UNDERSTANDING OF BLOCKCHAIN TECHNOLOGY

Abstract
Blockchain is a technology that has extensive attention recently which constructs a decentralized digital ledger that enables the
exchange between multiple parties in a secure and immutable manner. Block chain is a transparent money exchange system that has
transformed the way of business is conducted. The transactions once recorded in this technology can never be erased or manipulated ,
thus why this technology provide high security and most trust worthy among the users. This paper present information about blockchain
technology , how blockchain works , advantages and disadvantages , and its application.

Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking
assets in business network, where the asset can be tangible or intangible. It is a record-keeping technology
designed to make it impossible to hack the system or forge the data stored on it, thereby making it more
secure. The blockchain is a software protocol. However, blockchain cannot run without the internet. It is also
called as meta- technology as it affects other technologies.

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A Blockchain ledger consists of two types of records, individual transactions and blocks .The first block
consists of a header and data that pertain to transactions taking place within the time period. This
block’s time stamp is used to create an alphanumerical string called hash(a digital fingerprint or unique
identifier). Each block on the chain contains several transactions, and each user receives a copy of each
new transaction that takes place in blockchain. Distributed ledger technology hints at decentralized
database that is owned by the several participating computers called nodes. Each blockchain has its
own hashcodes and the hash code of the block that comes before it. If a hacker tries to edit or
manipulate the block, the next block’s hash will get changed which means the hacker should have to
change the next block’s hash in the chain also as this chains are connected with each other. Therefore,
to change one block a hacker have to change the hashcode of every block that comes one after the
other which would consume more time and computing power to execute.

The four key concepts behind the blockchain are

 Shared ledger: it is a distributed system of records which is shared across the business network
where the transactions are recorded only once by eliminating the duplication of effort that’s
typical of traditional business networks
 Permissions: permissions ensure that the transactions are secure, authenticated, and verifiable.
 Smart contracts: A smart contracts are the agreement or set of rules that governs a business
transaction which is stored in blockchain and is executed automatically as part of the transaction.
 Consensus: Through this consensus, all the users agree to the network-verified transaction.
Blockchain has various consensus mechanisms including proof of stake, multisignatures of users.

Blockchain technology is finding applications in wide range of areas – in both financial and non
financial
 Financial : here banks and other institutions use this technology as traditional business models.
The world’s biggest banks are also looking forward for the oppurtunities in this area by doing
some research on this blockchain applications. Where some biggest banks also found this
blockchain to be more secure and tested for some banking and financial related work.
 Non financial : here we can store the records of all legal documents, health records, and loyal
payments in music industries, notary, private securities and marriage licences in blockchain. By
storing the fingerprints of digital asset instead of storing digital asset itself.
How blockchain works
The blocks of data are bound to one another with the use of cryptographic principles, forming a
continuously connected chain. Public blockchain ledgers are managed autonomously and are used in
peer-to-peer networks to exchange data between connected groups of parties. As is the nature there
is no need for the administrator. The users work together as a collective administrator.

Every blockchain transaction goes through this steps regardless of whether it is used for financial
transactions or product tracking. The principles of blockchain follow contiguous steps:

1. A record is made of each transaction. This record, which contains certain details of the people
making the transaction, is authenticated using the digital signature of each.
2. Each transaction is verified to ensure its validity. This verification process is completed by the
computers connected to the network, each of the party independently checks to ensure the
transaction is legal.
3. Once verified, each transaction is added to a block that gets hashed. Blocks are basically
group of transaction records, and each one is unique. Each block carries a code called
hashcode, which both uniquely identifies it and calls out its position within the block
4. Nodes receive reward for proof of work. Proof of work includes people all over the world
competing to be the first to add a block to the blockchain so that they can be rewarded for
their efforts. As a result, they will be able to invest in processing power. They must find a hash
value that meets certain predetermined criteria to receive this payment.
 5. Once completed, the block is added to the end of the blockchain. This brings us to the end of
the blockchain creation and verification process. Once one block is complete, another block
will soon follow typically within just a matter of minutes.
6. The transaction is complete. Once the block is created it is added to the end of the chain,
which provides transparent record of transaction.

Advantages

 Blockchain allows database to be shared without a central body or entity.

 Since blockchain does not have any central point of failure. Due to its decentralized network, it
can withstand any security attack
 Users can be assured the transaction will be executed as protocol command
 By using blockchain, business data can be protected using end to end encryption
 Users can easily trace the history of any transaction as they are digitally stamped

Disadvantages

 Blockchain is rexpensive and a slow process as the block inserted needs to be verified to mark
the transaction as authentic by all the nodes.
 In blockchain, all transactions related information is available publically which can become a
great liability when distributed ledger are used in sensitive environments such as government
data or patients medical data.
 With blockchains, there is always a question about the ownership and the person who is
responsible when problem arise.
 Changing data in blockchain is typically a difficult task and takes lot of work
 Storage can grow to be very large over time, which risks the loss of nodes if the ledger becomes
too large for users to download.

Conclusion: Blockchain technology has captured more people’s attention due to its successful
operation and new developments. As result soon or later, individuals realised that it might also be
applied in other fields such as e-notary, medical records and tax calculations. Blockchains are well
known for making transactions easier without involvement of third parties.