BlockChain Technology Overview

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Blockchain, the foundation of Bitcoin, has received extensive attentions recently. Blockchain serves as an immutable ledger which allows transactions take place in a decentralized manner. Blockchain-based applications are springing up, covering numerous fields including financial services, reputation system and Internet of Things (IoT), and so on. However, there are still many challenges of blockchain technology such as scalability and security problems waiting to be overcome. This paper presents a comprehensive overview on blockchain technology. We provide an overview of blockchain architecture firstly and compare some typical consensus algorithms used in different blockchains. Furthermore, technical challenges and recent advances are briefly listed. We also lay out possible future trends for blockchain.

               The blockchain is a decentralized database that records the data (finance contracts, physical assets, and supply chain information). It has acquired a triumphant recognition over the time and is currently dominated and used by Bitcoin.

The blockchain is divided into two phrases: Block and Chain. Let’s precisely understand both of them.

Block is the authenticated entity that documents the time stamp and is encrypted. It is governed by an owner through a private key. In case, edits are introduced, all the distributed chains are updated on the real-time basis. It can be said as the most active part of the blockchain that records the previous transactions. Once completed, the block goes back to the blockchain and the new one is generated thus, forming the chains that are linked to one another. Every new block developed is already connected with the previous block. The blockchain contains the complete history of the users and addresses. The data can be distributed but the copy of it cannot be generated.

Digital information to be distributed but not copied, blockchain technology created the backbone of a new type of internet. Originally devised for the digital currency, Bitcoin, the tech community is now finding other potential uses for the technology.

“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”

Bitcoin has been called “digital gold,” and for a good reason. To date, the total value of the currency is close to $9 billion US. And blockchains can make other types of digital value. Like the internet (or your car), you don’t need to know how the blockchain works to use it. However, having a basic knowledge of this new technology shows why it’s considered revolutionary. So, we hope you enjoy this, what is Blockchain guide.

Picture a spreadsheet that is duplicated thousands of times across a network of computers. Then imagine that this network is designed to regularly update this spreadsheet and you have a basic understanding of the blockchain.

Information held on a blockchain exists as a shared — and continually reconciled — database. This is a way of using the network that has obvious benefits. The blockchain database isn’t stored in any single location, meaning the records it keeps are truly public and easily verifiable. No centralized version of this information exists for a hacker to corrupt. Hosted by millions of computers simultaneously, its data is accessible to anyone on the internet.

To go in deeper with the Google spreadsheet analogy, I would like you to read this piece from a blockchain specialist.

 

Diagram – Blockchain Applications for the Internet of Things (IoT) :

 

A blockchain is a public ledger of all bitcoin transactions that have ever been executed. A block is the “current” part of a blockchain which records some or all of the recent transactions, and once completed, goes into the blockchain as permanent database. Each time a block gets completed, a new block is generated. Blocks are linked to each other (like a chain) in proper linear, chronological order with every block containing a hash of the previous block. To use conventional banking as an analogy, the blockchain is like a full history of banking transactions. Bitcoin transactions are entered chronologically in a blockchain just the way bank transactions are. Meanwhile, blocks, are like individual bank statements. The full copy of the blockchain has records of every bitcoin transaction ever executed. It can thus provide insight about facts like how much value belonged to a particular address at any point in the past. Some developers have begun looking at the creation of other different blockchains as they do not believe on depending on a single blockchain. Parallel blockchains and sidechains allow for tradeoffs and improved scalability using alternative, completely independent blockchains, thus, allowing for more innovation.

To give an example of the blockchain concept, we found out about a product called Gyft, an online platform for gift cards where you can buy, sell and redeem gift cards. It is a partnership between 44-year-old merchant acquirer/processor/FinTech firm First Data and blockchain infrastructure provider Chain to offer gift cards for SMBs using blockchain. The product will be rolled out soon and will become a solid example of blockchain-based innovation that has nothing to do with bitcoin. Why does it make sense? A majority of the SMBs don’t have gift card programs and therefore, POS installed at SMBs don’t accept them. It is costly to offer a gift card program and difficult to see the immediate benefits. It’s basically postponed gratification for a retailer, but large retailers understand it very well and have gift cards acceptance. Blockchain allows Gyft to offer a great gift card solution to SMB customers.

Blockchain technology has been acknowledged as one of the most disruptive innovations since the advent of the Internet. The financial industry has also started looking to leverage it to store and transfer its value to other financial instruments. Capital Markets is one such industry in the financial space where industry experts are optimistic about the use of blockchain technology.

People use the term ‘blockchain technology’ to mean different things, and it can be confusing. Sometimes they are talking about The Bitcoin Blockchain, sometimes it’s other virtual currencies, sometimes it’s smart contracts. Most of the time though, they are talking about distributed ledgers, i.e. a list of transactions that is shared among a number of computers, rather than being stored on a central server.

By using a fingerprint instead of a timestamp or a numerical sequence, you also get a nice way of validating the data. In any blockchain, you can generate the block fingerprints yourself by using certain algorithms. If the fingerprints are consistent with the data, and the fingerprints join up in a chain, then you can be sure that the blockchain is internally consistent. If anyone wants to meddle with any of the data, they have to regenerate all the fingerprints from that point forwards and the blockchain will look different.

A blockchain is a sequence of hash-chained records . Once you’ve seen record N, you can’t change anything in the past. Some procedure for adding blocks to blockchain  .Who gets to add blocks? How is it done?  Validity conditions for new blocks . Are transactions valid? Are digital signatures correct? Etc.  Enforced by consensus-–chains with invalid blocks won’t be accepted.  Some procedure for deciding between alternative candidate blockchains.  When Alice and Bob have different pictures of history, there’s some way for them to eventually come to agreement about who is right.

Filament​​is a startup that provides a decentralized IoT software stack that uses the bitcoin blockchain to enable devices to hold unique identities on a public ledger. The goal here is to create a smart device directory that would enable Filament IoT devices to securely communicate, execute smart contracts and send microtransactions. Filament technology stack uses five layers-blockname, telehash, smart contracts, pennybank and BitTorrent. Each device is equipped with the ability to handle communications on all five layers. Using blockname, devices are able to create a unique identifiers which are stored in a part of the device’s embedded chip and recorded on the blockchain. Telehash, in turn, provides end-to-end encrypted communications and BitTorrent enables the file sharing.

Payments for the devices’ use is handled by smart contracts, which allows the terms of the payments and access to the device to be controlled programmatically. Filament uses a bitcoin-based protocol that it has developed called Pennybank for microtransactions on its platform, in part of unique need of IoT devices. IoT devices are not high power and they are not always online, Pennybank creates escrow service between two IoT devices, allowing them to settle transactions when they are connected online.

MeenaG Staff

Internet of Things Enthusiast

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