In 1991, the term blockchain was coined. Blockchain’s founder was an anonymous person who goes by the pseudonym Satoshi Naka Moto. For the first time in 2009, the blockchain was implemented in accordance with bitcoin and bitcoin is a crypto valuta. Due to its open-source nature, Blockchain has grown geometrically. Bitcoin was the first prominent blockchain. It is a decentralized technology, an unchangeable ledger for documenting transactions between two parties. A blockchain is a chain of blocks containing unique data that solves the problem of double-spending
Core components of Blockchain :
Setup of Blockchain and Network operations are based on the four core components that are –
- The Distributed Ledger –
The record of all transactions is a blockchain itself. Bitcoin is the original currency of the Bitcoin blockchain. It is decentralized, which serves its advantage. Soon we’ll be in a position to set up and manage our own digital identity, and that’s so fast.
- Peer-to-Peer Networks(P2P) –
Many nodes are linked to the Internet in a clustered way. It Stores the complete synchronized blockchain edition. At all points of time, each node in Peer-to-Peer networks agrees to one blockchain state, so that anyone can check a transaction independently. It works mainly on a decentralized system.
- Consensus Mechanism –
It is built on the Consensus Algorithm and protocol. It is a Process that utilizes protocol and algorithm so that nodes will agree on the same state of the blockchain without having to trust one another. It is a series of rules that control the whole network operation and all core components. Since bitcoin is having a protocol so it is a member of the consensus Mechanism. Two of the most popular consensus algorithms and their respective incentive Mechanism are Proof-of-stake and Proof-of-work. To secure the network the Proof-of-work uses intensive Resource as compare to Proof-of-Stake. A proof-of-work secure the blockchain. When we combine Ledger and Peer-to-Peer network the result obtained is not inherently secure and reliable but by using the Consensus Mechanism we can make the obtained result secure, reliable, and inherently immutable.
- Incentive Mechanism –
The original currency encourages participation in the decentralized network. While discussing blockchain we can consider an incentive as a transaction, so the transaction has to be secure, it means we have to check the security of an Incentive by analyzing the mutual behavior of intermediates nodes. If intermediate nodes are Honest and participate successfully then they are awarded from a blockchain transaction. An incentive mechanism is receiver-collusion resistant or a receiver-non competitive resistant, where the receiver and any party of his neighbors, using any strategic profile other than that, cannot maximize their anticipated amount of utilities.
Application of blockchain :
- For Loans
- For supply chains
- For mortgage
- For identity verification
- Emirate’s business
Advantages of Blockchain :
- High security and less fraud
- Low-cost transaction
- Faster processing time
- Free of friction
- Assets are controlled by the owner
- Verification is independent
- More transaction trust
- It is completely transparent, so it is safer.
Disadvantage of Blockchain :
- Not suitable where data has to be deleted.
- It’s really energy-intensive