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Introduction to Blockchain Technology

Vivek Tomar1, Swati Sharma2* and Sangeeta Arora2

1Graphic Era, (Deemed-to-be-University), Dehradun, India

2KIET Group of Institutions, Delhi-NCR, Ghaziabad, India

Abstract

Blockchain is a distributed shared ledger in which transactions are irreversible, but it makes it easy to track assets. An asset can be anything like our medical records, job records, educational and land records. Anything can be managed in a blockchain securely and authentically. Blockchain has eventually developed into a technology that has uses far beyond cryptocurrencies. A blockchain can be defined as a decentralized ledger that transparently logs transactions in chronological order. The word blockchain originates from the structure of this technology. Within the blockchain database, blocks are data structures that record transaction data permanently related to cryptocurrencies. A block contains transactions that are added recently, and the network has not yet verified them. The block is closed after the data are verified. A network device maintains this chain of blocks by reaching decisions through consensus. Transactions are verified and approved without the assistance of a centralized authority such as a bank or government. This is possible only because of its decentralized structure. One of the primary characteristics of blockchain is that it is immutable. Once the data is embedded in a block and is placed in the chain it cannot be removed or changed without consensus. This robust architecture makes blockchain more secure. There are many applications of blockchain but the most popular is the virtual currency or cryptocurrency. Bitcoin was the first successful implementation of blockchain technology, which enabled one to one transaction without the need for any central authority like banks and offered a secure, decentralised means of value transfer. Apart from cryptocurrencies, blockchain technology is being applied in many other fields. Another area where blockchain technology has made great progress is supply chain management. A transparent and unmodifiable record of the product path from producer to consumer allows stakeholders to keep track on the movement, provenance, and authenticity of goods. As a result, the probability of fake products has decreased, and transparency has improved. Blockchain technology can also be applied in the healthcare sector, finance sectors and many other businesses. In summary, blockchain technology is a disruptive force that affects a wide range of sectors. This chapter first discusses the introduction of blockchain technology its evolution from blockchain 1.0 to 4.0. Further working of blockchain is explained. After that various applications are given where blockchain is used and then future scope of blockchain technology is discussed.

Keywords: Blockchain, ledger, consensus, cryptocurrency, nodes, block

1.1 Introduction

Blockchain is used to store data, which is difficult to change or hack by any other persons or systems. It is a distributed database having the transactions, shared with all participating nodes in the creation of the block. The transaction is approved by the miners participating in mining the block. In a distributed ledger, a network of computers replicates the transaction among all the nodes. In this framework, a database is known as a chain which relates to all peer nodes to store the transaction records or a block. In the digital ledger, transactions are authorized with the help of a digital signature which makes it authentic and prevents modification. Due to the restriction of modification, data is secured [1]. The digital ledger is like the system that is connected and sharing the resources i.e., Google sheet.

The block in the blockchain is made up of two parts i.e., header and body. The body of the block contains the information, whereas the block header is composed of information like version, timestamp of block creation, Merkle root, hash, and nonce. The hash of the previous block in the chain connects the present block to the one before it, creating the chain on the blockchain, whereas the block version specifies the set of validation requirements to be adhered to [2]. A data structure called the Merkle root is utilized to effectively summarize each transaction in the block. The target specifies the difficulty of the mathematical puzzle that miners must solve, while the timestamp documents the block creation date. The hash computation process uses a random number called the nonce. The list of transactions, however, is contained in the block body. The sender and recipient addresses, the quantity of bitcoin being transferred, and the digital signatures of all participants are included in every transaction. A block transaction is arranged in a particular order, beginning with a special transaction known as the coin base transaction. With this transaction, fresh coins are added to the system and the miner gets paid for their mining task.

The data stored in the blockchain database is spread across nodes and devices in the network that is running the blockchain software itself. The data redundancy feature of blockchain keeps the data available and non-modifiable. All nodes keep the history of transactions that are irreversible due to immutability in nature. The data alteration is not possible due to the involvement of multiple nodes in the creation of a block. A blockchain not only contains the transactions but also various types of data i.e., smart contracts, certificates, inventory during the supply chain of products, etc. The decentralized structure of a blockchain looks at all transactions transparently. All transactions are taken care of by all the nodes involved in the blockchain. Each node keeps a copy of the blockchain as well as updates itself with each change. The blockchain keeps the identity hidden due to its encrypted nature. Blockchain users are transparent with each other without revealing their identities [3].

The security in blockchain technology due to decentralization may be maintained in different ways. All blocks of a blockchain are in sequential order in order of the creation. The new block will be added at the end of the blockchain. The block contains the hash of a previous block so that modifications become difficult. At the time of the creation of the block hash is calculated that is unchanged. The block also contains the hash of the previous block to create the chain. The hash of all the nodes is different and is not matched with a hash of any other node's hash.

The large data can be stored immutably in blockchain technology. The data can be of different forms i.e., land documents, inventory details, educational documents, etc. Various initiatives have been taken with the use of blockchain technology targeting another aspect i.e., use in the elections so that once a vote is cast that cannot be changed. The immutability feature of blockchain reduces the fraudulent during the voting process. In this process, the voters will receive a single token to vote [4].

Subsequently, voters would transmit their tokens or bitcoin to the wallet address of their preferred candidate, with every candidate being assigned a distinct address. Voting would be completely automated, thanks to blockchain's traceability and transparency, eliminating the need for human tallying and making it impossible for dishonest people to manipulate the system using real votes. Blockchain technology uses the consensus process to add the block to the blockchain. The consensus algorithm is made by the consensus of various miners to change the state of a distributed ledger. Consensus algorithms in distributed computing environments generate confidence among unknown peers and ensure reliability in the Blockchain network. All nodes participated in the consensus process to ensure the validity of information in the block. The consensus algorithm focuses on the goal of achieving consensus. All participating nodes are equally treated, there is no discrimination in the consensus process [5, 6].

Anybody can join and take part in a public blockchain, like Bitcoin. Some drawbacks could be the significant amount of processing power needed, the lack of transaction privacy, or insufficient security. The identified factors are used in the blockchain use cases of an enterprise. Public blockchain plays an important role in cryptocurrency which is widely accepted by users. This also helps to contribute to the journey from centralized to decentralized technology. The data is spread across various nodes in the peer-to-peer network in the blockchain. A consensus procedure helps to confirm the legacy of the information.

Private blockchains are typically effective for private companies and organizations, operating on closed networks. A single authority manages networks using private blockchains. It is a decentralized network owned by any private organization, whereas the public blockchain is accessed by anyone. This network is managed by a private company that adds the digital ledger using a consensus process but with restrictions on participation. It allows to customize of the network characteristics by giving rights to nodes to maintain the security. Due to this customization, it is easy to maintain the security and trust of the participants. This is managed in-house by an organization and functions within security measures. Private blockchain networks with permission access provide privileged user's extra access. Private blockchain helps to set up blockchain with better features with customization and allows the approved nodes to join a network for...