Blockchain Technology

The paradigm shift in the blockchain

The idea behind blockchain was first described in 1991, by Stuart Haber and W. Scott Stornetta, which is basically about time-stamping a digital document to know when created or last modified, these were done in the form of lab-notebook where the entries are computed sequentially without any page been left out. The sequential number attached to each page makes it difficult to tamper with, this was later then upgraded to a digital notebook.

In 1992 by Bayer, Haber, Stornetta introduced Hash data structure (Merkle tree). This Merkle tree was invented by Ralph Merkle in 1979 which was then named after him. A simple idea of how a data structure should be secured and verified, the hash data structure is nothing but a verified and completed list of the hash tree or rather hash chain.

Going into the year 2008, the fascinating idea put together by the above mentioned named was implemented in the following year (2009) as a core component of digital currency for Bitcoin by Satoshi Nakamoto whose identity remains anonymous to the world.

Initially, the word block and chain were separately used then later coined into blockchain and became very popular in 2016.

This Satoshi creation in 2009 solved the issue of double spend (the idea behind digital currency been able to be spent in two places) for digital currency through a distributed database that combined cryptography, game theory, and computer science. This creation gives birth to the blockchain 2.0 named as the second-generation blockchain.

What is blockchain?

Blockchain can be referred to as a chain of digital signatures known as blockchain”. Blockchain was originally developed for Bitcoin as a public digital database to track validated transactions. This validation is carried out by ‘mining’ (node or network of users who donates their computing power in exchange for financial incentives).

To use a traditional financial institution as a comparison, the blockchain is a complete track of financial institutions, and each block (fixed structure) is like an individual bank statement. It is devised for the digital currency, a regime change from the conventional ledger economic transaction for a better financial system.

Basically, blockchain is a digital ledger transaction performed by an individual coin owner or parties to coin owner, the blockchain is validated and immutable with the hash for future reference. The main component of each block is namely header and content.

Structure of blockchain

The structure of blockchain mainly comprises the block (fixed structure) and the chain which serves as a link secured using cryptographic computations. Each block in the chain contains the hash (a reference to the previous block), created time, the transaction performed. These blocks are co-jointly validated by a peer-to-peer network. The structure of blockchain is a sequentially arranged back-linked list of validated block transactions. At the early stage Bitcoin coin client store the blockchain metadata using google Level DB database. Blockchain as a stack of a block with first block serving as the foundation, the ‘height’ of blockchain is determined by calculating from the first block to the recent block ‘top’. The hash of each block defines its identity which is generated using the SHA256 cryptographic hash algorithm always located in the header of each block, a sometime previous block can be referred to as parent block.

Nevertheless, there only exists one parent block with temporary or permanent multiple blocks, each block or child refer back to the parent using the previous block hash. These multiple blocks arise during ‘blockchain fork’, a permanent or temporary situation that arises when different blocks are discovered by almost simultaneously by a different network of users donating power. After a period of time, only one block becomes part of the blockchain when the fork is resolved.

Structure of each block in the chain consist of block header and size and its content

Block header

Block header is categorized in to three metadata — reference to the parent block (technical version, previous block hash), duration of block creation, the proof-of-work algorithm, difficulty target created for the block, and a counter use for the proof-of-work algorithm (difficulty, time-stamp, and nonce), a hash of the root of the Merkle tree to that particular block transaction (root of Merkle tree)

Content

List of a previously validated digital wallet such as the number of inputs and outputs, conclusively a data structure efficiently used to summarize the transaction in the block.

Features of blockchain

Decentralized

Blockchain as a decentralized system, which means over millions of spreadsheet distributed in the database (ledger) is not stored in a single location, the record it keeps are easily and publicly verified by a network of computers simultaneously which makes it less porous to hackers.

Immutability

This digital ledger of economic transactions is a derivative of an individual block, where each block consist of transaction that has been executed, confirmed, and completed. Hence it reduces the high rate of fraud in the transaction procedure and it provides a referral known as hash-code which is immutable.

Digital trust

In blockchain technology, there is what is referred to as private key cryptography (authentication) and proven permission (authorization).

Transparency

Blockchain as a digital interaction, hence it eliminates the idea of third-party (middlemen), reduces expenses, mistakes, process delay, discrepancy, and repetitive verification encounter in the traditional method of record validation. Conclusively blockchain assists in self-auditing of a transaction.

Blockchain in the mainstream society has been adopted fully for digital transactions but with little setbacks such as political reasons, regulatory bodies, the value of the digital currency has yet not been tied to real life commodities.

Durability

Blockchain has an inherent robustness which stores blocks of information’s across its network that cannot be controlled by a single entity, it is a mechanism that brings everyone to the high degree of accountability, transparency. The internet itself which has proven to be durable for almost 30 years, it’s a track record that bodes well for blockchain technology as it continues to be developed.

How does blockchain work? (Mining)

The blockchain is derived from an existing technology which comprises (internet, private or public key cryptography, and distributed network of users).

Private or Public Key cryptography, a security method to secure digital wallet that comprises a randomly selected string of numbers. Blockchain technology work as a decentralized system that comprises of miners who adopted cryptographic computation methods of verification, which means users or clients without identification cannot associate with any account or perform transactions.

Another fascinating idea behind blockchain is the distributed network of users (node or mining) which means, for every transaction, it is not limited to a single entity to be verified rather a collection of several bodies are involved. The network of users donates power to verify a transaction after receiving an authentication transmit by a software, a block is formed using a nonce, a block (fixed structure) is verified and hash, store, and the block hash will be distributed to other networks for confirmation that is if the hash block is below difficulty, if not a block will created using nonce will be created for further verification. The first to verify the transaction is reward with an incentive. A simplified mining process of the decentralized system of blockchain is described as follows.

Step1 A sends B a digital currency (be it bitcoin, ethereum, ripple etc.) from it secured digital wallet using its authentication.

Step 2 Software’s bundles this transaction along with others, into a block, and transmits this block to a network of users (nodes or miners) for verification.

Step 3 these network of users race to verify the block of transactions.

Step 4 when the block is verified the block is added to the entire shared ledger of all transaction. This shared transaction is called the blockchain which is then distributed to the entire network as a reference for further verification.