Blockchain Technology
- 2. OUTLINE • Blockchain Architecture • Blockchain Mining • Structure of a Blockchain • Blockchain Header • Merkle Tree • How Blockchain works? • Types of Blockchain Networks • Centralized vs. Distributed Ledger.
- 3. What is Blockchain Technology? • Decentralized database which stores information in the form of transactions. • A cryptographically secure, shared, distributed ledger. • Immutable transactions are written on this distributed ledger on distributed nodes.
- 4. Blockchain • A blockchain consists of data sets which are composed of a chain of data packages(blocks) where a block comprises multiple transactions (TX 1 to TX N). • Blockchain is extended by each additional block and hence represents a complete ledger of the transaction history • In addition to the transactions, each block contains a timestamp, the hash value of the previous block, and a nonce. • This concept ensures the integrity of the entire blockchain through to the first block.
- 5. Blockchain Architecture These are the core blockchain architecture components: • Node • Transaction • Block • Chain • Miners • Consensus (consensus protocol) – PoW(Proof-of-Work) – PoS(Proof-of-Stake)
- 8. Structure of Block in Blockchain • A block is a container data structure, which brings together transactions for inclusion in the public ledger, known as the blockchain. • Block is made up of header: consists of three sets of block metadata. • Version: version number to track software/protocol upgrades. • Transaction counter: identifies how many transactions are stored in current block. • Block body: where all block transactions are stored.
- 9. Blockchain Header • Block Version: software/protocol version. • Parent Block Hash: connects current block to the previous block, lying in blockchain. • Timestamp: Block creation time • Nonce: counter used for the proof-of-work algorithm. • nBits: represents the target value. • Merkle Tree Root Hash: A hash of Merkle tree root of the block’s transaction.
- 10. Merkle Tree • Merkle tree summarize and verify the integrity of large sets of data. • A Merkle tree is built by recursively hashing pairs of nodes until there is only one hash, called the root hash. • Also known as Binary Hash Tree.
- 12. Example of Blockchain Step1: A trade is recorded. For example, let’s say Mr Pink is selling two of his coins to Mr Green for $100. The record lists the details, including a digital signature from each party.
- 13. Step 2: The record is checked by the network. The computers in the network, called 'nodes', check the details of the trade to make sure it is valid.
- 14. Step 3: The records that the network accepted are added to a block. Each block contains a unique code called a hash. It also contains the hash of the previous block in the chain.
- 15. Step 4: The block is added to the blockchain. The hash codes connect the blocks together in a specific order.
- 16. Types of Blockchain Network • Public Blockchain: Publicly accessible blockchains are termed as Public Blockchain. • Private Blockchain: This particular blockchain requires the participants to be invited before they can be a part of the blockchain • Hybrid Blockchain: This blockchain is divided into two different types, where some nodes are private, while the other nodes are public.
- 17. Features of Blockchain • Increased Capacity • Decentralized Technology • Immutability • Enhanced Security • Distributed Ledgers • Consensus
- 18. Centralized vs. Distributed Ledger A distributed ledger is a network that records ownership through a shared registry. The best known existing use for the distributed ledger is the cryptocurrency Bitcoin.
- 19. Centralized vs. Distributed Ledgers • Blockchain aims to decentralize transactions of assets to the internet network, via a chain of nodes called a distributed ledger. • Traditional centralized ledgers functions as a middleman exchange between the buyer and seller and chargers extra operational fees due to third party involvement. • In a blockchain environment, the user has personal access to his asset via a private key • If the user chooses to transact their assets, they can do so directly without the intervention of the third party entity.
- 20. Advantages of Distributed Ledger over Centralized Ledger Factors Centralized Ledger Distributed Ledger Control Single point of control Decentralized Failure Single point failure Distributed Third party involvement Unnecessary gateways and middleman Peer-to-peer Change in Data No restrictions Immutable(append only) Ease of use Easy and intuitive to use Complex to use, and not very intuitive. Hackable More susceptible to hacks Difficult to hack
Editor's Notes
- #17: Public: These blockchains have no restrictions on the participatory and validator. Private: Here all the transactions are visible only to persons who are part of the blockchain ecosystem. Hybrid: As a result, some of the nodes will be allowed to participate in the transactions. The other nodes are to control the consensus process.