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Blockchain Technology

Blockchain is a decentralized distributed ledger system that allows parties to securely record and store transactions in a transparent and tamper-resistant way using cryptography. It works by collecting transactions into blocks that are chained together using cryptographic hashes, creating an immutable record distributed across multiple nodes. The main advantages of blockchain include enhanced security, transparency, and cost reductions through disintermediation, though it also faces challenges related to scalability, energy use, and legal/regulatory issues.

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52 views7 pages

Blockchain Technology

Blockchain is a decentralized distributed ledger system that allows parties to securely record and store transactions in a transparent and tamper-resistant way using cryptography. It works by collecting transactions into blocks that are chained together using cryptographic hashes, creating an immutable record distributed across multiple nodes. The main advantages of blockchain include enhanced security, transparency, and cost reductions through disintermediation, though it also faces challenges related to scalability, energy use, and legal/regulatory issues.

Uploaded by

mahmoodtareq0000
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Blockchain Technology

Supervised By:
Mr: Murthad
Prepared By :
Shaho Rzgar
What is Block chain technology?

Block chain is a decentralized and distributed ledger system that allows multiple parties
to record and store information in a secure, transparent, and tamper-resistant manner?
The fundamental concept behind block chain is the creation of a chain of blocks, each
containing a list of transactions. These blocks are linked together using cryptographic
hashes, forming a continuous and irreversible chain.

Key characteristics of block chain technology include:

Decentralization: Unlike traditional centralized systems where a single authority


manages the database, blockchain is decentralized. Multiple nodes (computers) across
a network maintain a copy of the entire blockchain, making it resistant to censorship
and single points of failure.
1. Distributed Ledger: The ledger, containing a record of all transactions,
is distributed across all nodes in the network. Each node has a copy of
the entire blockchain, providing redundancy and resilience.
2. Consensus Mechanism: To add a new block to the blockchain, there
needs to be a consensus among the participants in the network. Various
consensus mechanisms, such as Proof of Work (used in Bitcoin) or Proof of
Stake, are employed to validate transactions and secure the network.
3. Immutability: Once a block is added to the blockchain, it is extremely
difficult to alter or delete the information within it. This is achieved
through cryptographic hashing and the consensus mechanism, making the
blockchain tamper-resistant.
4. Transparency: All participants in the network have access to the same
information. Transactions are visible to anyone in the network, enhancing
transparency.
Blockchain technology was initially developed as the underlying technology for
Bitcoin, a cryptocurrency. However, its applications have expanded beyond
cryptocurrencies. It is now used in various industries, including finance, supply
chain, healthcare, and more. Smart contracts, which are self-executing contracts
with the terms of the agreement directly written into code, are another notable
application of blockchain technology.

How does Blockchain work?

Blockchain works through a combination of cryptographic techniques,


consensus mechanisms, and a decentralized network. The basic idea
is to create a secure and transparent ledger of
transactions that is distributed across multiple nodes
(computers) in a network. Here's a simplified explanation
of how blockchain works:
You might be familiar with spreadsheets or databases. A blockchain is somewhat
similar because it is a database where information is entered and stored. But the
key difference between a traditional database or spreadsheet and a blockchain is
how the data is structured and accessed.

A blockchain consists of programs called scripts that conduct the tasks you
usually would in a database: Entering and accessing information and saving and
storing it somewhere. A blockchain is distributed, which means multiple copies
are saved on many machines, and they must all match for it to be valid.

The blockchain collects transaction information and enters it into a block, like a
cell in a spreadsheet containing information. Once it is full, the information is run
through an encryption algorithm, which creates a hexadecimal number called the
hash.The hash is then entered into the following block header and encrypted with
the other information in the block. This creates a series of blocks that are chained
together.
Transaction Process

Transactions follow a specific process, depending on the blockchain they are


taking place on. For example, on Bitcoin's blockchain, if you initiate a transaction
using your cryptocurrency wallet—the application that provides an interface for
the blockchain—it starts a sequence of events.In Bitcoin, your transaction is sent
to a memory pool, where it is stored and queued until a miner or validator picks
it up. Once it is entered into a block and the block fills up with transactions, it is
closed and encrypted using an encryption algorithm. Then, the mining begins.

The entire network works simultaneously, trying to "solve" the hash. Each
one generates a random hash except for the "nonce," short for number
used once. Every miner starts with a nonce of zero, which is appended to
their randomly-generated hash. If that number isn't equal to or less than
the target hash, a value of one is added to the nonce, and a new block
hash is generated. This continues until a miner generates a valid hash,
winning the race and receiving the reward.
Is Blockchain Secure?

Blockchain technology achieves decentralized security and trust in several ways.


To begin with, new blocks are always stored linearly and chronologically. That
is, they are always added to the “end” of the blockchain. After a block has been
added to the end of the blockchain, previous blocks cannot be changed.A
change in any data changes the hash of the block it was in. Because each block
contains the previous block's hash, a change in one would change the
following blocks. The network would reject an altered block because the hashes
would not match.

Advantages of
Enhances Transparency Blockchain
Blockchain's transparency stems from its public ledger functionality. All
participants in the network can track the transactions, fostering trust and
collaboration.

Improved Security
Due to its decentralized and cryptographic nature, blockchain is
more secure than traditional systems. Once a block is added to the
chain, it becomes almost impossible to alter or tamper with the data.

Elimination of Intermediaries
Blockchain technology enables peer-to-peer transactions, effectively
eliminating the need for intermediaries. This direct interaction can lead to
lower costs and increased efficiency.

Traceability and Auditability


Every transaction on a blockchain is recorded and linked to the previous one,
which aids traceability. This feature is particularly beneficial in supply chain
management, ensuring products' authenticity and preventing fraud.
Potential for Cost Reduction
The elimination of intermediaries, combined with enhanced efficiency and
automation through smart contracts, could result in significant cost
reductions

Disadvantages of
BlockchainIssues
Scalability
Due to the nature of its design, blockchain faces scalability challenges. As the
number of transactions increases.

High Energy Consumption


Mining, a process associated with certain public blockchains like Bitcoin,
involves solving complex mathematical puzzles for transaction validation,
requiring significant computational power and energy.

Legal and Regulatory Challenges


Blockchain's decentralized nature presents unique legal and regulatory
challenges. Without a central authority, issues like dispute resolution can
become complex.

Additionally, the legal status and regulatory framework for blockchain and
related technologies vary greatly worldwide, creating uncertainty.

Potential for Misuse


While blockchain provides security and privacy, these features can also be
exploited for illegal activities, such as money laundering or illicit trade.

Complexity and Technological Understanding


The technical complexity of blockchain can make it challenging for the
average person to understand and use. This barrier hinders its mainstream
adoption.
References
https://www.google.com/search?q=Blockchain+Technology&sca_esv=587781976&rlz=1C1BNSD_enIQ9
42IQ942&tbm=isch&source=lnms&sa=X&ved=2ahUKEwj7wuXS0PaCAxWl0wIHHdatG6EQ_AUoAXoEC
AIQAw&biw=1280&bih=563&dpr=1.5#imgrc=4Nw9YyBdxAg46M&imgdii=0bJ1EFKUAof1sM

https://www.simplilearn.com/tutorials/blockchain-tutorial/blockchain-technology
https://www.investopedia.com/terms/b/blockchain.asp

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