Blockchain

Blockchain is a decentralized, distributed, transparent digital ledger used for secure transfer of money, property, contracts, and so on. It uses decentralized consensus and encryption techniques to maintain the secured network. The most popular application of the blockchain technology is Bitcoin, which is used to exchange the product and services. However, blockchain and Bitcoin are different: Bitcoin is a digital token, whereas blockchain is a publicly accessible ledger used to store the transactions. Transactions on blockchain exchanges digital currency and all verified transactions are stored in the form of blocks.

Hash techniques are used to link the blocks together to form a chain of blocks as shown in Figure 12.3. Each block holds data, hash value of current and previous blocks. Any change in the block always results in generation of new hash value for that particular block. As each block in blockchain is linked with hash, it serves as bullet proof against the attackers. Moreover, a copy of the blockchain is maintained at each node in the network, which helps them to initiate and verify different transactions. Nodes in the network use wallet software to create the cryptographic keys with one private and public key, respectively. The public key of a node is shared to the network where it acts as a unique identifier for transactions. A node that wants to transact the money creates new transaction with its own and receiving node’s public key. Due to the advancement in system performance, intruder can easily tamper the data and reconstruct the hash key in corresponding blocks at a fast pace to make valid blockchain. Proof-of-work (PoW) concepts are used to overcome such issues in blockchain, PoW involves high computation methods, which slows down the creation of new blocks in the chain. Suppose, if an intruder tampers the data in a particular block, PoW need to be recalculated for all the blocks. Hence, it sets up a concrete wall to secure the data in blockchain. In addition, blocks in blockchain constitute distributed peer-to-peer network to secure themselves. The change in a block is broadcast across the network, and each node authorizes the block change so as to add the block in the blockchain. Hence, all these nodes in the network creates consensus to agree the validity of the blocks.

When a node wants to initiate the transaction, a transaction request is broadcasted to distributed peer-to-peer network as in Figure 12.4. When a neighboring node receives a new transaction request, an algorithm ensures whether the block was

FIGURE 12.3 Hashing in blockchain.

FIGURE 12.4 Consensus.

actually signed by the creator node and user status to verify transaction integrity. Finally, the new block is added to the blockchain after computing the hash. It is very difficult to calculate the hash value lower than the threshold value. The static block contents in the blockchain always ends up with same hash and variable value. Nounce are added to the block contents to find the new hash value below the threshold value. Miners are used in the network to identify the suitable nonce to add in new block and this process of searching nonce and miners is called mining, where it requires high-speed processing units. The new blocks mined by miners are relayed over the distributed network, and it will be appended to blockchain only when the majority of peers agree on the consensus of the new block.

Bitcoin is the first footstep to introduce blockchain to the world. It allows for the financial exchanges across the borders and totally replace the third party for security and exchange overhead cost. In spite of the fact that bitcoin is effective and advancements in blockchain have exhibited their value in both financial and non-financial frameworks. The use of smart contracts over blockchain shows the extent of the effect of blockchain. The decentralized autonomous organization (DAO) is a design where it can exist on Ethereum blockchain and whose target is shown based on a collection of smart contracts. It keeps running alone without human intercession. Any changes made to the association must pass through all individuals or in all likelihood it won’t happen. A DAO can connect with different DAOs and execute smart contracts in them. This ascent new plan of action with wide execution scope. Even government bodies and various organizations can envision an application to run over blockchain using the idea of DAO.