BLOCKCHAIN

BLOCKCHAIN

• A blockchain is a digital ledger of transactions maintained by a network of computers in

a way that makes it difficult to hack or alter. The technology offers a secure way for
individuals to deal directly with each other, without an intermediary like a government,
bank or other third party.
• A list of records, called blocks, is linked together using cryptography. Each transaction is
independently verified by peer-to-peer computer networks, time-stamped and added to
the ledger. Once recorded, the data cannot easily be altered.
• While popularized with the growing use of Bitcoin, Ethereum and other cryptocurrencies,
blockchain technology has promising applications for legal contracts, property sales,
medical records and any other industry that needs to authorize and record a series of
actions or transactions.
BLOCKCHAIN EXAMPLE: BITCOIN

Using the Bitcoin system as an example, here’s how blockchain — also known as distributed ledger
technology — works:
The purchase and sale of Bitcoin is entered and transmitted to a network of powerful computers,
known as nodes.
This network of thousands of nodes around the world vie to confirm the transaction using computer
algorithms. This is known as Bitcoin mining. The miner who first successfully completes a new block
is rewarded with Bitcoin for their work. These rewards are paid with a combination of newly minted
Bitcoin and network fees, which are passed on to the buyer and seller. The fees can rise or fall
depending on the volume of transactions.
After the purchase is cryptographically confirmed, the sale is added to a block on the distributed
ledger. The majority of the network must then confirm the sale.
The block is permanently chained to all previous blocks of Bitcoin transactions, using a
cryptographic fingerprint known as a hash, and the sale is processed.
INTRODUCTION TO DISTRIBUTED LEDGER TECHNOLOGIES
(DLT)

• Distributed Ledger Technology (DLT) refers to a digital system for recording the
transaction of assets in which the transactions and their details are recorded in multiple
places at the same time. Unlike traditional databases, distributed ledgers have no central
data store or administration functionality.
• DLT refers specifically to the technological infrastructure and protocols that enable the
simultaneous access, validation and updating of records that characterize distributed
ledgers. It works on a computer network spread over multiple entities, locations or nodes.
• In a distributed ledger, each node processes and verifies every item, thereby generating a
record of each item and creating a consensus on its veracity. A distributed ledger can be
used to record static data, such as a registry, and dynamic data, such as financial
transactions. Blockchain is a well-known example of a distributed ledger technology.
HOW DO DISTRIBUTED LEDGERS WORK?

• DLT works based on principles of decentralization. Unlike traditional centralized databases, DLT
operates on a peer-to-peer (P2P) network, where multiple nodes store, validate and update the
ledger simultaneously. This eliminates the need for a central authority and reduces the risk of a
single point of failure.
• The process begins with the replication of digital data across the network of nodes. Each node
maintains an identical copy of the ledger and independently processes new update transactions. To
ensure consensus, all participating nodes employ a consensus algorithm that determines the correct
version of the ledger. Once a consensus is reached, the updated ledger is propagated to all nodes,
ensuring synchronization and accuracy.
• DLT uses cryptography to securely store data and cryptographic signatures and keys to allow access
only to authorized users. The technology also creates an immutable database, which means
information, once stored, cannot be deleted and any updates are permanently recorded for posterity.
HISTORY AND EVOLUTION OF
BLOCKCHAIN
1. Origins:
1970s-1990s: The idea of cryptographically secured chains of blocks was initially described in
1979 by Ralph Merkle and in 1991 by Stuart Haber and W. Scott Stornetta.
1998: Computer scientist Nick Szabo worked on a decentralized digital currency called "Bit Gold,"
which used concepts that would later appear in Bitcoin.
2. Creation of Bitcoin and Blockchain:
2008: An unknown person or group of people using the name Satoshi Nakamoto published a white
paper titled "Bitcoin: A Peer-to-Peer Electronic Cash System," introducing the concept of blockchain
as the underlying technology for Bitcoin.
2009: Bitcoin was launched as the first cryptocurrency, utilizing blockchain to secure transactions.
CONTINUE……….

3. Development of Alternative Cryptocurrencies:

2011-Present: Other cryptocurrencies, like Ethereum, Litecoin, and Ripple, were developed,
each with unique features and improvements on the original Bitcoin blockchain.
4. Evolution of Blockchain Technology:
2015: Ethereum introduced the concept of smart contracts, allowing programmable
transactions.
2017: The concept of Initial Coin Offerings (ICOs) emerged, allowing blockchain projects to
raise funds through token sales.
Present: Blockchain technology is now being explored and implemented in various industries
beyond cryptocurrencies, including finance, supply chain management, healthcare, and more.
FUNDAMENTAL CONCEPTS OF BLOCKCHAIN

• Block: The basic unit of a blockchain, containing a list of transactions. Each block includes a unique code
called a hash, the hash of the previous block, and a timestamp.
• Chain: A series of blocks linked together. Each block references the previous block, forming a chain.
• Nodes: Computers that participate in the blockchain network. Nodes store copies of the blockchain and
validate transactions.
• Mining: The process of validating transactions and adding new blocks to the blockchain. Miners compete
to solve complex mathematical problems, and the first to solve it adds the block to the blockchain.
• Consensus Mechanisms: Protocols that ensure all nodes agree on the state of the blockchain.
Examples include Proof of Work (PoW) and Proof of Stake (PoS).
• Cryptography: Techniques used to secure transactions and control the creation of new units. Public-key
cryptography ensures that only the owner of a private key can access the associated funds.
COMPONENTS OF BLOCKCHAIN

Decentralized Network: A peer-to-peer network where all participants have equal

rights and responsibilities.
Distributed Ledger: A database spread across multiple nodes, where each node has a
copy of the ledger.
Consensus Algorithm: The method used to achieve agreement on the state of the
ledger among distributed nodes (e.g., PoW, PoS).
Cryptographic Security: Methods such as hashing and digital signatures to secure
data and ensure integrity.
Smart Contracts: Self-executing contracts with the terms directly written into code,
automatically enforcing and executing the terms.
TYPES OF BLOCKCHAIN

• Public Blockchains: Open to anyone to participate and validate transactions

(e.g., Bitcoin, Ethereum).
• Private Blockchains: Restricted to a specific group of participants, often used
within organizations for internal purposes.
• Consortium Blockchains: Controlled by a group of organizations, allowing
them to collectively decide who can read and submit transactions (e.g.,
Hyperledger, R3 Corda).
• Hybrid Blockchains: Combine elements of both public and private blockchains,
offering controlled access while maintaining some level of openness.
BLOCKCHAIN STRUCTURE

• Blockchain is a Distributed Ledger Technology. It is a distributed and

decentralized database and it is secured ever as compared to other
technologies.
CONTINUE………

Header: It is used to identify the particular block in the entire blockchain. It handles all blocks in the
blockchain. A block header is hashed periodically by miners by changing the nonce value as part of
normal mining activity, also Three sets of block metadata are contained in the block header.
Previous Block Address/ Hash: It is used to connect the i+1 th block to the ith block using the hash. In
short, it is a reference to the hash of the previous (parent) block in the chain.
Timestamp: It is a system verify the data into the block and assigns a time or date of creation for digital
documents. The timestamp is a string of characters that uniquely identifies the document or event and
indicates when it was created.
Nonce: A nonce number which uses only once. It is a central part of the proof of work in the block. It is
compared to the live target if it is smaller or equal to the current target. People who mine, test, and
eliminate many Nonce per second until they find that Valuable Nonce is valid.
Merkel Root: It is a type of data structure frame of different blocks of data. A Merkle Tree stores all the
transactions in a block by producing a digital fingerprint of the entire transaction. It allows the users to
verify whether a transaction can be included in a block or not.
 Size Field Description

A version number to track

4 bytes Version
software/protocol upgrades.

A reference to the hash of the

32 bytes Previous Block Hash previous (parent) block in the
chain.

A hash of the root of the merkle

32 bytes Merkle Root
tree of this block’s transaction.

The approximate creation time of

4 byttes Timestamp
the block.

A counter used for the proof of

4 bytes Nounce
work algorithm.
THE GENESIS BLOCK

The genesis block is the first block in any blockchain. It is unique in that it does
not reference a previous block (since there is none). The genesis block is hard-
coded into the blockchain software and serves as the foundation for all
subsequent blocks.
Linking Blocks in the Blockchain
Blocks are linked together using cryptographic hashes. Specifically, each block
contains the hash of the previous block in its header. This creates a chain of
blocks, where each block is dependent on the previous one, ensuring the integrity
and immutability of the blockchain. If any block in the chain is altered, it would
change the hash of that block, invalidating all subsequent blocks.
MERKLE TREE

A Merkle tree (or hash tree) is a binary tree structure that summarizes and verifies the integrity
of large sets of data efficiently. It is used in blockchain to ensure that all transactions within a
block are valid and unaltered.
Merkle Root: The top hash in the Merkle tree, which represents the cumulative hash of all the
transactions in the block. It is stored in the block header.
Merkle Branches: Intermediate hashes that combine pairs of transaction hashes, ultimately
leading to the Merkle root.
Merkle Leaves: The individual transaction hashes.
The process of creating a Merkle tree involves repeatedly hashing pairs of transaction hashes
until a single hash remains, which is the Merkle root. This structure allows for efficient and secure
verification of the integrity of the transactions without needing to download the entire blockchain.