A blockchain is a distributed ledger with growing lists ofrecords (blocks) that are securely linked together via cryptographic hashes. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data (generally represented as a Merkle tree, where data nodes are represented by leaves). Since each block contains information about the previous block, they effectively form a chain (compare linked list data structure), with each additional block linking to the ones before it. Consequently, blockchain transactions are irreversible in that, once they are recorded, the data in any given block cannot be altered retroactively without altering all subsequent blocks.
Blockchains are typically managed by a peer-to-peer (P2P)computer network for use as a public distributed ledger, where nodes collectively adhere to a consensus algorithm protocol to add and validate new transaction blocks. Although blockchain records are not unalterable, since blockchain forks are possible, blockchains may be considered secure by design and exemplify a distributed computing system with high Byzantine fault tolerance.
Brief History
The conceptual foundation of blockchain was laid in the early 1990s with the development of cryptographic secure chains of blocks by Stuart Haber and W. Scott Stornetta. They envisioned a system where document timestamps could not be tampered with. In 1997, Adam Back invented Hashcash, a proof-of-work system that would later influence Bitcoin mining processes.
Blockchain technology as we know it today first came to prominence with the publication of the Bitcoin white paper in 2008 by an individual (or group) using the pseudonym Satoshi Nakamoto. Nakamoto introduced a fully operational blockchain that provided the public transaction ledger for Bitcoin, the first cryptocurrency. Since then, the technology has evolved and expanded beyond cryptocurrency, exploring potential applications in various
sectors such as finance, supply chain, and government.
Key aspects of blockchain technology:
1. Decentralization:
Unlike traditional databases managed bycentral authorities, blockchain utilizes a decentralized network of nodes (computers). Each node on the network holds a copy of the entire ledger, making it highly resistant to censorship and centralized control. Decentralization means that no single entity has control over the entire network, which enhances security and reduces risks associated with centralized data control.
2. Transparency and Trust:
Blockchain technology provides enhanced transparency. Since every transaction is recorded on a public ledger, accessible by anyone within the network, it ensures a high level of
transparency. Moreover, transactions once recorded on the blockchain cannot be altered without the consensus of the network, fostering a new level of trust in digital transactions.
3. Immutability:
Once a transaction is recorded on the blockchain, it is nearly impossible to change. This immutability is secured through cryptographic hashes — unique digital signatures for each block. Changing any information on a block would require altering all subsequent blocks and the consensus of the network, which is impractical.
4. Consensus Mechanism: A key to maintaining the blockchain is the consensus mechanism, a set of rules the network uses to verify each transaction and agree on the current state of the blockchain. Common mechanisms include Proof of Work (PoW) and Proof of Stake (PoS). PoW, used by Bitcoin, involves solving complex mathematical puzzles to validate new transactions and create new blocks. PoS, on the other hand, selects validators in proportion to their quantity of holdings in the associated cryptocurrency.
Types of blockchain
Public blockchains
A public blockchain has absolutely no access restrictions.Anyone with an Internet connection can send transactions to it as well as become a validator (i.e., participate in the execution of a consensus protocol). Usually, such networks offer economic incentives for those who secure them and utilize some type of a proof-of-stake or proof-of-work algorithm. Some of the largest, most known public blockchains are thebitcoin blockchain and the Ethereum blockchain.
Private blockchains
A private blockchain is permissioned. One cannot join itunless invited by the network administrators. Participant and validator access is restricted. To distinguish between open blockchains and other peer-to-peer decentralized database applications that are not open ad-hoc compute clusters, the terminology Distributed Ledger (DLT) is normally used for private blockchains.
Hybrid blockchains
A hybrid blockchain has a combination of centralized anddecentralized features. The exact workings of the chain can vary based on which portions of centralization and decentralization are used.
Sidechains
A sidechain is a designation for a blockchain ledger thatruns in parallel to a primary blockchain. Entries from the primary blockchain (where said entries typically represent digital assets) can be linked to and from the sidechain; this allows the sidechain to otherwise operate independently of the primary blockchain (e.g., by using an alternate means of
record keeping, alternate consensus algorithm, etc.).
Consortium blockchain
A consortium blockchain is a type of blockchain thatcombines elements of both public and private blockchains. In a consortium blockchain, a group of organizations come together to create and operate the blockchain, rather than a single entity. The consortium members jointly manage the blockchain network and are responsible for validating transactions.
Consortium blockchains are permissioned, meaning that only certain individuals or organizations are allowed to participate in the network. This allows for greater control over who can access the blockchain and helps to ensure that sensitive information is kept confidential.