Blockchain Over the past few years, “Blockchain” has emerged as a potentially disruptive technology. The core of the innovation is built around the concept of a distributed cryptographic database, which is also referred to as the ledger maintained by a network of computers. The ledger makes it possible for the entire network to create, evolve, and keep track of an immutable record of transactions.
The three key features of a blockchain based system:
Distributed: The blockchain is also referred to as a Distributed ledger. This is both because many nodes on the blockchain network possess their copy of the entire ledger and that they are connected. This creates a distributed arrangement of nodes. This is an important design choice because when a block of transactions is ready to be uploaded onto the blockchain, the individual nodes participate in a voting mechanism to decide which node, called the ’leader’, makes the addition. This entire process is based upon a networking paradigm derived from BFT or Byzantine Fault Tolerance algorithms.
Cryptographic Security: The blockchain is designed such that transactions are created using public-key encryption. Each account has a private key associated with it. The public key derived from the private key is used to sign transactions. The private key establishes ownership of the token transferred by the transaction. The use of public-key encryption means that if someone were to get hold of the transaction data through malicious means, they would be unable to derive any information from it because the private key for an account is never exposed. The data stays encrypted and is of no use to the attacker.
Immutable: As the name suggests, the blockchain is a long collection of blocks that link to each other in a specific way. In most implementations, each new block that is added to the blockchain contains a pointer to the previous block called the parent block. This pointer is included in a specific area of the block, sometimes called the header. What this arrangement accomplishes is that if someone tried to maliciously alter a transaction somewhere in the blockchain, they would change the block's hash. Since the block’s hash is included in the block following it, they would then have to change the child’s hash as well. This quickly becomes an impossible task since new blocks are being added constantly which gives rise to the property of immutability. This means that the state object, once created, is unchangeable.
The above 3 features guarantee a highly available, secure, and trustable application. One of the first and most successful applications built on the concept of blockchain is ‘Bitcoin’, which is a per-peer cash system. Bitcoin is a public blockchain network where everyone can see the ledger of transactions since the genesis block in 2009. At the heart, a blockchain system operates on a distributed consensus mechanism which means in each blockchain network the participants decide and agree on every transaction that is signed thereby establishing a high degree of trust. Businesses have started embracing Blockchain technology to bring more transparency and trust both to their customer and business partners. The banking, payment, and financial services industries are amongst the frontrunners in adopting blockchain for business. We are still in the initial days where the blockchain industry is maturing and businesses are working on setting up best practices, make changes to the current practices, and build a network of partners. The blockchain as a whole will be successful when more businesses participate with an open mind.