History
The idea of blockchain originated in 1991 from a paper titled “How to time-stamp a digital document” by Stuart Haber and W Scott Stornetta which conveys the idea of a system by which digital documents could be timestamped securely.
In 2012 the paper “Improving the Efficiency and Reliability of Digital Time-Stamping” by Dave Bayer, Haber and Stornetta incorporated a cryptographic hash tree known as Merkle Tree into design to improve efficiency and security.
A Merkle tree is recursively defined as a binary tree of hash lists where the parent node is the hash of its children, and the leaf nodes are hashes of the original data blocks.
A hash is the result of the cryptographic formula that has taken some form of data encrypted it and returned the result as single string of characters.
Bitcoin was introduced by Satoshi Nakamoto in his official Bitcoin whitepaper (Bitcoin: A Peer-to-Peer Electronic Cash System) and is the one who created and deployed bitcoin’s original reference implementation.
What is a blockchain?
A blockchain is a distributed ledger often referred as DLT(Distributed Ledger Technology) which is accessible to everyone meaning it is decentralized.
Once data is stored within a block it becomes extremely difficult to change it.
A block is comprised of three things: Data, a hash and the hash of the previous block.The data in a blockchain all depends on what type of blockchain there is.
Data in block
So lets assume we have the Bitcoin Blockchain. The data that is stored in there will be the sender, the receiver and the amount.
The block hash
The block will also contain a Hash. The bitcoin uses the SHA-256 Hash Algorithm. When the block is created, the data is taken and the hash is calculated from the Data. This process is called cryptography. Because the hash will be unique to the block and the data inside, it can be treated as and is often referred to as a "digital fingerprint".
The previous block hash
The block also contains the hash of the previous block and it is this which created the chain. It is also this which is integral to the security of the blockchain.
Genesis Block
But there must be some starting point for a block?
Yes Block 0 or sometimes called block 1 is known as the Genesis Block. A genesis block is the first block of a block chain. Modern versions of Bitcoin number it as block 0, though very early versions counted it as block 1. The genesis block is almost always hardcoded into the software of the applications that utilize its block chain. It is a special case in that it does not reference a previous block
How is a blockchain secure?
The blockchain utilises three techniques for its security:
Merkle Tree Methodology
In 2012 the merkle tree cryptographic hash methodology was implemented which improves efficiency and security of blockchain. The implementation of Merkle trees allow for a deterministic and waterfall style method of block creation. Each block will be assigned a hash of its data and each new block from that block will be a copy of the parent blocks hash
A Bitcoin example
Suppose there is a transaction between Susan Bloggs and Chris Bloggs of BTC 3.456 which creates a new block on the chain with the data of the transaction, the hash of that data and the hash from the initial block.
So the data we are encrypting is Sender: Susan Boggs, Receiver: Chriss Bloggs and Amount: 3.456 BTC
Using our hashing function we get the hash: b4de b27c 02e8 bdbe 6beb 48c5 a943 d189. We then add this hash to our block. In order to add a new block to our blockchain we check that the new blocks previous hash matches the previous block. In our example it is: b4de b27c 02e8 bdbe 6beb 48c5 a943 d189It is exactly the same and thus we know that nothing has been tampered with. This confirmation process verifies that all hashes are consistent back to the Genesis block.
Proof of Work
What if create a new block and re-calculate all previous block hashes using high speed computers and get around this security feature. To Mitigate this, blockchain also utilises something called (PoW) Proof-of-Work. PoW effectively slows down the creation of new blocks. In a Bitcoin example each block would take around 10-15 mins to calculate the required PoW and add a new block to the existing chain
Peer to peer network consensus
The blockchain is made public and available to everyone, making it decentralised. When someone joins the blockchain they get a full copy of it in its current state. This is then referred to as a node. When a new block is created, any node connected to this chain will take the new block and then use PoW to verify that it is indeed secure.
Each node will check the other nodes response to the new block. This means that if the block was tampered with and even if some nodes had tampered with blockchains, the new block would still be rejected as other nodes will notice the inconsistencies.
What problem can a blockchain solve?
Blockchain technology offers numerous benefits, including secure digital time stamping of documents, decentralization in transactions, and the ability to raise substantial amounts in a short amount of time. It eliminates the need for third-party intermediaries, reducing fees and ensuring the protection of personal data. Blockchain also eliminates the need for trust in third-party services, allowing transactions to be almost instant and free of fees.
In 2018, ConsenSys introduced Project i2i, a payment network built on Ethereum to connect rural community banks in the Philippines. This system, known as crypto-cash, uses crypto-tokens backed by fiat currency.
Ethereum's Crowdsale and Smart Contracts have allowed start-ups to raise substantial amounts quickly. Filecoin, an open-source decentralized storage market, raised $257,000,000 in just a few hours.
Blockchain storage solutions, like Filecoin and Storj.io, provide full control over data and ensure only authorized access. Blockchain technology can also be used for voting, eliminating fraud and boosting turnout. This technology can help maintain transparency, minimize costs, and streamline the voting process.
YouTube Videos to Understand more
References
An Elementary and Slightly Distilled Introduction to Blockchain by Mark Petherbridge
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