Blockchain and Distributed Ledger System


Blockchain is a technology that arrived in early 2008 when Satoshi Nakamoto came with the concept of Bitcoin (Nakamoto, 2008) the cryptocurrency. The blockchain technology has grown since then, and the technology is being used in various different sectors of industry as well.

A blockchain is a distributed, decentralized, and a tamper-proof technology. These qualities have made the technology more useful in many of the organizations. A blockchain is a decentralized ledger, or we can say it is like a linked list type of data structure where in nodes are connected with a pointer. Similarly, a blockchain is a chain of blocks connected with each other with the current one referring to previous ones. Each node or a user of the blockchain can create a block and add it in a blockchain. The users of the blockchain network are unaware of the transactions taking place in the network. The blockchain network is a tamper-evident network that means once any transaction or information is added on to a blockchain, that information can never be changed; if any node tries to change the information, other nodes gets the information that there is a change in the transactions and that block will get rejected from the chain of blocks. For this reason, many organization and industries are moving their existing network to the blockchain network, as the blockchain network provides better security, better privacy, and above all transparency among the users.

But the organizations and industries need to keep in mind the fundamental aspects related for implementation of blockchain technology, as it is not easy to export an existing database to a new platform. Consider a situation where an organization has moved on to the blockchain network and then some modifications need to be done in the database. Blockchain technology and a network based on blockchain technology is tamper proof so changes would be very difficult as it would require changes to be made from the starting block.

Since blockchain technology is a decentralized network, that means there is no single owner or central authority of the network, and each node can directly communicate with other nodes. Thus, blockchain can be very beneficial in business organization where the transfer of money is involved from one party to another party without the involvement of a middle man.

However, blockchain technology is still in its growing phase, and organizations should investigate how the industry-based problems can be fitted into blockchain technology before moving onto blockchain network.


A blockchain process is based on the consensus mechanism for a transaction to be verified and valid. A blockchain network consists of various nodes connected in a distributed and decentralized fashion. Any node that needs to perform a transaction has to write the transaction in a block. A block can be thought of a container like a data structure that can consists of about 500 transactions on an average; however, the size of a block can be up to 1 MB (Madeira, 2016). The node performs a transaction in a block and sends to other nodes, which are connected in a distributed network. Since the blockchain network is decentralized, the block of transaction created by the node, hence the block is being broadcasted to all the nodes present in the network. The blockchain network is a consensus-based network meaning all the nodes present has to agree on transaction made based on consensus algorithm. Consensus algorithm is a process by which multiple nodes present in a distributed network agreed upon a decision (Margaret Rouse, n.d.). The consensus algorithm provides reliability to a distributed network. There are many consensus algorithms like proof of work, proof of stake, Byzantine fault tolerance, and many others. Thus, as shown in Figure 8.1, a block created is added to the chain of the blocks already

present in the blockchain once it is verified and validated by all the nodes present in the network as shown in the figure. The newly added block will always refer the previous block in the chain, which will make the chain more secure. Once the block is added onto the chain of blocks, the receiver node can now update the ledger with the new information.


A blockchain network can be classified into three categories based on the transaction processing and the access of data in the network. These classifications can be of great use when an organization thought of either moving their existing database on to a new blockchain network or creating a new blockchain network. The blockchain network can be of three types—public, private, and a consortium type of blockchain. All the three type of blockchain network places important role in any organization and depending upon their functionality an organization can go for any of these networks.

Public Blockchain Network

A public blockchain also termed as a permissionless blockchain. As the name says permissionless, there is no need of any permission to join the network. Any one is allowed to join the network. The public network is open to everyone anyone who wants to read the transactions made on the block, anyone can make legitimate changes on to the network, and anyone is allowed to add a new block of transaction on to the existing chain as shown in Figure 8.2. The biggest advantage of a public network is that it can accommodate any anonymous actors on the network. Bitcoin and Ethereum network (Peters and Panayi, 2016) are the examples of a permissioned blockchain network. However, public blockchains suffers most with the limitations of both the transaction fees and scalability.

Private Blockchain Network

A private blockchain is also known as a permissioned blockchain. Unlike a public blockchain network, a private type of blockchain is a network has some restriction in it and is not open for any anonymous users. A private or a permissioned block- chain consists of limited users and only authorized users who have access to the network (Figure 8.3). In a private blockchain network the creator of the network will be the administrator or a validator who approves or disapprove any transactions made by the node of the network. In a private blockchain, only the administrator has the access to the transactions and the information present in the network. It is the duty of the administrator to maintain the network and has the authority to change or modify the rules of the network. Hyper Ledger, Ripple (Peters and Panayi, 2016) are the examples of a permissioned blockchain.

Consortium Blockchain

A consortium blockchain can be considered as a semi-private blockchain. In a private blockchain the members of the blockchain are connected in a permissioned environment. The private blockchain is owned by a single company or an industry which is more specifically described as a centralized system but with strong cryptographic methods attached.

A consortium blockchain has the same benefits which a private block- chain provide but in a consortium blockchain the ownership is not in control of a single company or a person rather operates under the leadership of group (Thompson, 2018).

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