled block, forming a chain of data known as the blockchain. All new information that follows that freshly added block is compiled into a newly formed block that will then also be added to the chain once filled.

A database usually structures its data into tables, whereas a blockchain, as its name implies, structures its data into chunks (blocks) that are strung together. This data structure inherently makes an irreversible timeline of data when implemented in a decentralized nature. When a block is filled, it is set in stone and becomes a part of this timeline. Each block in the chain is given an exact timestamp when it is added to the chain.

Block Chain 

  

Who Invented Blockchain?

Blockchain technology was first outlined in 1991 by Stuart Haber and W. Scott Stornetta, two mathematicians who wanted to implement a system where document timestamps could not be tampered with.

 In the late 1990s, Cypherpunk Nick Szabo   proposed using a blockchain to secure a digital payments system, known as bit gold (which was never implemented).

Stuart Haber  

   

W. Scott Stornetta

 

    

Cypherpunk Nick Szabo

   What is blockchain application ?

Blockchain applications go far beyond cryptocurrency and bitcoin. With its ability to create more transparency and fairness while also saving businesses time and money, the technology is impacting a variety of sectors  in ways that range from how contracts are enforced to making government work more efficiently. 

There are  real-world blockchain use cases for this pragmatic yet revolutionary technology. It’s far from an exhaustive list, but they’re already changing how we do business.

Block Chain Application

TOP BLOCKCHAIN APPLICATIONS TO KNOW

• Money transfer
• Smart contracts
• Internet of Things (IoT)
• Personal identity security
• Healthcare
• Logistics
• Non-fungible tokens (NFTs)
• Government
• Media

                                 What are blockchain benefits?

· Peer to peer (P2P) connection: machines that are part of the network are connected in a way that there is no central server. So there is no risk of the main server going down. Also, hackers cannot simply attack the main server so the probability of a successful attack is pretty low.

· Decentralized data: every machine can be a part of the network, have different localisation and store data.

·  Open-source: if a blockchain system is open-source (that’s not a must), your data aren’t dependent on any providers e.g. tech giants that store them on a daily basis.

· Transparency: as a part of a blockchain network you can see information about every transaction or state change.

·Security: decentralisation, encrypted data, P2P just make a blockchain more secure (difficult to hack).

              Why blockchain is secure?

                First of all, blockchain is transparent because data are decentralised and everyone has a view of each other actions. What is more, you cannot change the block hash without modifying previous blocks that is why it is extremely difficult to modify the existing chain. As an example, let’s explain the Ethereum consensus of Proof of work which secures the data. Only a group of miners that control more than 50% of the network can influence the hash which is called the 51% rule. This situation is practically impossible.

 

How Does a Blockchain Work?

The goal of blockchain is to allow digital information to be recorded and distributed, but not edited. In this way, a blockchain is the foundation for immutable ledgers, or records of transactions that cannot be altered, deleted, or destroyed. This is why blockchains are also known as a distributed ledger technology (DLT)  

How BlockChain works

                                        Benefits of Blockchains

Accuracy of the Chain

Transactions on the blockchain network are approved by a network of thousands of computers. This removes almost all human involvement in the verification process, resulting in less human error and an accurate record of information. Even if a computer on the network were to make a computational mistake, the error would only be made to one copy of the blockchain. For that error to spread to the rest of the blockchain, it would need to be made by at least 51% of the network’s computera near impossibility for a large and growing network the size of Bitcoin’s

Cost Reductions

Typically, consumers pay a bank to verify a transaction, a notary to sign a document, or a minister to perform a marriage. Blockchain eliminates the need for third-party verification—and, with it, their associated costs. For example, business owners incur a small fee whenever they accept payments using credit cards, because banks and payment-processing companies have to process those transactions. Bitcoin, on the other hand, does not have a central authority and has limited transaction fees.

Private Transactions

Many blockchain networks operate as public databases, meaning that anyone with an Internet connection can view a list of the network’s transaction history. Although users can access details about transactions, they cannot access identifying information about the users making those transactions. It is a common misperception that blockchain networks like bitcoin are anonymous, when in fact they are only confidential.

When a user makes a public transaction, their unique code—called a public key, as mentioned earlier—is recorded on the blockchain. Their personal information is not. If a person has made a Bitcoin purchase on an exchange that requires identification, then the person’s identity is still linked to their blockchain address—but a transaction, even when tied to a person’s name, does not reveal any personal information.

Decentralization

Blockchain does not store any of its information in a central location. Instead, the blockchain is copied and spread across a network of computers. Whenever a new block is added to the blockchain, every computer on the network updates its blockchain to reflect the change. By spreading that information across a network, rather than storing it in one central database, blockchain becomes more difficult to tamper with. If a copy of the blockchain fell into the hands of a hacker, only a single copy of the information, rather than the entire network, would be compromised

Efficient Transactions

Transactions placed through a central authority can take up to a few days to settle. If you attempt to deposit a check on Friday evening, for example, you may not actually see funds in your account until Monday morning. Whereas financial institutions operate during business hours, usually five days a week, blockchain is working 24 hours a day, seven days a week, and 365 days a year. Transactions can be completed in as little as 10 minutes and can be considered secure after just a few hours. This is particularly useful for cross-Border  trades, which usually take much longer because of time zone issues and the fact that all parties must confirm payment processing

Secure Transactions

Once a transaction is recorded, its authenticity must be verified by the blockchain network. Thousands of computers on the blockchain rush to confirm that the details of the purchase are correct. After a computer has validated the transaction, it is added to the blockchain block. Each block on the blockchain contains its own unique hash, along with the unique hash of the block before it. When the information on a block is edited in any way, that block’s hash code changes—however, the hash code on the block after it would not. This discrepancy makes it extremely difficult for information on the blockchain to be changed without notice.

Transparency

Most blockchains are entirely open-source software. This means that anyone and everyone can view its code. This gives auditors the ability to review cryptocurrencies like Bitcoin for security. This also means that there is no real authority on who controls Bitcoin’s code or how it is edited. Because of this, anyone can suggest changes or upgrades to the system. If a majority of the network users agree that the new version of the code with the upgrade is sound and worthwhile, then Bitcoin can be updated.

Banking the Unbanked

Perhaps the most profound facet of blockchain and Bitcoin is the ability for anyone, regardless of ethnicity, gender, or cultural background, to use it. According to The World Bank, an estimated 1.7 billion adults do not have bank accounts or any means of storing their money or wealth.7 Nearly all of these individuals live in developing countries, where the economy is in its infancy and entirely dependent on cash. 

These people often earn a little money that is paid in physical cash. They then need to store this physical cash in hidden locations in their homes or other places of living, leaving them subject to robbery or unnecessary violence. Keys to a bitcoin wallet can be stored on a piece of paper, a cheap cell phone, or even memorized if necessary. For most people, it is likely that these options are more easily hidden than a small pile of cash under a mattress. 

Blockchains of the future are also looking for solutions to not only be a unit of account for wealth storage but also to store medical records, property rights, and a variety of other legal contracts

Drawbacks of Blockchains

Technology Cost

Although blockchain can save users money on transaction fees, the technology is far from free. For example, the PoW system which the bitcoin network uses to validate transactions, consumes vast amounts of computational power. In the real world, the power from the millions of computers on the bitcoin network is close to what Norway and Ukraine consume annually.

Despite the costs of mining bitcoin, users continue to drive up their electricity bills to validate transactions on the blockchain. That’s because when miners   add a block to the bitcoin blockchain, they are rewarded with enough bitcoin to make their time and energy worthwhile. When it comes to blockchains that do not use cryptocurrency, however, miners will need to be paid or otherwise incentivized to validate transactions.

Some solutions to these issues are beginning to arise. For example, bitcoin-mining farms have been set up to use solar power, excess natural gas from fracking sites, or power from wind farms.

Speed and Data Inefficiency

Bitcoin is a perfect case study for the possible inefficiencies of blockchain. Bitcoin’s PoW system takes about 10 minutes to add a new block to the blockchain.9 At that rate, it’s estimated that the blockchain network can only manage about seven transactions per second (TPS). Although other cryptocurrencies such as Ethereum perform better than bitcoin, they are still limited by blockchain. Legacy brand Visa, for context, can process 65,000 TPS

Solutions to this issue have been in development for years. There are currently blockchains that are boasting more than 30,000 TPS.

 Ethereum's merge between its main net and beacon chain (Sep. 15, 2022) is predicted to allow up to 100,000 TPS after it rolls out an upgrade that includes sharding—a splitting of the database so that more devices (phones, tablets, and laptops) can run Ethereum. This will increase the network participation, reduce congestion, and increase transaction speeds.

The other issue is that each block can only hold so much data. The block size debate  has been, and continues to be, one of the most pressing issues for the scalability of blockchains going forward.

Illegal Activity

While confidentiality on the blockchain network protects users from hacks and preserves privacy, it also allows for illegal trading and activity on the blockchain network. The most cited example of blockchain being used for illicit transactions is probably the Silk Road, an online dark web illegal-drug and money laundering marketplace operating from February 2011 until October 2013, when it was shut down by the FBI.

The dark web allows users to buy and sell illegal goods without being tracked by using the Tor browser and make illegal purchases in Bitcoin or other cryptocurrencies. Current U.S. regulations require financial service providers to obtain information about their customers when they open an account, verify the identity of each customer, and confirm that customers do not appear on any list of known or suspected terrorist organizations.                                  

This system can be seen as both a pro and a con. It gives anyone access to financial accounts but also allows criminals to more easily transact. Many have argued that the good uses of crypto, like banking the unbanked world, outweigh the bad uses of cryptocurrency, especially when most illegal activity is still accomplished through untraceable cash.While Bitcoin had been used early on for such purposes, its transparent nature and maturity as a financial asset has actually seen illegal activity migrate to other cryptocurrencies such as Monero and Dash. Today, illegal activity accounts for only a very small fraction of all Bitcoin transactions. 

Regulation

Many in the crypto space have expressed concerns about government regulation over cryptocurrencies. While it is getting increasingly difficult and near impossible to end something like Bitcoin as its decentralized network grows, governments could theoretically make it illegal to own cryptocurrencies or participate in their networks. 

This concern has grown smaller over time, as large companies like PayPal begin to allow the ownership and use of cryptocurrencies on its platform

                                          Finally



Blockchain is an especially promising and revolutionary technology because it helps reduce security risks, stamp out fraud and bring transparency in a scalable way.