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Blockchain Technology

Rishi Batra , 1 month ago | Technology

Now a days most people use a trusted middleman such as a bank to make a transaction. But blockchain has a solution to this problem and allows consumers and suppliers to connect directly, removing the need for a third party.

Blockchains are very popular nowadays, so let us discuss what is blockchain and how it can be used. Just like the name goes, a blockchain is a chain of blocks that contains information. This technique was originally discovered in 1991 by group of researchers and was originally intended to time stamp digital documents so that its not possible to backdate them or to tamper with them. Something like a notary. Making use of cryptography to keep exchanges secure, blockchain provides a form of decentralized database, or “digital ledger”, of transactions that everyone on the network can see. This network is essentially a chain of computers that must all approve an exchange before it can be verified and recorded.

However it went by mostly unused until it was adopted by satoshi nakamoto in 2009 to create the digital cryptocurrency bitcoin. A blockchain is a distributed ledger that is completely open to anyone. They have an interesting property once some data has been recorded inside a blockchain it becomes very difficult to change it.

We attempt to explain this concept by breaking down the concept of a blockchain, into two separate components – a block and the chain:

Block

What is a block, in a blockchain?

A block may be thought of as the container which contains data. In this case of a bitcoin blockchain, every block contains data (such as bitcoin transactions), Block Identifies, Block Header, and Merkle Trees.

  • Block identifiers are essentially the cryptographic hash to uniquely identify the particular block.
  • Block headers contain the metadata for that particular block, such as

    1)Cryptographic hash from the block chronologically before it

    2) Mining competition

    3) Data structure to summarize the transactions in the block – also called the Merkle Tree Root.

  • Merkle Trees refer to the structure of transactions in the block.

Chain

What is a chain, in a blockchain?

Now that we know what blocks really are, we can now focus on how they are chained together to create this operating structure that we call as a blockchain.

Taking the bitcoin blockchain example, the block header of every block, has a field to identify the previous block in the chain. This cryptographic hash in the block header of each block, is the what which chronologically ties the blocks together in a chain.

Components in blockchain

The Blockchain Ecosystem can be segregated in these 4 logical components.

  • a node application
  • a shared ledger
  • a consensus algorithm
  • a virtual machine
  1. Node Application

  2. Any Machine who want to be part of the blockchain ecosystem, need to run a node of the specific Blockchain. Using bitcoin as an example , the machine must be running Bitcoin wallet Application.

  3. Shared Ledger

  4. Suppose it is a data structure, which is inside the node application. If you are running the Ethereum client, you can see the Ethereum ecosystem ledger and interact according to the rules of that ecosystem (smart contracts, payments, etc.). If you are running the Bitcoin client, you can participate in the Bitcoin ecosystem, according to the rules set out in the program code of the Bitcoin node application.

    You may run as many node application of any blockchain ecosystem, but there will be only one shared ledger of the particular blockchain ecosystem.

  5. Consensus Algorithm

  6. This very component provides the “rules and regulation” on how the single view of the shared ledger will be reached in blockchain ecosystem. Different ecosystems have different methods for attaining consensus depending on the desired features the ecosystem needs. The various famous consensus algorithms are – Proof of Work, Proof of Authority, Proof of Stake, Proof of Elapsed Time.

  7. Virtual Machine

  8. This is the final logical component of the blockchain ecosystem. It acts a bucket or container where all the logical components rest, act and interact.

    A virtual machine is a representation of a machine (real or imaginary) created by a computer program and operated with instructions embodied in a language.It is an abstraction of a machine inside a machine.

How does blockchain works ?

Let’s try to understand how blockchain works with a simple transaction over a Blockchain network

So how your transaction gets confirmed and is added to the blockchain? Since I couldn’t find any clear step by step explanation of this process, I decided to write one myself.

Here is how a blockchain transaction is processed on a blockchain, in six simple steps.

  • Step 1:A user signs off on a transaction from their wallet application, attempting to send a certain crypto or token from them to someone else.

  • Step 2:The transaction is broadcasted by the wallet application and is now waiting to be picked up by a miner on the according blockchain.

  • Step 3:Miners on the network (sometimes referred to as nodes), select transactions from these pools and form them into a ‘block’. A block is basically a collection of transactions , in addition to some extra metadata. Every miner constructs their own block of transactions.

    Before adding a transaction to their block, a miner needs to check if the transaction is eligible to be executed according to the blockchain history. If A’s wallet balance has sufficient funds according to the existing blockchain history, the transaction is considered valid and can be added to the block. Miners will usually prioritise transactions that have a high transaction fee set, because this provides them a higher reward.

  • Step 4:By selecting transactions and adding them to their block, miners create a block of transactions. To add this block of transactions to the blockchain (to have all other miners and nodes register the transactions), the block first needs a signature (also referred to as a proof of work). This signature is created by solving a very complex mathematical problem that is unique to each block of transactions. In order to solve this mathematical problem, a lot of computational power is used . This is the process referred to as mining.

  • Step 5:The miner that finds an eligible signature for its block first, broadcasts this block and its signature to all the other miners.

  • Step 6:Other miners now verify the signature legitimacy by taking the string of data of the broadcasted block, and hashing it to see if the output hash indeed matches the included signature. If it is valid, the other miners will confirm its validity and agree that the block can be added to the blockchain (they reach consensus, aka they all agree with each other, hence the term consensus algorithm). This is also where the definition ‘proof of work’ comes from. The block can now be added to the blockchain, and is spread across all other nodes on the network.

Blockchain. How does it helps in app development?

  • The Use of Blockchain Distributed Database Application

  • As you may be knowing that the Blockchain has a distributed database, which is a very good news for the app developers. The fact that they run via networked computers and set up the coordination by passing the message. The message either gets coded between instances of the application or it uses a shared memory.

  • Developing the Distributed Applications a Tough Ask

  • The developers should be aware that developing the distributed application isn’t a cake walk and can pose a tricky situation. You need to test and debug the software so that it can run on a single system.

  • The Appropriateness of Blockchain Transactions including Legality

  • Whatever transactions getting carried out must be done through a legitimate and legal channel such as government agencies. The examples of these include payment through bank accounts. On the contrary, since the Blockchain is free from government control and regulations, the bitcoin implementation does not enjoy the same level of legal support

Conclusion

Blockchain is one of the major trendsetters of today and is a rapidly increasing need for the future due to its efficiency and security.

Research project proposed as in 1991, blockchain is comfortably settling into its late twenties. Like most millennials its age, blockchain has seen its fair share of public scrutiny over the last two decades, with businesses around the world speculating about what the technology is capable of and where it’s headed in the years to come.

With many practical applications for the technology already being implemented and explored, blockchain is finally making a name for itself at age twenty-seven, in no small part because of bitcoin and cryptocurrency. As a buzzword on the tongue of every investor in the nation, blockchain stands to make business and government operations more accurate, efficient, and secure.

For the ones looking to transform their ideas into a working reality, understand what the potential application.

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