BlockChain Technology at computer Networking
BLOCK CHAIN
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Introduction
In recent years, there is a lot of buzz on Blockchain. Many have described this as a most disruptive technology of the decade. Especially, the financial markets could be the most affected ones.
The technology is being adapted into many verticals like Healthcare, Medicines, Insurance, Smart Properties, Automobiles, and even Governments.
However, so far the most successful implementation of Blockchain is the Bitcoin - A Peer-to-Peer Electronic Cash System, which incidentally is also the first implementation of blockchain technology. Thus, to understand blockchain technology, it is best to understand how Bitcoin System is designed and implemented.
The Bitcoin not only solved the double-spending problem, but also offered many more advantages, One such advantage worth mentioning here is the anonymity in the transactions. Satoshi who created the system and did transact few coins on this system is totally anonymous to the entire world.
What is Bitcoin?
As you saw earlier, the bank maintains a ledger recording each transaction. This ledger is privately held and maintained by the bank. Satoshi proposed that let this ledger be public and maintained by the community.
The moment you make such a ledger public, several considerations would come to your mind. This ledger has to be tamper-proof so that nobody can modify its entries. As each entry in the ledger is publicly visible, we will have to figure out how to maintain the anonymity - obviously you would not like everybody in the world to know that I paid you one million dollars.
Also, as there is only one single ledger keeping track of each and every transaction in the world, the size of ledger would be another great concern. Providing a solution to these intricacies was not trivial and that’s what I am attempting it here to make you understand underlying architecture of Bitcoin in simple words.
This underlying architecture is the Blockchain and that’s what this tutorial is about. To understand the Blockchain architecture, you need to understand a few key features on which it is based on. So, let us get started with PKI - Public Key Cryptography.
Public Key Cryptography
Public Key Cryptography or in short PKI is also known as asymmetric cryptography. It uses two pairs of keys - public and private. A key is a some long binary number. The public key is distributed worldwide and is truly public as its name suggests. The private key is to be strictly held private and one should never lose it.
In case of Bitcoin, if you ever lose the private key to your Bitcoin wallet, the entire contents of your wallets would be instantly vulnerable to theft and before you know it, all your money (the contents of your wallet) would be gone with no mechanism in the system to trace out who stole it - that is the anonymity in the system that I mentioned earlier.
The PKI accomplies two functions - authentication and the message privacy through encryption/decryption mechanism. I will now explain both these functions Authentication
When the two parties exchange messages, it is important to establish a trust between the sender and the receiver.
Network & Mining
I will now summarize the steps described above; this is what happens in the network −
Anybody who wants to obtain services from the third party who has advertised on the network first creates a transaction (message to the desired recipient).
Over a given period of time, there could be many senders (buyers) and receivers (sellers) creating such transactions.
All transactions are broadcast on the network to all nodes. Note that it is not necessary that a given transaction must reach each and every other node in the network.
Each node assembles the new transactions into a block. Note that the set of transactions in each block is independent of the set in blocks created by others and will naturally be different than others. This does not matter; the system ensures that every transaction broadcast on the network gets included in some block over a reasonable amount of time. Generally, the sender will incentivize the node by offering a certain amount of bitcoins to the miner for its efforts. The miner may opt for giving priority for inclusion in the block to those with higher incentives.
The node now works on finding the proof-of-work for its assembled block.
When the node finds a proof-of-work, it broadcasts the assembled block on the network.
The nodes that receive the new block will accept it only after verifying that all transactions in the block are valid and not already spent.
If the block is accepted as valid, the node which is working on its own new block will have to re-assemble the transactions in its block ensuring that the transactions are not duplicated. The node now works on finding the proof-of-work on its newly created block; while doing so it will take the hash of the accepted block as the previous hash.
Likewise, the blockchain continues growing for ever.
Now, as we have seen how the entire system works, let me describe some of the side effects and how to resolve them.
Conclusions
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several concepts of Blockchain by taking Bitcoin as a case study. The Bitcoin is the first successful implementation of blockchain. Today, the world has found applications of blockchain technology in several industries, where the trust without the involvement of a centralized authority is desired. So welcome to the world of Blockchain.
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