What is Blockchain?
Under the vast domain of cryptocurrency, there is a need for storing the records of transactions. And cryptocurrencies use a database called blockchain representing ledger. In the peer-to-peer electronic cash transfer, the whole transaction is mathematically stored in a list of the database system.
A single user, by using a private key, can regulate and monitor the whole system of sending and receiving bitcoins by using his personal computer or his phone’s app. The whole database or ledger is publicly held and distributed by everyone using the bitcoin transfer system.
To be more precise, blockchain is “an openly distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”. It is related to cryptocurrency bitcoin as it serves as the public transaction ledger of the cryptocurrency bitcoin. It was invented by Satoshi Nakamoto back in the year 2008. The blockchain is a type of “payment rail” or a payment network that moves money from a payer to a payee.
Mainly, blockchain is not only a decentralized but also a permissionless database. As a result, everyone has access to all the data and no access control layer is required because cryptocurrencies use proof of work as a security measure.
History of Blockchain
In 1991, Stuart Haber and W. Scott Stornetta wanted to implement a system where document timestamps could not be tampered with. In 1992, the design was much improved with the incorporation of Merkle trees to the design by allowing several document certificates to be collected into one block.
In 2008, Nakamoto improved the design in an important way by using a Hashcash like a method to add blocks to the chain without requiring them to be signed by a trusted party. In the following year, Nakamoto implemented the design as a core component of the cryptocurrency bitcoin, where it serves as the public ledger for all transactions on the network.
Radically, in August 2004, the bitcoin blockchain file size that contained records of all transactions reached 20 GB. By January 2015,the size had developed to almost 30 GB and from January 2016 to January 2017, the bitcoin blockchain grew from 50 GB to 100 GB in size.
Later, in July 2016, IBM opened a blockchain innovation research center in Singapore. In November 2016, the development of governance models related to blockchain was discussed. In recent times, Conservative MEP Emma McClarkin’s plan to utilize blockchain technology to boost trade was backed by the European Parliament Trade Committee.
Technical Details of Bitcoin Blockchain
The blockchain in a cryptocurrency protocol consists of blocks, which are integral nodes chained together. Every block contains list of transactions that became valid when it was added to the blockchains at the time of inception of bitcoin.
Information Saved in a Bitcoin Block
- Block Height: Block height is a value representing the number of blocks between first and current block.
- Black Hash: It is a hash of the current block header.
- Previous Block Hash: It stores a hash of the last block header.
- Block Time: Block Time stores GMT date and time when the block was added to the blockchain.
- Transactions: It contains a list of transactions included in the current block.
Blockchain technology can be implemented in multiple areas. The main use of blockchain technology today is as a distributed ledger for cryptocurrencies, most importantly bitcoin.
The use of blockchains remains doubtful as Steve Wilson (member of Constellation Research) believes the technology has been hyped with unrealistic claims. To negate the risk factor in business, businessmen are reluctant to place blockchain at the core of the business structure.
- Cryptocurrencies: Most cryptocurrencies, notably bitcoin uses blockchain to contain records of their transactions. Ethereum network is also based on blockchain technology. On May 2018, the social network Facebook confirmed that it is opening a new blockchain group which will be headed by David Marcus.
- Banks: Recent study says that banks are interested in blockchain technology because it has the potential to speed up back office settlement system. It has also the potential to be used in financial services to increase efficiency and reduce costs.
- Other Uses: There are some video games which are based on blockchain technology like Huntercoin, released in 2014. Another instance of such video game is The sharing economy is also set to make benefits from blockchain because they involve many collaborative peers. Another application of blockchain technology can be seen in online voting. It can also track digital use and payments to content creators, such as wireless users or musicians. Imogen Heap’s Mycelia service has been suggested as blockchain-based alternative “that gives artists more control over how their songs and associated data circulate among fans and other musicians”2. Everledger is one of the first clients of IBM’s blockchain-based tracking service.
Types of Blockchains
There are three main types of blockchain networks -public blockchains, private blockchains, and consortium blockchains.
1. Public Blockchains: A public blockchain such as Bitcoin and Ethereum has no access restrictions. Anyone and anywhere having an internet connection in the computer or mobile phones can transact using this service.
2. Private Blockchains: A private blockchain is a permission system. One cannot use it unless one is invited by the network administrator. All the access by the participants and validators are fully restricted.
3. Consortium Blockchains: A consortium blockchain is half-decentralized. It is also permission but instead of a single organization controlling it, a number of other companies might each operate and monitor a node on such a network.
The first ever journal Ledger, dedicated to Cryptocurrencies and blockchain technology research, was published in the year 2015 September. The journal’s cover embraced all the aspects of mathematics, computer science, law, philosophy, engineering and economics related to cryptocurrency such as bitcoin. The journal encouraged authors to digitally sign a file hash of submitted papers and then that will be timestamped into bitcoin blockchains.
1. Iansiti, Marco; Lakhani, Karim R. (January 2017). The Truth About Blockchain.Harvard Business Review. Harvard University. Archived from the original on 18 January 2017. Retrieved 17 January 2017.
2. “Imogen Heap: savior of the music industry?” The Guardian. Archived from the original on 22 April 2016. Retrieved 18 June 2016.