Blockchain Technology: how it works and its real life uses

 Blockchain Technology

 

First of all, before going in the details of blockchain let’s understand what is the need of it, what is the issue with current system.

Suppose you runs a medical shop and you store down all the details of medicines, suppliers, customer in a database. So you might ask yes, so what’s the problem database is enough to store our records.

So basically there are 2 problems.

Centralized access: - Not everyone has the authority to access that database.

If admin’s mood suddenly got changed maybe because he gets into the fight with his girlfriend, he can tamper the data present in database and we will not even come to know, if some changes has been done.

So, as data are like new oil/new gold we need to protect our information and to solve these issues as there is solution to every problem, we need a system that has decentralized access, it’s next to impossible to change contents present and that technology is Block chain.

 

 

An Introduction to Blockchain Technology:


 

 


 

Block chain technology was first introduced in 1991 by Stuart Haber and W. Scott Stornetta, who wanted to implement a system where document time stamps could not be tampered with. In the late 1990s, Nick Szabo proposed using blockchain to secure a digital payments system, known as bit gold which was not implemented.

 

Later in 2009, a gentleman name Satoshi Nakamoto used this technology to create a digital currency called bitcoin. So as the term has been introduced, let’s understand everything about it in a simple language.

Blockchain is a collection of records which are linked with each other and are strongly resistant to alteration and are also protected using cryptography.

You can also say a blockchain is distributed database, distributed ledger (chain of records/blocks) completely open to anyone. Once some data has been recorded inside a block, it is very difficult to tamper with it.

Block Chain is also called as Distributed Ledger Technology.

The data in a database is distributed among several network nodes at various locations which blockchain allows.

This not only creates redundancy but also maintains the accuracy of the data stored therein. So if somebody tries to alter a record at one instance of the database, the other nodes would not be altered and thus would prevent a bad actor from doing so. If one user tampers with Bitcoin’s record of transactions, all other nodes can cross-reference with the other nodes and easily pinpoint the node with the incorrect information. This system helps to establish an exact and transparent order of events. Therefore, not one node within the network can alter information held within it.

Because of the information and the history such as the transactions of a cryptocurrency are nor reversible. So these records could be a list of transactions, but a block chain can also hold a variety of other information like contracts, state identifications, a company’s product inventory etc.

Let’s understand step by step:

 


Blockchain as the name implies it is the chain of blocks.

 

 


 


 

 



 

Block consists of data+hash+hash of previous block.

Data: - Data stores the content depends upon the type of blockchain. For e.g., in medical shop for customer you will store customer name, what medicine he/she has purchased, quantity etc.

Like in bitcoin, you can store from where you received, to whom you sent and the no of coins/amount.

Hash: - Just like our unique fingerprints or our aadhar number, hash number is collections of characters and digits and every block has its own hash, which helps us to identify a particular block.

Hash to previous block: -As the name suggests the hash to the previous block is also stored in a block which forms a chain


 


As we can see in the figure 4, each block contains hash of its previous block and the very 1st block is Genesis Block.

 

So, if someone wants to change suppose 2nd block so automatically its hash value will also change and now the previous hash of 3rd block will not be the same as the hash of the 2nd block so the rest of chain becomes invalid.

But it’s not only that we have smart technology, nowadays with the help of computers hundreds and thousands of hash can be created within seconds and hackers can easily tamper and calculate the hash value of the next blocks.

So we have another method to provide security i.e. PROOF OF WORK


As the name implies you need a proof of the time that you invested to change something in that block. In bitcoin it takes 10  minutes to change the hash of  a single block, so suppose we have 1 crore blocks than it will take 200 yrs to change every block .


 

 

Even if this system is still not enough to provide security as hackers also have got smart brain so why not add another layer of security.

It is called CONSENSUS RULE.

Block chain uses p2p network (Peer to peer network-, a group of computers are linked together with equal permissions and responsibilities for processing data). This means whenever a new block is created its copy will be sent to all the other peers in the network and like a voting system each one will verify whether to add new block in the chain or not.

So, let’s summarize

If you want to change anything in the chain you need to calculate each block’s hash value, proof of work and take control of 50% of p2p network.

Now you have got the basic idea of blockchain technology so let’s see where to use this technology. Here are a few examples:

1. The most popular example is digital currency/ cryptocurrencies.

 

Ever wondered, if there’s any easier way to complete transaction without dealing with online wallets, banks (as sometimes its servers may get down and can result delay) or without third party.

The answer is yes thanks to Blockchain Technology.

Blockchain is the foundation of cryptocurrency like BITCOIN.

The USD is controlled by the Federal Reserve. A client’s currency and information are with the bank.

If the user’s bank is hacked, then the client’s personal information will be at risk.

If the user’s bank collapses then the value of the currency will also be at risk.
In 2008, such several cases occurred. Because of this BITCOIN was created.

 

By distributing its processes across a number of machines, block chain allows Bitcoin and other cryptocurrencies to operate with no central authority.

This also helps us eliminate risks regarding processing and transactional fees.

This technology can be used by the financially underdeveloped countries which will help them with a more stable currency and more applications.

 

2. Digital Voting

Nowadays generally voting happens either on paper or on computers but paper costs a lot of money and trees and computers have security issues.

You must have heard during election that the losing party always blames on elm machines that votes has been tampered.

So using this technology one can keep voters count, process will be transparent and alteration can never happen and loosing party has to finally accept the defeat.

The Swiss Company AGORA is already working on such systems.

 

3. Food Industry

 The food industry has seen countless outbreaks of E. coli, salmonella, and listeria, as well as hazardous materials being accidentally introduced to foods. It was hard to find the source of the sickness as we were not able to find the source of the bad products that were being delivered. Using block chain gives brands the ability to track a food product’s route from its origin, through each stop it makes, and finally, its delivery. The contaminated food can be traced from all the checkpoints it went through. The companies can track these problems from the root of its cause and save lives too. This is one example of block chain in practice, but there are many other forms of block chain implementation.

WALMART and IBM are currently working on such systems

 

4. Another idea would be to track packages and shipments by using a block chain that is something IBM and shipping giant Maersk are working on.

Smart Contracts

Block chain can be more powerful when we add SMART CONTRACTS to them.



 

Smart contracts are simple programs that live on block chain and can perform actions when certain conditions are met.

It is just like real world contract but completely digital.

Let’s understand with example:

Suppose you want to donate money to any organization but you don’t really trust whether money will reach to whom we need or not.

So use smart contracts as these are immutable and distributed. That means once created can never be changed again and output of each contract is validated by everyone.

With smart contracts we can use secure our own data on a block chain. They could be for instance allow store our medical records on a block chain and only allow doctors to access them when we approve it with a digital signature.

 

Block Chain Platform:

Ethereal is a platform powered by block chain technology that is best known for its native cryptocurrency, called ether, or ETH, or simply Ethereum. What makes the Ethereum platform more secure is its distributed nature.

The number of live blockchains is growing every day at an ever-increasing pace. There are more than 10000 active cryptocurrencies and a hundred more non-cryptocurrency blockchains.

The biggest technology which support smart contract is Ethereum.

 



 


 

 



Types of blockchain

 


 

1) Public

There is a famous dialogue- “Public knows everything”.

Similarly, in this block chain anyone can join the network and carry out their respective transactions and will able to perform any role like miners, or simple user to send and receive coins.

This is the most decentralized and permission less blockchain.

But it takes more time as compared to private blockchain.

 

2) Private

It is only accessible to a particular organization who creates and only the members/employee of that company can access all the details.

It is restricted one and one need to take permission to enter the chain. Here decentralized nature is less but its processing time is slower compared to public one as it doesn’t have to implement proof of work.

 

3) Consortium(federative)

        This type of block chain is made for group of different organizations joined together.

        It is similar to the private one, thus you need permission to enter and decentralized nature                   increases  as compared to private one as many people have the authority.

 

4) Hybrid

        We can say, this is the future of block chain door to its flexible nature and behavior.

        It takes the benefits of both private and public block chain and uses according to the situations.

        So far, it provides the best security and transaction fee is also minimum.

 

Advantages: -

 

1) Greater transparency: Transaction histories will become more transparent as every records have been saved in the blocks

2) Traceability: One can easily locate any problem and correct if there any in less time.

3) Security: It provides the high security so it is very hard to tamper any data present in the blocks and no one can really enter the chain

4) Process Integrity: Users can trust that transaction as it will execute exactly as the protocol commands and removes the need for a trusted 3rd party.

5) Lower Transaction Cost: The elimination of middle man leads to lower cost.

6) Accounting: It allows to record transactions that virtually eliminates human error. Data is verified every single time it is passed from 1 to other the block chain. In addition, it also provides great accuracy.

7) Supply chain Management: It offers the benefits of traceability and cost effectiveness, allows for tracking of goods their origin, quantity and more.

 

Disadvantages:-

1) Heavy energy consumption:

Energy consumption is high as in a particular year power consumption of bitcoin miners was alone more than per capita power consumption of 159 individual countries OMG.

Keeping a real time ledger increases the consumption and every time a new block is created and it communicates with every other block at same time increases the power consumption

 

2) Maintenance cost:

Average cost of bitcoin maintenance is $75-$160 by energy consumption.

 

3) Uncertainty regulatory status:

It is hard to accept the cryptocurrency as all the money transactions are dealt by governments and pre-existing financial institutions. As you know, El Salvador is the only country to accept bitcoin as legal currency

 

4) Storage :

       Since block chain databases are stored indefinitely on all network nodes, the issue of storage surfaces. With the increasing number of transactions, the size of the database will only expand, and there are no way personal computers can store unlimited data which just gets appended. To put this in perspective, the Ethereum block chain is increasing at the speed of 55 GB/year.

 

5) Complex: 

This technology definitely provides a lot of features but its complexed to learn it.

 

 

Here are some of the real world applications of Block Chain technology:

l Medical Data can be shared securely

l NFT marketplaces

l Tracking of music Royalties

l Payments across the border

l IOT operating system which are based on real time

l Personal Identity Security

l Anti-Money laundering systems for tracking

l Logistics and supply chain monitoring

l Mechanism for voting

l Advertising insights

l Original Content Creation

l Exchange of Cryptocurrency

l A processing platform for Real Estate


 



 

Conclusion:

Block chain is now used in almost every sector of businesses comprising of supply chain and logistics, intellectual property management, food safety, cryptocurrency, healthcare data management etc.

The use of Smart Contracts can be made by companies that can automate pay for performance.

Digital ledgers can be used to make transaction more transparent, no loss of records,

Avoid fraud. This can also prove to be less costly to do international transactions and reduce cost of operations by securing data to avoid breaches and make it easy to exchange data on a p2p manner.

A company can make block chain public, private or hybrid according to their needs and they can also make its own custom block chain, customize their current application or use a smart contract and port its services to block chain one by one.

The Future of Block chain:

Many real life and practical applications are being implemented and some of them are already implemented, Bitcoin and cryptocurrency remain at the top as the poster children of this technology.

Blockchain helps make government and businesses a more efficient, secure, and cheap to use with fewer to no middlemen.

Now in the third decade of this technology, most of the companies have already at least looked into it. And the technology is growing now faster than ever. Today we can see the popularity of NFT’s. The next few years will be the defining chapter for the growth of blockchain.

 
Blockchain Technology from a student's perspective:

According to recent studies, it could be used as a foundational technology for 30 per cent of the global customer base by 2030. By 2025, blockchain would add a business value that will grow to over $176 billion. This would increase further to $3.1 trillion by 2030. Blockchain shows us a potential that is unleashing. So students are looking at a big market ahead from which they can capitalize on. This provides students with an opportunity like no other which will help them grow with new innovations and creations.

Pre-requisites to learning Blockchain Technology:

  1. Fundamental skill and Knowledge in Technical Field
  2. Smart Contracts
  3. Decentralized Applications
  4. Learn to Simplify
  5. Understand Blockchain Security
  6. Know the Platforms
  7. Distributed ledger expertise
  8. Master of Interoperability
  9. Embracing Blockchain Expertise as a Service
  10. Learning to Drive Business Outcomes


Certification courses on Blockchain Technology:


There are multitudes of websites from where you can learn about blockchain.
You can learn about blockchain as a tutorial from websites like Coursera, Udemy, Edx , Blockchain A-Z, Blockchain 101 and many more.
Just know that Blockchain will be a turning point for innovation in the near future.


Team members:

Atharv Bagade


Haripriya Arya


Harish Garud

Abhishek Dighekar

Comments

Post a Comment