Definition of Blockchain
Blockchain is a decentralized and distributed ledger technology that allows multiple participants to maintain a shared database of records, known as blocks, in a secure and transparent manner. It is designed to ensure the integrity, immutability, and consensus of data without relying on a central authority.
Goal of Blockchain
The goal of blockchain is to allow digital information to be recorded and distributed, but not edited.
Types of blockchain
1. Public blockchain
A public, or permission-less, blockchain network is one where anyone can participate without restrictions. Most types of cryptocurrencies run on a public blockchain that is governed by rules or consensus algorithms.
2. Permissioned or private blockchain
A private, or permissioned, blockchain allows organizations to set controls on who can access blockchain data. Only users who are granted permissions can access specific sets of data. Oracle Blockchain Platform is a permissioned blockchain.
3. Federated or consortium blockchain
A blockchain network where the consensus process (mining process) is closely controlled by a preselected set of nodes or by a preselected number of stakeholders.
Key concepts of blockchain include:
- Unlike traditional centralized systems, blockchain operates on a decentralized network of computers called nodes.
- Each node has a copy of the entire blockchain and participates in the validation and verification of transactions.
- Distributed Ledger:
- The blockchain is a digital ledger that records a chronological sequence of transactions.
- Each transaction is bundled into a block, and multiple blocks are linked together to form a chain.
- This distributed ledger is shared among all participating nodes, providing transparency and eliminating the need for a central authority.
- Transparency and Immutability:
- Once a transaction is added to the blockchain, it becomes immutable and cannot be altered or deleted.
- The transparent nature of blockchain allows anyone to view the transaction history, promoting trust and accountability.
- Blockchain utilizes cryptographic techniques to secure and protect the integrity of data.
- Hash functions are used to generate unique digital fingerprints (hashes) for each block, ensuring the immutability of the data.
- Digital signatures provide authenticity and verify the identity of participants.
- Consensus Mechanisms:
- Blockchain relies on consensus mechanisms to achieve agreement among nodes on the state of the blockchain.
- Common consensus algorithms include Proof of Work (PoW), Proof of Stake (PoS), and Practical Byzantine Fault Tolerance (PBFT).
- These mechanisms prevent double-spending and ensure the validity of transactions.
- Smart Contracts:
- Smart contracts are self-executing contracts with predefined rules and conditions encoded within the blockchain.
- They automate the execution of agreements and transactions between parties, eliminating the need for intermediaries.
- Trust and Security:
- Blockchain promotes trust by providing a tamper-resistant and auditable record of transactions.
- The distributed nature of the network and consensus mechanisms make it highly secure against fraud, hacking, and unauthorized modifications.
- Use Cases:
- Blockchain technology finds applications in various domains beyond cryptocurrencies, including supply chain management, healthcare, finance, voting systems, real estate, identity management, and more.
- It enables secure and efficient processes, reduces intermediaries, and fosters transparency and trust.