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PRACTICAL SET - 1
TITLE : Introduction to Blockchain

THEORY :

What Is a Blockchain?

A blockchain is a distributed database or ledger that is shared among the nodes of a

computer network. As a database, a blockchain stores information electronically in digital
format. Blockchains are best known for their crucial role in cryptocurrency systems, such as
Bitcoin, for maintaining a secure and decentralized record of transactions. The innovation
with a blockchain is that it guarantees the fidelity and security of a record of data and
generates trust without the need for a trusted third party.

What Is a Block (Blockchain Block)?

Blocks are data structures within the blockchain database, where transaction data in a
cryptocurrency blockchain are permanently recorded. A block records some or all of the
most recent transactions not yet validated by the network. Once the data are validated, the
block is closed. Then, a new block is created for new transactions to be entered into and
validated.

A block is thus a permanent store of records that, once written, cannot be altered or
removed.

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Types of Blockchain

There are four different types of blockchains. They are as follows:

Private Blockchain Networks

Private blockchains operate on closed networks, and tend to work well for private
businesses and organizations. Companies can use private blockchains to customize their
accessibility and authorization preferences, parameters to the network, and other important
security options. Only one authority manages a private blockchain network.

Public Blockchain Networks

Bitcoin and other cryptocurrencies originated from public blockchains, which also
played a role in popularizing distributed ledger technology (DLT). Public blockchains
also help to eliminate certain challenges and issues, such as security flaws and
centralization. With DLT, data is distributed across a peer-to-peer network, rather
than being stored in a single location. A consensus algorithm is used for verifying
information authenticity; proof of stake (PoS) and proof of work (PoW) are two
frequently used consensus methods.

Permissioned Blockchain Networks

Also sometimes known as hybrid blockchains, permissioned blockchain networks are

private blockchains that allow special access for authorized individuals.
Organizations typically set up these types of blockchains to get the best of both
worlds, and it enables better structure when assigning who can participate in the
network and in what transactions.

Consortium Blockchains

Similar to permissioned blockchains, consortium blockchains have both public and

private components, except multiple organizations will manage a single consortium
blockchain network. Although these types of blockchains can initially be more
complex to set up, once they are running, they can offer better security. Additionally,
consortium blockchains are optimal for collaboration with multiple organizations.

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Important Feature Of Blockchain

• Blockchain Decentralization
• Transparency

Fundamentals of Blockchain

1. Public Distributed Ledgers

• A blockchain is a decentralized public distributed ledger that is used to record

transactions across many computers
• A distributed ledger is a database that is shared among the users of the blockchain
network
• The transactions are accessed and verified by users associated with the bitcoin
network, thereby making it less prone to cyberattack

2. Encryption

• Blockchain eliminates unauthorized access by using the cryptographic algorithm

(SHA256) to ensure the blocks are kept secure
• Each user in the blockchain has their key

3. Proof of Work

Proof of work (PoW) is a method to validate transactions in a blockchain network by solving

a complex mathematical puzzle called mining.

Note: Users trying to solve the puzzle are called miners.

4. Mining

In Blockchain, when miners use their resources (time, money, electricity, etc.) to validate a
new transaction and record them on the public ledger, they are given a reward.

How Will Blockchain Disrupt Industries?

Several industries like Unilever, Walmart, Visa, etc. use blockchain technology and have
gained benefits in transparency, security, and traceability. Considering the benefits
blockchain offers, it will revolutionize and redefine many sectors.

Here are the top 5 prominent industries that will be disrupted by blockchain technology in the
near future:

1. Banking
2. Cyber Security
3. Supply Chain Management
4. Healthcare
5. Government

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CONCLUSION

I learned about Blockchain technology.

REFERENCES

https://www.investopedia.com/terms/b/blockchain.asp

https://www.simplilearn.com/tutorials/blockchain-tutorial/why-is-
blockchain-important

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