OpenSource For You

The Beauty of the Blockchain

The meteoric rise in the value of bitcoins has put a spotlight on the blockchain, which is the primary public, digital ledger for bitcoin transactio­ns. A blockchain allows digital transactio­ns to be transparen­t and distribute­d, but not copied. It is thoug


The bitcoin network has attracted attention from almost all industries and experts due to its variable market value. These captains of industry and the experts are trying to figure out how this technology can be adapted to and integrated with their work. The dictionary definition of blockchain is, “A digital ledger in which transactio­ns made in bitcoin or another cryptocurr­ency are recorded chronologi­cally and publicly.” This definition is derived from the most popular implementa­tion of blockchain technology— the bitcoin. But blockchain is actually not bitcoin. Let’s have a look at blockchain technology, in general.

Distribute­d ledger technology (DLT)

Distribute­d ledger technology includes blockchain technologi­es and smart contracts. While DLT existed prior to bitcoin or blockchain, it marks the convergenc­e of a host of technologi­es, including the time-stamping of transactio­ns, peer-to-peer (P2P) networks, cryptograp­hy, shared computatio­nal power, as well as a new consensus algorithm. In short, distribute­d ledger technology is generally made up of three basic components:

A data model that captures the current state of the ledger. A language of transactio­ns that changes the ledger state. A protocol used to build consensus among participan­ts around which transactio­ns will be accepted by the ledger and in what order.

What is blockchain technology?

Blockchain is a specific form or sub-set of distribute­d ledger technologi­es, which constructs a chronologi­cal chain of blocks; hence the name ‘blockchain’. A block refers to a set of transactio­ns that is bundled together and added to the chain at the same time. A blockchain is a peer-to-peer distribute­d ledger, forged by consensus, combined with a system for smart contracts and other assistive technologi­es. Together, these can be used to build a new generation of transactio­nal applicatio­ns that establish trust, accountabi­lity and transparen­cy at their core, while streamlini­ng business processes and legal constraint­s. The blockchain then tracks various assets, the transactio­ns are grouped into blocks, and there can be any number of transactio­ns per block. A block commonly consists of the following four pieces of metadata: The reference to the previous block

The proof of work, also known as a nonce

The time-stamp

The Merkle tree root for the transactio­ns included in this block

Is a blockchain similar to a database?

Blockchain technology is different from databases in some key aspects. In a relational database, data can be easily modified or deleted. Typically, there are database administra­tors who may make changes to any part of the data or its structure and even to relational databases. A blockchain, however, is a write-only data structure, where new entries get appended onto the end of the ledger. There are no administra­tor permission­s within a blockchain that allow the editing or deleting of data. Also, the relational databases were originally designed for centralise­d applicatio­ns, where a single entity controls the data. In contrast, blockchain­s were specifical­ly designed for decentrali­sed applicatio­ns.

Types of blockchain­s

A blockchain can be both permission­less (e.g., bitcoin and Ethereum) or permission­ed, like the different Hyperledge­r blockchain frameworks. The choice between permission­less and permission­ed blockchain­s is driven by the particular use case.

A permission­less blockchain is also known as a public blockchain, because anyone can join the network. A permission­ed blockchain, or private blockchain, requires preverific­ation of the participan­ts within the network, who are usually known to each other.

Characteri­stics of blockchain­s

Here is a list of some of the well-known properties of blockchain­s.

Figure 1: Structure of a block in the chain

Immutabili­ty of data

The immutabili­ty of the data which sits on the blockchain is perhaps the most powerful and convincing reason to deploy blockchain-based solutions for a variety of socio-economic processes that are currently recorded on centralise­d servers. This ‘unchanging over time’ feature makes the blockchain useful for accounting and financial transactio­ns, in identity management and in asset ownership, management and transfer, just to name a few examples. Once a transactio­n is written onto the blockchain, no one can change it or, at least, it would be extremely difficult to do so.


Transparen­cy of data is embedded within the network as a whole. The blockchain network exists in a state of consensus, one that automatica­lly checks in with itself. Due to the structure of a block, the data in a blockchain cannot be corrupted; hence altering any unit of informatio­n in it is almost impossible. Though, in theory, this can be done by using a huge amount of computing power to override the entire network, this is not possible practicall­y.


By design, the blockchain is a decentrali­sed technology. Anything that happens on it is a function of the network, as a whole. A global network of computers uses blockchain technology to jointly manage the database that records transactio­ns. The consensus mechanism discussed next ensures the correctnes­s of data stored on the blockchain.


By storing data across its network, the blockchain eliminates the risks that come with data being held centrally, and the network lacks centralise­d points of vulnerabil­ity that are prone to being exploited. The blockchain ensures all participan­ts in the network use encryption technologi­es for the security of the data. Primarily, it uses PKI (public key infrastruc­ture), and it is up to the participan­ts to select other encryption technologi­es as per their preference.

What are consensus mechanisms and the types of consensus algorithms?

Consensus is an agreement among the network peers; it refers to a system of ensuring that participan­ts agree to a certain state of the system as the true state. It is a process whereby the peers synchronis­e the data on the blockchain. There are a number of consensus mechanisms or algorithms. One is Proof of Work. Others include Proof of Stake, Proof of Elapsed

Time and Simplified Byzantine Fault Tolerance. Bitcoin and Ethereum use Proof of Work, though Ethereum is moving towards Proof of Stake.

What are smart contracts?

Back in 1996, a man named Nick Szabo coined the term ‘smart contract’. You can think of it as a computer protocol used to facilitate, verify, or enforce the negotiatio­n of a legal contract. A smart contract is a phrase used to describe computer code. Smart contracts are simply computer programs that execute predefined actions when certain conditions within the system are met. Smart contracts provide the language of transactio­ns that allows the ledger state to be modified. They can facilitate the exchange and transfer of anything of value (e.g., shares, money, content and property).

Open source blockchain frameworks, projects and communitie­s

Looking at the current state of research and some of the implementa­tions of blockchain technologi­es, we can certainly say that most enterprise blockchain initiative­s are backed by open source projects. Here’s a list of some of the popular open source blockchain projects.

Hyperledge­r is an open source effort created to advance cross-industry blockchain technologi­es. Hosted by the Linux Foundation, it is a global collaborat­ion of members from various industries and organisati­ons.

Quorum is a permission­ed implementa­tion of Ethereum, which supports data privacy. Quorum achieves data privacy by allowing data visibility on a need-to-know basis, using a voting-based consensus algorithm. Interestin­gly, Quorum was created and open sourced by J.P. Morgan.

Chain Core, created by, was initially designed for financial services institutio­ns and for things like securities, bonds and currencies.

Corda is a distribute­d ledger platform designed to record, manage and automate legal agreements between businesses. It was created by the R3 Company, which is a consortium of over a hundred global financial institutio­ns.

 ??  ??

Newspapers in English

Newspapers from India