What is Blockchain?

A Blockchain, as the name implies, is a chain of digital “blocks” that contain records of
transactions. Each block is connected to all the blocks before and after it. Blockchain is a
Distributed Ledger System (DLT)

The Blockchain technologies composed of six key characteristic

 Decentralized: The basic feature of blockchain, means that blockchain doesn't have to
rely on centralized node anymore, the data can be record, store and update distributed.
 Transparent: The data's record by blockchain system is transparent to each node, it also
transparent on update the data that is why blockchain can be trusted.
 Open Source: Most blockchain system is open to everyone, record can be check publicly
and people can also use blockchain technologies to create any application they want.
 Autonomy: Because of the base of consensus, every node on the blockchain system can
transfer or update data safely, the idea is to trust form single person to the whole
system, and no one can intervene it.
 Immutable : Any records will be reserved forever, and can't be changed unless someone
can take control more than 51% node in the same time.
 Anonymity: Blockchain technologies solved the trust problem between node to node, so
data transfer or even transaction can be anonymous, only need to know the person's
blockchain address.

Core Components of Blockchain Architecture

 Node - user or computer within the blockchain architecture (each has an independent
copy of the whole blockchain ledger)
 Transaction - smallest building block of a blockchain system (records, information, etc.)
that serves as the purpose of blockchain
 Block - a data structure used for keeping a set of transactions which is distributed to all
nodes in the network
 Chain - a sequence of blocks in a specific order
 Miners - specific nodes which perform the block verification process before adding
anything to the blockchain structure
 Consensus (consensus protocol) - a set of rules and arrangements to carry out
blockchain operations
Use of Blockchain

 Blockchain for payment processing and money transfers: Transactions processed over a
blockchain could be settled within a matter of seconds and reduce (or eliminate) banking
transfer fees.
 Blockchain for monitoring of supply chains: Using blockchain, businesses could pinpoint
inefficiencies within their supply chains quickly, as well as locate items in real time and see
how products perform from a quality-control perspective as they travel from manufacturers
to retailers.
 Blockchain for digital IDs. Microsoft is experimenting with blockchain technology to help
people control their digital identities, while also giving users control over who accesses that
data.
 Blockchain for data sharing. Blockchain could act as an intermediary to securely store and
move enterprise data among industries.
 Blockchain for copyright and royalties protection. Blockchain could be used to create a
decentralized database that ensures artists maintain their music rights and provides
transparent and real-time royalty distributions to musicians. Blockchain could also do the
same for open source developers.
 Blockchain for Internet of Things network management. Blockchain could become a
regulator of IoT networks to “identify devices connected to a wireless network, monitor the
activity of those devices, and determine how trustworthy those devices are” and to
“automatically assess the trustworthiness of new devices being added to the network, such
as cars and smartphones.”
 Blockchain for healthcare. Blockchain could also play an important role in healthcare:
“Healthcare payers and providers are using blockchain to manage clinical trials data and
electronic medical records while maintaining regulatory compliance.”
The benefit of blockchain
The primary benefit of blockchain is as a database for recording transactions, but its benefits extend
far beyond those of a traditional database. Most notably, it removes the possibility of tampering by
a malicious actor, as well as providing these business benefits:

 Time savings. Blockchain slashes transaction times from days to minutes. Transaction
settlement is faster because it doesn’t require verification by a central authority.
 Cost savings. Transactions need less oversight. Participants can exchange items of value
directly. Blockchain eliminates duplication of effort because participants have access to a
shared ledger.
 Tighter security. Blockchain’s security features protect against tampering, fraud, and
cybercrime
How blockchain and distributed ledger technology work
Blockchain uses a multistep process that includes these five steps:
 1. An authorized participant inputs a transaction, which must be authenticated by the
technology.

2. That action creates a block that represents that specific transaction or data.

3. The block is sent to every computer node in the network.

4. Authorized nodes validate transactions and add the block to the existing blockchain.

5. The update is distributed across the network, which finalizes the transaction.

Types of Blockchain
Private Blockchain

Private blockchains, restrict access to authorized participants, making them suitable for
enterprise organization use wherein privacy and control are paramount. Unlike public
blockchains, which depend on decentralized consensus mechanisms, private blockchains
typically employ centralized governance models, allowing designated entities to validate
transactions and manage network permissions.

Public Blockchain

Public blockchains are decentralized networks open to anyone to participate, transact, and
validate transactions. They offer a high level of transparency and censorship resistance, as
anyone can view the entire transaction history and contribute to the network's security through
mechanisms like proof-of-work (PoW) or proof-of-stake (PoS). Bitcoin and Ethereum are prime
examples of public blockchains, facilitating peer-to-peer transactions and supporting a wide
range of decentralized applications (dApps).

Security issues of the Blockchain

Hackers and fraudsters threaten blockchains in four primary ways: phishing, routing, Sybil and
51% attacks.

1. Phishing attacks

Phishing is a scamming attempt to attain a user's credentials. Fraudsters send wallet key owners
emails designed to look as though they're coming from a legitimate source.

2. Routing attacks
Blockchains rely on real-time, large data transfers. Hackers can intercept data as it's transferring
to internet service providers. In a routing attack, blockchain participants typically can't see the
threat, so everything looks normal. However, behind the scenes, fraudsters have extracted
confidential data or currencies.

3. Sybil attacks

In a Sybil attack, hackers create and use many false network identities to flood the network and
crash the system. Sybil refers to a famous book character diagnosed with a multiple identity
disorder.

4. 51% attacks

Mining requires a vast amount of computing power, especially for large-scale public blockchains.
But if a miner, or a group of miners, might rally enough resources, they might attain more than
50% of a blockchain network's mining power. Having more than 50% of the power means having
control over the ledger and the ability to manipulate it.

Note: Private blockchains are not vulnerable to 51% attacks.