BLOCKCHAIN TECHNOLOGY

(very important topic for UPSC Prelims,focus on key words-a term may be given in question and a question may be asked to which technology its related- This is an exahustive article to help one answer any question from the topic)

A blockchain, is a growing list of records, called blocks, that are linked using cryptography.Each block contains a cryptographic hash of the previous block,a timestamp, and transaction data (generally represented as a Merkle tree).

By design, a blockchain is resistant to modification of the data.

It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way“.

Blocks

A block can be considered as a page in the ledger. Each block in the blockchain comprises of data, timestamp, a hash of the block and a hash of the previous block.

Hash

Hash of the block acts as a fingerprint as it gives a unique identification to the blocks and the contents it includes. All transactions in a block can be included in a hash.

Hash of a previous block is always added to the hash of a new block to maintain chronology and ensure that blocks are valid.

Timestamp

A timestamp includes the time when the block was created to keep track of the creation and updation time of the block.

Altering any block within the network would make all the blocks invalid in the blockchain.

To ensure that there is no single entity controlling the information on the network, the blocks get distributed across all machines, specifically called nodes on the network.

Every node keeps a copy on the ledger so that data is never lost and remains accessible to all members present on the network. When some data is added to the blockchain, all nodes have to agree if the data is valid or not.

Consensus Algorithm

Since there are different blockchain platforms available, different consensus algorithms are used to agree if a block should be added to the blockchain or not.

Hard Forks

A hard fork is a rule change such that the software validating according to the old rules will see the blocks produced according to the new rules as invalid. In case of a hard fork, all nodes meant to work in accordance with the new rules need to upgrade their software.

Block time

The block time is the average time it takes for the network to generate one extra block in the blockchain.

Advantages

• Improved accuracy by removing human involvement in verification

• Cost reductions by eliminating third-party verification

• Decentralization makes it harder to tamper with

• Transactions are secure, private and efficient

• Transparent technology

Disadvantages

• Significant technology cost associated with mining bitcoin

• Low transactions per second

• History of use in illicit activities

• Susceptibility to being hacked

Newer cryptocurrencies and blockchain networks are susceptible to 51% attacks– extremely difficult to hack.

Applications of Blockchain Technology

1. Cryptocurrencies
2. Smart Contracts
3. Financial Services
4. Video games
5. Supply Chains
6. Domain names
7. Healthcare
8. Property Records
9. Intellectual Property Rights
10. Voting
11. Identity Management
12. Sharing Economy.

Merkel Tree

(Just remember the term and relation to Blockchain Technology)

In cryptography and computer science, a hash tree or Merkle tree is a tree in which every leaf node is labelled with the cryptographic hash of a data block, and every non-leaf node is labelled with the cryptographic hash in the labels of its child nodes.