FundamentalsofBlockchainTechnologyExplained
Overview
WiththeevolutionofBlockchaininthelastdecade anditsprominenceinvariousapplications,therehas beenaneedtounderstanditsconcepts.Thispaper coversthefundamentalsofBlockchain,itsprominent usecases,andhow"decentralization"toitscorehelps challengeallthingsweknowtoday.
WhatisaBlockchain?
Blockchainisacollectionofrecordslinkedtoeach other,stronglyresistanttoalterations,protectedusing cryptographywithafoundationofdistributed processingandpersistence.
Block
ABlockisacollectionofdataandauniquealphanumericvaluegeneratedusingthedatacalledHash.It alsocontainstheHashofthepreviousBlock.
Data
ThedatainsideaBlockisdependentontheapplication, anditcouldbeanythingbasedontheusecase.
UnderstandingBlockchain Immutable
OnceaBlockiswritten,it’simmutable,meaningit cannotbealtered.IfanymaliciousactoraltersaBlock, itsHashchangeswhichisalreadyrecordedinthenext chainedBlock.
Hash
It’sacodegeneratedbasedonthedataintheBlock.It isalwaysunique,eventhoughthedatacouldstillbethe same.
PreviousHash
It’stheHashcodeofthepreviousBlock.Thisishowa chainofBlocksiscreatedinaBlockchain.
EachBlockcontainsaHashofthepreviousBlockto makeitachainofBlocks.This’PreviousHash’helpsto navigatetheentirechainandmakesithardtotamper withdataofanyBlock.
Forinstance,ifamaliciousactortriestomakeachange tothedataonBlock#2,itscorrespondingHashvalue needstoberegenerated.IfaHashvalueisregenerated forBlock#2,thePreviousHashinBlock#3gets delinked,hencebreakingthechain.
Sotheoretically,ifsomeonechangesaBlock,the entirechainmustbechanged,whichrequiresheavy processingpower.
Withtoday’sever-growingcapacityofprocessing power,itcouldtheoreticallystillbepossibletochange theentirechain.Toavoidthat,anychangetothe BlockmustgothroughsomethingcalledtheConsensus model.
Consensus
ABlockcanbeaddedtothechainbyatechniquecalled theConsensusmodel.Theprocessingnodeswhich aredistributedacross,mustreachaconsensusbefore addinganewBlocktothechainbysolvingacomplex problempresentedtothem.
Thisisatopicofitsownandwillbecoveredinafollowuppaper.
Coins&Tokens
BlockchainNetworksrunonthousandsofcomputers, andtomotivatepeopletorunthem,anincentiveis needed.Thisincentiveisthecryptocurrencyintheform ofCoinorToken.
Coin: UsesitsownBlockchainNetworktokeeptrack ofallthedata,operatesindependentlyofanyother platform.
Token: UsesotherBlockchain’snetworkand infrastructureanddoesnotworryabouthowit’s validatedonthenetwork.TheTokenjustrunsonother Blockchain’snetwork.
TokensTypes:
• Usagetokens:Atokenthatisrequiredtousea service
• Worktokens:Atokenthatgivesuserstherightto contributeworktoaDAOandearninexchange
fortheirwork
• Securitytokens:Anexternal,tradableassetthat isarepresentationofvalueinasystem
PublicKey/PrivateKey
CryptocurrenciesarebuiltuponPublic-Key Cryptography(PKC),acryptographicsystemthatuses pairsofkeys–publickeys,whicharepubliclyknown andessentialforidentification,andprivatekeys,kept secretandusedforauthenticationandencryption.
PublicKey
Apublickeyallowsyoutoreceivecryptocurrency transactions.It’sacryptographiccodethat’spairedwith aprivatekey.Whileanyonecansendtransactionsto thepublickey,youneedtheprivatekeyto"unlock"it andprovethatyouaretheownerofthecryptocurrency receivedinthetransaction.
PrivateKey
Aprivatekeygivesyoutheabilitytoproveownership orspendthefundsassociatedwithyourpublicaddress. Whileyoucangenerateapublickeywithaprivatekey, doingtheoppositeispracticallyimpossiblebecauseof theone-way"trap-door"function.Youcanhaveany numberofpublickeysconnectedtoaprivatekey.
Decentralized
Blockchaintakesdecentralizationtoanall-newlevel. Anythingwhichhasbeencentralizedandmanagedby acentralbodyisbeingre-imaginedwithBlockchain networks.
Nosingleperson,body,orentityownsanyofthe networks.Instead,everyonewhoispartofthenetwork ownsit–whetheritisinfrastructure,processing, persistence,changestothenetwork,orevendecision making.
Infrastructure
Nodesaredecentralizedandnotownedbyan organization.Anyonewhowantstomaketheirsystems contributetothenetworkcandosoandgetrewarded.
Processing
Abunchofnodesareselectedbythenetworkto processaBlock.Anynodefromthenetworkcanbe chosentoprocesseachBlock,andtheselectionof nodesdependsondifferentBlockchainnetworks.
Persistence
OncedistributednodesprocesstheBlock,it’swritten tothechainandispersistedonthesedistributednodes. So,noonenodeholdsthedata.
Political
UnliketraditionalorganizationswhereCEOandthe executiveleadershipholdsthedecision-makingpower, Blockchainoffersadecentralizedwayofmaking decisionscalledDAO–DecentralizedAutonomous Organization.
SampleUseCases
Currency
Respectivecentralbankscontrolfiatcurrenciesand theirvalue,andgovernmentsdecidethevolumeof currenciestoprint.CryptocurrenciesonBlockchain networkscanoperatewithouttheneedforacentral authority.
Voting
VotingwithBlockchaincarriesthepotentialtoeliminate electionfraudandboostvoterturnout,aswastestedin theNovember2018midtermelectionsinWestVirginia. UsingBlockchaininthiswaywouldmakevotesnearly impossibletotamperwith.TheBlockchainprotocol wouldalsomaintaintransparencyintheelectoral
process,reducingthepersonnelneededtoconduct anelectionandprovidingofficialswithnearlyinstant results.Thiswouldeliminatetheneedforrecountsor anyrealconcernthatfraudmightthreatentheelection.
PropertyRecords
Inthepresentday,theprocessofrecordingproperty rightsisbothburdensomeandinefficient.Today,a physicaldeedmustbedeliveredtoagovernment employeeatthelocalrecordingoffice,whereitis manuallyenteredintothecounty’scentraldatabase andpublicindex.Thisprocessisnotjustcostlyand time-consuming,itisalsopronetohumanerror,where eachinaccuracymakestrackingpropertyownership lessefficient.Blockchaincaneliminatetheneedtoscan documentsandtrackphysicalfilesinalocalrecording office.Ifpropertyownershipisstoredandverified ontheBlockchain,ownerscantrustthattheirdeedis accurateandpermanentlyrecorded.
SupplyChain
AsintheIBMFoodTrustexample,supplierscanuse Blockchaintorecordtheoriginsoftheirpurchased materials.Thiswouldallowcompaniestoverifythe authenticityofnotonlytheirproductsbutalsocommon labelssuchas"Organic,""Local,"and"FairTrade."
HealthcareRecords
HealthcareproviderscanleverageBlockchaintostore theirpatients’medicalrecordssecurely.Whena medicalrecordisgeneratedandsigned,itcanbe writtenintotheBlockchain,whichprovidespatients withtheproofandconfidencethattherecordcannot bechanged.Thesepersonalhealthrecordscould beencodedandstoredontheBlockchainwitha privatekey,sothattheyareonlyaccessiblebycertain individuals,therebyensuringprivacy.
Conclusion
Blockchainisaburgeoningtechnologythatcan potentiallybeintegratedwithmanybusinesssectors andestablishahighly-securesystemfortransacting andmaintainingrecords.Conventionalandcentralized systemsarebeingchallengedwithBlockchain-based applications,andlargecorporationsareleadingthe researchanddevelopmentofsuchproducts.Withan explosiveriseinthepopularityandconsumptionof cryptocurrencies,Blockchaintechnologyisheretostay andkick-startanewrevolutioninthemarket.
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Author
Prabhuhasover20yearsofexperienceinvariousroles,includingEnterpriseArchitecture,Data&SolutionArchitecture, StrategicData&SolutionPlanning,andLeadingDeliveries.HehasbeeninstrumentalinhelpingCDOOrganizationsin DataArchitectureStrategy&Roadmapforshort-termandlong-termgoalsforvariousclients.
AboutMastechInfoTrellispartnerswithenterprisestohelpthemachievetheirbusinessobjectivesbyleveragingthepowerof datatoderivedeep,analyticalinsightsabouttheirbusinessanditsoperations.Weacceleratebusinessvelocity, minimizecosts,anddrasticallyimprovecorporateresiliencythroughpersonalized,process-orientedprograms, consistingofstrategy,datamanagement(includingmasterdatamanagement),businessintelligenceandreporting,data engineering,predictiveanalytics,andadvancedanalytics.PartoftheNYSE-listed,$193.6M,digitaltransformationIT servicescompany,MastechDigital;wedrivebusinessesforwardaroundtheworld,withofficesspreadacrosstheUS, Canada,India,Singapore,UK,andIreland.