Blockchain


A blockchain, originally block chain, is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a cryptographic hash of the previous block, a timestamp, and transaction data. By design, a blockchain is resistant to modification of the data. It is "an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way". For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for inter-node communication and validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without alteration of all subsequent blocks, which requires collusion of the network majority.
Blockchains are secure by design and exemplify a distributed computing system with high Byzantine fault tolerance. Decentralized consensus has therefore been achieved with a blockchain. This makes blockchains potentially suitable for the recording of events, medical records, and other records management activities, such as identity management, transaction processing, documenting provenance, food traceability, and voting.
Blockchain was invented by Satoshi Nakamoto in 2008 to serve as the public transaction ledger of the cryptocurrency bitcoin. The invention of the blockchain for bitcoin made it the first digital currency to solve the double-spending problem without the need of a trusted authority or central server. The bitcoin design has inspired other applications.

History

Bitcoin transactions (January 2009 – September 2017) The first work on a cryptographically secured chain of blocks was described in 1991 by Stuart Haber and W. Scott Stornetta. They wanted to implement a system where documents' timestamps could not be tampered with or backdated. In 1992, Bayer, Haber and Stornetta incorporated Merkle trees to the design, which improved its efficiency by allowing several documents to be collected into one block.
The first blockchain was conceptualized by a person (or group of people) known as Satoshi Nakamoto in 2008. It was implemented the following year by Nakamoto as a core component of the cryptocurrency bitcoin, where it serves as the public ledger for all transactions on the network.[1] Through the use of a blockchain, bitcoin became the first digital currency to solve the double-spending problem without requiring a trusted authority and has been the inspiration for many additional applications.
In August 2014, the bitcoin blockchain file size, containing records of all transactions that have occurred on the network, reached 20 GB (gigabytes).[19] In January 2015, the size had grown to almost 30 GB, and from January 2016 to January 2017, the bitcoin blockchain grew from 50 GB to 100 GB in size.
The words block and chain were used separately in Satoshi Nakamoto's original paper, but were eventually popularized as a single word, blockchain, by 2016. The term blockchain 2.0 refers to new applications of the distributed blockchain database, first emerging in 2014.[21] The Economist described one implementation of this second-generation programmable blockchain as coming with "a programming language that allows users to write more sophisticated smart contracts, thus creating invoices that pay themselves when a shipment arrives or share certificates which automatically send their owners dividends if profits reach a certain level."[1] Blockchain 2.0 technologies go beyond transactions and enable "exchange of value without powerful intermediaries acting as arbiters of money and information." They are expected to enable excluded people to enter the global economy, protect the privacy of participants, allow people to "monetize their own information," and provide the capability to ensure creators are compensated for their intellectual property. Second-generation blockchain technology makes it possible to store an individual's "persistent digital ID and persona" and provides an avenue to help solve the problem of social inequality by "potentially changing the way wealth is distributed".[22]:14–15 As of 2016, blockchain 2.0 implementations continue to require an off-chain oracle to access any "external data or events based on time or market conditions [that need] to interact with the blockchain."
In 2016, the central securities depository of the Russian Federation (NSD) announced a pilot project, based on the Nxt blockchain 2.0 platform, that would explore the use of blockchain-based automated voting systems.[24] IBM opened a blockchain innovation research center in Singapore in July 2016.[25] A working group for the World Economic Forum met in November 2016 to discuss the development of governance models related to blockchain.[26] According to Accenture, an application of the diffusion of innovations theory suggests that blockchains attained a 13.5% adoption rate within financial services in 2016, therefore reaching the early adopters phase.[27] Industry trade groups joined to create the Global Blockchain Forum in 2016, an initiative of the Chamber of Digital Commerce.[28]
In May 2018, Gartner found that only 1% of CIOs indicated any kind of blockchain adoption within their organisations, and only 8% of CIOs were in the short-term ‘planning or [looking at] active experimentation with blockchain’.[29]
Structure A blockchain is a decentralized, distributed and public digital ledger that is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network.[1][30] This allows the participants to verify and audit transactions inexpensively.[31] A blockchain database is managed autonomously using a peer-to-peer network and a distributed timestamping server. They are authenticated by mass collaboration powered by collective self-interests.[32] The result is a robust workflow where participants' uncertainty regarding data security is marginal. The use of a blockchain removes the characteristic of infinite reproducibility from a digital asset. It confirms that each unit of value was transferred only once, solving the long-standing problem of double spending. Blockchains have been described as a value-exchange protocol.[21] This blockchain-based exchange of value can be completed quicker, safer and cheaper than with traditional systems.[33] A blockchain can assign title rights because, when properly set up to detail the exchange agreement, it provides a record that compels offer and acceptance.
Blocks Blocks hold batches of valid transactions that are hashed and encoded into a Merkle tree.[1] Each block includes the cryptographic hash of the prior block in the blockchain, linking the two. The linked blocks form a chain.[1] This iterative process confirms the integrity of the previous block, all the way back to the original genesis block.[36]
Sometimes separate blocks can be produced concurrently, creating a temporary fork. In addition to a secure hash-based history, any blockchain has a specified algorithm for scoring different versions of the history so that one with a higher value can be selected over others. Blocks not selected for inclusion in the chain are called orphan blocks.[36] Peers supporting the database have different versions of the history from time to time. They keep only the highest-scoring version of the database known to them. Whenever a peer receives a higher-scoring version (usually the old version with a single new block added) they extend or overwrite their own database and retransmit the improvement to their peers. There is never an absolute guarantee that any particular entry will remain in the best version of the history forever. Because blockchains are typically built to add the score of new blocks onto old blocks and because there are incentives to work only on extending with new blocks rather than overwriting old blocks, the probability of an entry becoming superseded goes down exponentially[37] as more blocks are built on top of it, eventually becoming very low.[1][38]:ch. 08[39] For example, in a blockchain using the proof-of-work system, the chain with the most cumulative proof-of-work is always considered the valid one by the network. There are a number of methods that can be used to demonstrate a sufficient level of computation. Within a blockchain the computation is carried out redundantly rather than in the traditional segregated and parallel manner.
Block time The block time is the average time it takes for the network to generate one extra block in the blockchain.[41] Some blockchains create a new block as frequently as every five seconds.[42] By the time of block completion, the included data becomes verifiable. In cryptocurrency, this is practically when the money transaction takes place, so a shorter block time means faster transactions. The block time for Ethereum is set to between 14 and 15 seconds, while for bitcoin it is 10 minutes.[43]
Hard forks This section is transcluded from Fork (blockchain). (edit | history) A hard fork is a rule change such that the software validating according to the old rules will see the blocks produced according to the new rules as invalid. In case of a hard fork, all nodes meant to work in accordance with the new rules need to upgrade their software.
If one group of nodes continues to use the old software while the other nodes use the new software, a split can occur. For example, Ethereum has hard-forked to "make whole" the investors in The DAO, which had been hacked by exploiting a vulnerability in its code.[45] In this case, the fork resulted in a split creating Ethereum and Ethereum Classic chains. In 2014 the Nxt community was asked to consider a hard fork that would have led to a rollback of the blockchain records to mitigate the effects of a theft of 50 million NXT from a major cryptocurrency exchange. The hard fork proposal was rejected, and some of the funds were recovered after negotiations and ransom payment.[46]
Alternatively, to prevent a permanent split, a majority of nodes using the new software may return to the old rules, as was the case of bitcoin split on 12 March 2013.[47]
Decentralization By storing data across its peer-to-peer network, the blockchain eliminates a number of risks that come with data being held centrally.[1] The decentralized blockchain may use ad-hoc message passing and distributed networking.
Peer-to-peer blockchain networks lack centralized points of vulnerability that computer crackers can exploit; likewise, it has no central point of failure. Blockchain security methods include the use of public-key cryptography.[4]:5 A public key (a long, random-looking string of numbers) is an address on the blockchain. Value tokens sent across the network are recorded as belonging to that address. A private key is like a password that gives its owner access to their digital assets or the means to otherwise interact with the various capabilities that blockchains now support. Data stored on the blockchain is generally considered incorruptible.[1]
While centralized data is more easily controlled, information and data manipulation are possible. By decentralizing data on an accessible ledger, public blockchains make block-level data transparent to everyone involved.[48]
Every node in a decentralized system has a copy of the blockchain. Data quality is maintained by massive database replication[9] and computational trust. No centralized "official" copy exists and no user is "trusted" more than any other.[4] Transactions are broadcast to the network using software. Messages are delivered on a best-effort basis. Mining nodes validate transactions,[36] add them to the block they are building, and then broadcast the completed block to other nodes.[38]:ch. 08 Blockchains use various time-stamping schemes, such as proof-of-work, to serialize changes.[49] Alternate consensus methods include proof-of-stake.[36] Growth of a decentralized blockchain is accompanied by the risk of node centralization because the computer resources required to process larger amounts of data become more expensive.[50]
Openness Open blockchains are more user-friendly than some traditional ownership records, which, while open to the public, still require physical access to view. Because all early blockchains were permissionless, controversy has arisen over the blockchain definition. An issue in this ongoing debate is whether a private system with verifiers tasked and authorized (permissioned) by a central authority should be considered a blockchain.[51][52][53][54][55] Proponents of permissioned or private chains argue that the term "blockchain" may be applied to any data structure that batches data into time-stamped blocks. These blockchains serve as a distributed version of multiversion concurrency control (MVCC) in databases.[56] Just as MVCC prevents two transactions from concurrently modifying a single object in a database, blockchains prevent two transactions from spending the same single output in a blockchain.[22]:30–31 Opponents say that permissioned systems resemble traditional corporate databases, not supporting decentralized data verification, and that such systems are not hardened against operator tampering and revision.[51][53] Nikolai Hampton of Computerworld said that "many in-house blockchain solutions will be nothing more than cumbersome databases," and "without a clear security model, proprietary blockchains should be eyed with suspicion."[57] Business analysts Don Tapscott and Alex Tapscott define blockchain as a distributed ledger or database open to anyone.[58]
Permissionless The great advantage to an open, permissionless, or public, blockchain network is that guarding against bad actors is not required and no access control is needed.[37] This means that applications can be added to the network without the approval or trust of others, using the blockchain as a transport layer.[37]
Bitcoin and other cryptocurrencies currently secure their blockchain by requiring new entries to include a proof of work. To prolong the blockchain, bitcoin uses Hashcash puzzles. While Hashcash was designed in 1997 by Adam Back, the original idea was first proposed by Cynthia Dwork and Moni Naor and Eli Ponyatovski in their 1992 paper "Pricing via Processing or Combatting Junk Mail".
Financial companies have not prioritised decentralized blockchains.[59] In 2016, venture capital investment for blockchain-related projects was weakening in the USA but increasing in China.[60] Bitcoin and many other cryptocurrencies use open (public) blockchains. As of April 2018, bitcoin has the highest market capitalization.
Permissioned (private) blockchain Main article: Distributed ledger Permissioned blockchains use an access control layer to govern who has access to the network.[61] In contrast to public blockchain networks, validators on private blockchain networks are vetted by the network owner. They do not rely on anonymous nodes to validate transactions nor do they benefit from the network effect.[62][better source needed] Permissioned blockchains can also go by the name of 'consortium' or 'hybrid' blockchains.[63]
The New York Times noted in both 2016 and 2017 that many corporations are using blockchain networks "with private blockchains, independent of the public system."[64][65][better source needed]
Disadvantages Nikolai Hampton pointed out in Computerworld that "There is also no need for a '51 percent' attack on a private blockchain, as the private blockchain (most likely) already controls 100 percent of all block creation resources. If you could attack or damage the blockchain creation tools on a private corporate server, you could effectively control 100 percent of their network and alter transactions however you wished."[57] This has a set of particularly profound adverse implications during a financial crisis or debt crisis like the financial crisis of 2007–08, where politically powerful actors may make decisions that favor some groups at the expense of others[66][67], and "the bitcoin blockchain is protected by the massive group mining effort. It's unlikely that any private blockchain will try to protect records using gigawatts of computing power—it's time consuming and expensive."[57] He also said, "Within a private blockchain there is also no 'race'; there's no incentive to use more power or discover blocks faster than competitors. This means that many in-house blockchain solutions will be nothing more than cumbersome databases."[57]
Self-describing data Data interchange between participants in a blockchain is a technical challenge that could inhibit blockchain's adoption and use. This has not yet become an issue because thus far participants in a blockchain have agreed (either tacitly or actively) on metadata standards. Standardized metadata will be the best approach for permissioned blockchains such as payments and securities trading with high transaction volumes and a limited number of participants. Such standards reduce the transaction overhead for the blockchain without imposing burdensome mapping and translation requirements on the participants. However, Robert Kugel of Ventana Research points out that general purpose commercial blockchains require a system of self-describing data to permit automated data interchange.[68] Self-describing data makes it easy for disparate systems to correctly process the data on both sides of a transaction and supports the decentralized and open characteristics of blockchain. According to Kugel, by enabling universal data interchange, self-describing data can greatly expand the number of participants in permissioned commercial blockchains without having to concentrate control of these blockchains to a limited number of behemoths.[68] It would promote openness, for example, by eliminating one of the significant costs of proprietary (EDI) services, that is, the need to map one or more of an organization's systems to the data model of the EDI service provider. Self-describing data also facilitates the integration of data between disparate blockchains. For example, being able to link data from one for pharmaceutical traceability to another for an individual’s medical records (two common use cases) would enable a hospital or physician to confirm that a prescription was filled with an authentic drug.[69]
Uses Blockchain technology can be integrated into multiple areas. The primary use of blockchains today is as a distributed ledger for cryptocurrencies, most notably bitcoin.[70] While a few central banks, in countries and regions such as India, China, Hong Kong, United States, Sweden, Singapore, South Africa and the United Kingdom are studying issuance of a Central Bank Issued Cryptocurrency (CICC), none have done so as of 22 December 2016.[70]
General potentials Blockchain technology has a large potential to transform business operating models in the long term. Blockchain distributed ledger technology is more a foundational technology—with the potential to create new foundations for global economic and social systems—than a disruptive technology, which typically "attack a traditional business model with a lower-cost solution and overtake incumbent firms quickly".[8] Even so, there are a few operational products maturing from proof of concept by late 2016.[60] The use of blockchains promises to bring significant efficiencies to global supply chains, financial transactions, asset ledgers and decentralized social networking.[8]
As of 2016, some observers remain skeptical. Steve Wilson, of Constellation Research, believes the technology has been hyped with unrealistic claims.[71] To mitigate risk, businesses are reluctant to place blockchain at the core of the business structure.[72]
This means specific blockchain applications may be a disruptive innovation, because substantially lower-cost solutions can be instantiated, which can disrupt existing business models.[8] Blockchain protocols facilitate businesses to use new methods of processing digital transactions.[73] Examples include a payment system and digital currency, facilitating crowdsales, or implementing prediction markets and generic governance tools.[74]
Blockchains alleviate the need for a trust service provider and are predicted to result in less capital being tied up in disputes. Blockchains have the potential to reduce systemic risk and financial fraud. They automate processes that were previously time-consuming and done manually, such as the incorporation of businesses.[75] In theory, it would be possible to collect taxes, conduct conveyancing and provide risk management with blockchains.
As a distributed ledger, blockchain reduces the costs involved in verifying transactions, and by removing the need for trusted "third-parties" such as banks to complete transactions, the technology also lowers the cost of networking, therefore allowing several applications.[31]
Starting with a strong focus on financial applications, blockchain technology is extending to activities including decentralized applications and collaborative organizations that eliminate a middleman.
Types of blockchains Currently, there are three types of blockchain networks - public blockchains, private blockchains and consortium blockchains.[152][self-published source?]
Public blockchains A public blockchain has absolutely no access restrictions. Anyone with an internet connection can send transactions[disambiguation needed] to it as well as become a validator (i.e., participate in the execution of a consensus protocol). [153][self-published source?] Usually, such networks offer economic incentives for those who secure them and utilize some type of a Proof of Stake or Proof of Work algorithm.
Some of the largest, most known public blockchains are Bitcoin and Ethereum.
Private blockchains A private blockchain is permissioned.[61] One cannot join it unless invited by the network administrators. Participant and validator access is restricted.[7][unreliable source?]
This type of blockchains can be considered a middle-ground for companies that are interested in the blockchain technology in general but are not comfortable with a level of control offered by public networks. Typically, they seek to incorporate blockchain into their accounting and record-keeping procedures without sacrificing autonomy and running the risk of exposing sensitive data to the public internet.
Consortium blockchains A consortium blockchain is often said to be semi-decentralized. It, too, is permissioned but instead of a single organization controlling it, a number of companies might each operate a node on such a network. The administrators of a consortium chain restrict users’ reading rights as they see fit and only allow a limited set of trusted nodes to execute a consensus protocol.[154]
Academic research
Blockchain panel discussion at the first IEEE Computer Society TechIgnite conference In October 2014, the MIT Bitcoin Club, with funding from MIT alumni, provided undergraduate students at the Massachusetts Institute of Technology access to $100 of bitcoin. The adoption rates, as studied by Catalini and Tucker (2016), revealed that when people who typically adopt technologies early are given delayed access, they tend to reject the technology.[155]
Journals Main article: Ledger (journal) In September 2015, the first peer-reviewed academic journal dedicated to cryptocurrency and blockchain technology research, Ledger, was announced. The inaugural issue was published in December 2016.[156][157] The journal covers aspects of mathematics, computer science, engineering, law, economics and philosophy that relate to cryptocurrencies such as bitcoin.[158][159]
The journal encourages authors to digitally sign a file hash of submitted papers, which will then be timestamped into the bitcoin blockchain. Authors are also asked to include a personal bitcoin address in the first page of their papers.[160]
Predictions A World Economic Forum report from September 2015 predicted that by 2025 ten percent of global GDP would be stored on blockchains technology.
In early 2017, Harvard Business School professors Marco Iansiti and Karim R. Lakhani said the blockchain is not a disruptive technology that undercuts the cost of an existing business model, but is a foundational technology that "has the potential to create new foundations for our economic and social systems". They further predicted that, while foundational innovations can have enormous impact, "It will take decades for blockchain to seep into our economic and social infrastructure."

Source: https://en.wikipedia.org/wiki/Blockchain