Unit-1
Introduction to
Blockchain Technology
Introduction to blockchain technology
• Blockchain technology is a groundbreaking distributed
ledger technology (DLT) that's revolutionizing the way
digital information is recorded, stored, and managed.
At its core, a blockchain acts as a secure,
decentralized, and immutable record of transactions
or data, maintained across a network of computers
(nodes). Each transaction or set of data is packaged
into a "block," which is then cryptographically linked
to the previous block, forming a continuous "chain".
This makes it extremely difficult to alter or delete any
information once it's been recorded, ensuring high
levels of data integrity and trustworthiness.
Key features of blockchain technology
• Decentralization: Unlike traditional centralized systems controlled
by a single entity, blockchain networks are distributed across
numerous nodes, eliminating a single point of failure and reducing
the risk of data manipulation or control by a single entity.
• Immutability: Once data is recorded on a blockchain, it becomes
virtually impossible to alter or delete it. Each block is
cryptographically linked to the previous one, and any attempt to
tamper with a block would break the chain, making the alteration
evident.
• Transparency: In public blockchains, all transactions and data are
visible to all network participants, fostering trust and
accountability. While transparency is high, user identities can
remain anonymous or pseudonymous, identified by their public
keys rather than personal information.
• Consensus Mechanism: Blockchain networks use
various consensus algorithms (e.g., Proof of Work
(PoW) and Proof of Stake (PoS)) to validate and agree
on transactions, ensuring that all network participants
reach a common agreement before adding new data.
• Security: Blockchain employs advanced cryptographic
techniques like hashing and digital signatures to
secure transactions, protect data integrity, and
provide participant identity protection through
public/private keys.
Evolution of blockchain
• Timeline Blockchain Bitcoin Ethereum
• 1991 Stuart Haber and Scott Stornetta Work on The First Blockchain
NA NA
• 1992 Merkle Trees formed a legal corporation using a system
developed by Stuart Haber and W. Scott Stornetta NA NA
• 2000 Stefan Konst published his theory of cryptographic secured
chains NA NA
• 2004 Cryptographic activist Hal Finney introduced “Reusable Proof of
Work”. NA NA
• 2008 Satoshi Nakamoto conceptualized the concept of “Distributed
Blockchain” in his white paper: ”A Peer to Peer Electronic Cash System”.
NA NA
• 2009
• James Howells was an IT worker in the United Kingdom, who starts
mining bitcoin.
• Satoshi Nakamoto Releases Bitcoin White Paper
• 2014 Blockchain 2.0 is born. NA Ethereum Blockchain Is
Funded By Crowdsale
• 2015 Linux Foundation launched the Hyperledger project. NA
Ethereum Frontier Network was launched
• 2016 Blockchain is accepted as a single word instead of two different
concepts Bitfinex bitcoin exchange was hacked resulting in 120,000
bitcoin being stolen. NA
• 2017 Block.one company introduced the EOS blockchain
operating system. Japan recognized Bitcoin as a legal currency. NA
• 2018 Google, Twitter, and Facebook banned the advertising of
cryptocurrencies. Bitcoin turned 10 in the year 2018. NA
• 2019 NA NA Ethereum network transactions exceeded 1 million per
day.
• 2020 Stablecoins saw a rise. NA Ethereum launched Beacon
Chain in preparation for Ethereum 2.0.
• 2022 NA NA Ethereum Merge. Ethereum's consensus mechanism is
now PoS.
General Structure of Blockchain
Block Header
• Constituents of Block Header are :
• Timestamp
• Version
• Merkle Root
• Difficulty Target
• Nonce
• Previous Hash
Merkle Tree
Types of blocks
1. Genesis Block
2. Valid Block
3. Orphan Block
How blockchain works
• Transaction Initiation: A new transaction or data input enters the
network, typically encrypted using public and private keys.
• Verification: The transaction is broadcast to the network of nodes.
These nodes independently verify the transaction's legitimacy and
authenticity based on the network's rules.
• Block Creation: Validated transactions are grouped into a block.
• Consensus: A consensus mechanism (e.g., Proof of Work, Proof of
Stake) determines which node can add the new block to the chain.
This involves solving complex puzzles or staking cryptocurrency,
incentivizing honest participation.
• Chain Linking: The validated block is added to the blockchain, and
its unique cryptographic hash is linked to the previous block,
strengthening the chain's integrity.
• Ledger Distribution: The updated blockchain (ledger) is distributed
and replicated across all network nodes, ensuring consistency and
transparency.
Key Components of Blockchain
• Blockchain technology relies on a few fundamental components
and concepts that work together to achieve its functionality:
• Distributed Ledger: Blockchain is a shared record system spread
across many computers, with each participant having a copy. Once
data is added, it can't be changed or deleted, ensuring no single
point of failure or control.
• Blocks: Data is stored in blocks, each containing a set of
transactions, a timestamp, and a reference (hash) to the previous
block. This creates a secure, linked chain of blocks, where any
change would disrupt the chain.
• Nodes (Peer-to-Peer Network): Nodes are the devices in the
network that store the blockchain and validate new transactions.
They communicate directly, ensuring the blockchain remains
decentralized and operates without a central authority.
• .
• Cryptography (Hashes & Signatures): Blockchain
uses cryptography to secure data. Each block’s
unique hash acts as a tamper-proof seal, and public/private
key pairs verify the authenticity of transactions, ensuring
data integrity and privacy.
• Consensus Mechanism: Nodes agree on the blockchain’s
state using consensus algorithms (e.g., Proof of
Work or Proof of Stake). This prevents fraud by ensuring that
the majority of the network agrees on each new block.
• Smart Contracts: Smart contracts are automated scripts on
the blockchain that execute actions when specific conditions
are met. They help automate complex processes like
payments and agreements, without the need for
intermediaries, providing transparency and security
Types of blockchain networks
• Public Blockchains: Open to everyone, allowing anyone
to join, participate in the consensus mechanism, and
view all records. Examples include Bitcoin and Ethereum.
• Private Blockchains: Operated by a single organization,
controlling who can join and participate. While
restricted, they offer enhanced privacy and control.
• Consortium Blockchains: Governed by a group of
predefined organizations or individuals, balancing
decentralization and control.
• Hybrid Blockchains: Combine elements of both public
and private blockchains, offering flexibility in terms of
access and transparency.
Applications beyond cryptocurrency
• Although initially made famous by Bitcoin, blockchain technology has
evolved far beyond cryptocurrencies. Blockchain is being used in various
industries to enhance security, efficiency, and transparency in areas such
as:
• Supply Chain Management: Tracking goods and products from origin to
consumer.
• Healthcare: Securing patient records and facilitating data sharing.
• Financial Services: Streamlining payments, managing accounts, and
enhancing security in traditional financial institutions.
• Voting Systems: Ensuring secure, transparent, and tamper-proof elections.
• Digital Identity Management: Providing secure and self-sovereign digital
identities.
• Intellectual Property: Protecting copyrights and ensuring creators receive
due credit.
• Smart Contracts: Automating agreements and transactions based on
predefined conditions, eliminating the need for intermediaries.
