What is blockchain technology?
Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system. A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain.
Let’s go deep into it,
- How does a blockchain works?
- Different types of blockchain technology
- Cryptography in Blockchain
- Blockchain technology in Bitcoin
- Key elements of the blockchain ecosystem
- Is it possible to double spend in a blockchain system?
- What is a transposition cipher?
- Difference between On-chain and Off-chain transactions
- What is the side-chain transaction?
- What type of records can be kept in the blockchain? Are there any restrictions on the same?
- Secret sharing
Blockchain technology first came to light when a person or group of individuals name ‘Satoshi Nakamoto’ published a white paper on “Bitcoin: A peer to peer electronic cash system” in 2008. The blockchain is a distributed database of records of all transactions or digital events that have been executed and shared among participating parties. Each transaction is verified by the majority of participants of the system. It contains every single record of each transaction. Bitcoin is the most popular cryptocurrency an example of the blockchain. Blockchain Technology Records Transaction in Digital Ledger which is distributed over the network thus making it incorruptible. Anything of value like Land Assets, Cars, etc. can be recorded on Blockchain as a Transaction.
HOW DOES A BLOCKCHAIN WORKS?
Blockchain technology is most simply defined as a decentralized, distributed ledger that records the provenance of a digital asset.
- DISTRIBUTED LEDGER:
DIFFERENT TYPES OF BLOCKCHAIN TECHNOLOGY
There are four main types of blockchain networks: public blockchains, private blockchains, consortium blockchains, and hybrid blockchains. Each one of these platforms has its benefits, drawbacks, and ideal uses.
- PUBLIC BLOCKCHAIN:
- PRIVATE BLOCKCHAIN:
- CONSORTIUM BLOCKCHAIN:
- HYBRID BLOCKCHAIN:
CRYPTOGRAPHY IN BLOCKCHAIN
Blockchains make use of two types of cryptographic algorithms, asymmetric-key algorithms, and hash functions. Hash functions are used to provide the functionality of a single view of blockchain to every participant. Blockchains generally use the SHA-256 hashing algorithm as their hash function.
BLOCKCHAIN TECHNOLOGY IN BITCOIN
Blockchain is the technology that underpins Bitcoin and it was developed specifically for Bitcoin. Bitcoin is a decentralized digital currency, or peer-to-peer electronic payment system, where users can anonymously transfer bitcoins without the interference of a third-party authority (like a bank or government).
KEY ELEMENTS OF THE BLOCK ECOSYSTEM
The four main components of any blockchain ecosystem are:
- A NODE APPLICATION:
- A SHARED LEDGER:
- A CONSENSUS ALGORITHM:
- A VIRTUAL MACHINE:
IS IT POSSIBLE TO DOUBLE SPEND IN A BLOCKCHAIN SYSTEM?
Double-spending is the risk that a digital currency can be spent twice. It is a potential problem unique to digital currencies because digital information can be reproduced relatively easily by savvy individuals who understand the blockchain network and the computing power necessary to manipulate it.
Double-spending occurs when a blockchain network is disrupted and cryptocurrency is essentially stolen. The thief would send a copy of the currency transaction to make it look legitimate, or might erase the transaction altogether. Although it is not common, double-spending does occur.
WHAT IS A TRANSACTION CIPHER?
Transposition Cipher is a cryptographic algorithm where the order of alphabets in the plaintext is rearranged to form a ciphertext. In this process, the actual plain text alphabets are not included.
DIFFERENCE BETWEEN ON-CHAIN AND OFF-CHAIN TRANSACTIONS
An on-chain transaction, simply called a transaction, occurs and is considered valid when the blockchain is modified to reflect the transaction on the public ledger. In contrast, an off-chain transaction takes the value outside of the blockchain. It can be executed using multiple methods.
WHAT IS THE SIDE-CHAIN TRANSACTION?
Sidechains are the emerging mechanisms that are trying to make blockchain more scalable and efficient. This mechanism allows the tokens and other digital assets from one blockchain to be securely used in another blockchain and then be moved back to the original blockchain when required.
A sidechain is a separate blockchain that is attached to its parent blockchain using a two-way peg. After the waiting period, the equivalent number of coins is released on the sidechain, allowing the user to access and spend them there. The reverse happens when moving back from a sidechain to the main chain.
WHAT TYPE OF RECORDS CAN BE KEPT IN THE BLOCKCHAIN? ARE THERE ANY RESTRICTIONS ON THE SAME?
These records are block records and transactional records. Both these records can easily be accessed, and the best thing is, it is possible to integrate them without following the complex algorithms.
There is no restriction on keeping records in the blockchain approach. It must be noted that the record-keeping is not just limited to these applications only
The common types of records that can be kept on them:
- Records on medical transactions
- Identity management
- Transaction process
- Events related to an organization
- Management activities
Secret sharing essentially allows data to be stored in a decentralized way across N parties such that any K parties can work together to reconstruct the data, but K-1 parties cannot recover any information at all. N and K can be set to any values desired; all it takes is a few simple parameter tweaks in the algorithm.
Bitcoin is the first successful implementation of blockchain.Today, the world has found applications of blockchain technology in several industries, where trust without the involvement of centralized authority is desired.
“Blockchain is the backbone Technology of Digital CryptoCurrency BitCoin.”