CHAPTER THREE

INTRODUCTION TO BLOCKCHAIN
TECHNOLOGY
 INTRODUCTION
It is a currently ongoning developed technology and this technology is described as the most
disruptive technology of the decade.
Blockchain is used for the secure transference of items like money, contracts,property rights,
stocks, and even networks
It’s without any requirement of Third Party Intermediaries like Governments, banks, etc.
 Once the data is stored in the Blockchain it becomes very difficult to manipulate the stored
data.
 A Blockchain is a Network Protocol like SMTP. However, Blockchain cannot be run without
the Internet.
BlockChain is useful in many areas like Banking, Finance, Healthcare, Insurance, etc.
A blockchain is an open, distributed ledger that can record transactions between two parties
efficiently and in a verifiable and permanent way without the need for a central authority
Blockchain technology is an advanced database mechanism that allows
Whatisblockchaintechnology?

transparent information sharing within a business network.

stores data in blocks that are linked together in a chain.

 The data is chronologically consistent because you cannot delete or modify the chain
without consensus from the network.

to create an unalterable or immutable ledger for tracking orders, payments, accounts,
and other transactions.

The system has built-in mechanisms that prevent unauthorized transaction entries and
create consistency in the shared view of these transactions.
 Key Characteristics
Open: Anyone can access blockchain.
Distributed or Decentralised: Not under the control of any single authority.
Efficient: Fast and Scalable.
Verifiable: Everyone can check the validity of information because each node
maintains a copy of the transactions.
Permanent(Immutability): Once a transaction is done, it is persistent and can’t
be altered.
Blockchain can be defined as the Chain of Blocks that contain some specific
Information called a ladger.

 Cont…
A ledger i.e file that constantly grows and keeps the record of all transactions
permanently.

This process takes place in a secure, chronological ( means every transaction happens
after the previous one) and immutable way.

 Each time when a block is completed in storing information, a new block is generated .
 Why is blockchain important?
To solve several challenges with traditional database
 Once the money is exchanged, ownership of the property is transferred to the buyer.
Both the buyer and the seller can record the monetary transactions, but neither source
can be trusted.
A trusted third party has to supervise and validate transactions
The presence of this central authority not only complicates the transaction but also
creates a single point of vulnerability.
blockchain creates one ledger each for the buyer and the seller.
 All transactions must be approved by both parties and are automatically updated in
both of their ledgers in real time.
These properties of blockchain technology have led to its use in various sectors,
including the creation of digital currency like Bitcoin.
 How does blockchain work?
It’s mechanisms are complex, we give a brief overview in the following steps.
Step 1 – Record the transaction
It is recorded as a data block and can include details like these:
Who? What? When? Where? Why ? How much ? How?
Step 2 – Gain consensus
Most participants on the distributed blockchain network must agree that the recorded transaction is
valid.
Step 3 – Link the blocks
Thus, the blocks and chains link securely, and you cannot edit them.
Step 4 – Share the ledger
The system distributes the latest copy of the central ledger to all participants
Peer-to-peer
Distributed
 types of blockchain networks?
There are four main types of decentralized or distributed networks in the blockchain:

Public blockchain networks are permissionless and allow everyone to join them.
All members of the blockchain have equal rights to read, edit, and validate the blockchain.
People primarily use public blockchains to exchange and mine cryptocurrencies like
Bitcoin, Ethereum, and Litecoin.

Private blockchain networks A single organization controls private blockchains, also called
managed blockchains.
The authority determines who can be a member and what rights they have in the network.
And only partially decentralized because they have access restrictions.
Ripple, a digital currency exchange network for businesses, is an example of a private
blockchain.
Cont…
Hybrid blockchain networks combine elements from both private and public networks.
 Companies can set up private, permission-based systems alongside a public system.
 they control access to specific data stored in the blockchain while keeping the rest of the
data public.
For example, HBC can grant public access to digital currency while keeping bank-owned
currency private.
Consortium blockchain networks
Industries in which many organizations have common goals and benefit from shared
responsibility often prefer consortium blockchain networks.
For example, the Global Shipping Business Network Consortium is a not-for-profit
blockchain consortium that aims to digitize the shipping industry and increase