Blockchain can be described as a data structure that holds transactional records and while ensuring security, Transparency, and decentralization. A block chain is a decentralized, distributed and oftentimes public, digital ledger that is used to record transactions across many computers so that any involved record cannot be altered retroactively, without the alteration of subsequent blocks.
A blockchain is a growing list of records, called blocks that are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. A blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for inter node-communication and validating new blocks.
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 document timestamps could not be tempered with. In 1992, Haber, stornetta, and Dave Bayer incorporated Merkel trees to the design, which improved its efficiency by allowing several document certificates to be collected into one block. The first blockchain was conceptualized by Satoshi Nakamoto in 2008. A Nakamoto improved design by using a Hash-like method to timestamp blocks without requiring them to be signed by a trusted party and introducing a difficulty parameter to stabilize the rate with which blocks are added to the chain. The design was implemented the following year by Nakamoto as a core component of the cryptocurrency bitcoin, where it serves as the public ledger for all transaction on the network.
Types of Blockchain
There are four type of Blockchain.
A public blockchain has absolutely no access restrictions. Anyone with an internet connection can send transactions to it as well as become a validator. Usually such networks offer’s 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 the bitcoin blockchain and Ethereum blockchain.
A private Blockchain is permissioned. One cannot join it unless invited by the network administrators. Participant and validator access are restricted.
A hybrid blockchain has a combination of centralized and decentralized features. The exact working of the chain can vary based on which portions of centralization and decentralization are used.
A sidechain is designation for blockchain ledger that runs in parallel to a primary blockchain. Entries form the primary blockchain can be linked to and from sidechain; this allows sidechain to otherwise operate independently the primary blockchain.
Uses of Blockchain
Blockchain technology can be integrated in to multiple areas.
Most cryptocurrencies use blockchain technology to record transactions. The primary use of blockchain today is as a distributed ledger for cryptocurrencies, most notably bitcoin.
Blockchain based smart contracts are proposed contracts that can be partially or fully executed or enforced without human interactions. One of the main objectives of a smart contract is escrow. An IMF staff discussion reported that smart contracts based on blockchain might reduce moral hazards and optimize the use of contracts in general.
Major Portions of the financial industry are implementing distributed ledger for use in Banking and according to IBM study, this is occurring faster than expected. Banks are interested in technology because it has potential to speed up back office settlement system.
Blockchain is also used in videogames like CryptoKitties.
There are a number of efforts and industry organizations working to employ blockchain in supply chain logistics and Supply chain management. Everledger is one of the inaugural clients of IBM’S blockchain based tracking service for supply chain.
Blockchain domain names are another use of blockchain on the rise.
Blockchain technology can used to create permanent, public, transparent ledger system for compiling data on sales, tracking digital use and payment to content creators such as wireless users or musicians.