Anastasia Yakimovska

Software Engineering
Group 1 FN 855362

Blockchain and its application

Introduction
As the name indicates, a blockchain is a chain of blocks containing information and is essentially, a
distributed ledger that is completely open for anyone to view. This software was first mentioned at the end
of the 20th century and its initial intention was to timestamp digital document in order to make them
tamper-proof. Years went by without it being used until Satoshi Nakamoto adapted it in 2009 to create the
digital currency Bitcoin.

Blockchain
The essential part of the Blockchain technology is its way of securing the information stored in the blocks.
A block contains information, the hash of the information in the block and the hash of the information in
previous block. The hash function is a function used to cryptographically secure the information from
anyone unauthorized that may try to access it. Modifying any of the information in the block will in turn
cause the hash to modify. So, essentially, if the hash of a block changes, it no longer is the same block,
and this way modifications to blocks can be easily detected and last element of each block is the hash of
the previous one, thus creating a chain of blocks. This is what makes the Blockchain technology
effectively secure, but the usage of hashes is not enough to intercept with tampering. Nowadays,
computers can easily crack thousands of hashes per second and a block could be effectively tampered
with, as well as have hashes of all other blocks recalculated to make the block in question valid again, all
in under a minute. To solve this, blockchains have a mechanism called proof-of-work, which slows down
the creation of new blocks. It makes it very hard to tamper with the blocks, because if you modify 1 block,
you'll need to do the proof-of-work for all the following blocks, apart from the hashes. The last attribution
that blockchains use to secure themselves is by being distributed. To simplify this, Blockchain pushes
aside the idea of a central entity managing the chain, and instead uses a peer-to-peer network, with
anyone allowed to join. So, when someone joins this network, they get the full copy of the blockchain up
to the moment they had joined. To verify that everything is still in order, when a new block is created it is
sent to everyone on the network. Each user then verifies it to make sure that it has not been tampered
with. If everything is valid, each user adds this block to their own blockchain. All the users in this network
create a joint consensus. They all come together to agree about which blocks are valid and which are not.
Blocks that are tampered with are rejected by other users in the network. Blockchains are also constantly
evolving. Recent developments include the creation of smart contracts, which are simple programs,
stored on the blockchain and can be used to automatically exchange coins based on pre-existing
conditions. With the creation of the blockchain technology a lot of people’s interest rapidly increased.
Soon came the realization that the technology could be used for things like storing medical records,
creating a digital ledger or even collecting taxes. A smart contract is essentially a small computer
program, stored inside a blockchain. Using smart contracts, a system can be built for making transactions
that does not require a third-party establishment and because smart contracts are stored on a blockchain,
everything is completely distributed, so no one is essentially in control of the money. It is important to add
that smart contracts are immutable, since once a block is created it cannot be tempered with. Since our
lives have come to be almost entirely online, from social media and entertainment to it being impossible to
find a job that does not require basic Internet knowledge, it was only natural for money to make its way to
the wide webs. As it was already addressed, the invention of Blockchain provided to smart contracts to be
implemented and the came could be applied to an “online currency”, called cryptocurrency. Bitcoin came
to be the first implemented example of a cryptocurrency and no government and banks are needed to
issue it and manage accounts and transactions, respectfully. In August 2008, the domain bitcoin.org was
Anastasia Yakimovska
Software Engineering
Group 1 FN 855362

registered and only a few months later a paper called “Bitcoin: A Peer-to-Peer Electronic Cash System”
was posted to a cryptography mailing list by the presumed pseudonymous Satoshi Nakamoto, who had
integrated many ideas from the cypher-punk community into the paper. This paper explained the use of a
peer-to-peer network to create “a system for electronic transactions without relying on trust”. In 2009
Satoshi Nakamoto mined the genesis block, thus creating the bitcoin network. In the beginning,
Nakamoto is said to have mined a million bitcoins. Before “retiring”, Satoshi handed over the business to
Gavin Andersen, who came to become the lead developer at Bitcoin Foundation. It took only 2 years for
the value of Bitcoin to reach 1$, whereas now it is valued at over 58 000$. The conversion of Bitcoin into
the currencies we currently use has been known to take days, but these "points of transaction" are
suspected to play a significant role in determining Bitcoin's success moving forward. The majority of the
excitement surrounding around Bitcoin has much to do with the fact that its exchanges are anonymous,
and every Bitcoin exchange is recorded publicly on the blockchain ledger, a feature that secures each
transaction.

Conclusion
It is inevitable to accept the fact that eventually from the education to the banking system, to paying taxes
and bills, will become entirely online and distributed. The major problem with Blockchain, as with anything
digital, is the security, but Nakamoto has really thought of every aspect the average person would think
of, not to mention that the software as a whole has been holding up extremely well in the last decade. A
clear testament of that is the value of Bitcoin has only been skyrocketing with more and more people
joining the chain, and in my opinion that is nothing to be underestimated.