Professional Documents
Culture Documents
Anirvan Vinod
B.Tech Information Technology
Saranathan College of Engineering, Tiruchirapalli
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Abstract - A blockchain is essentially a distributed years and is being successfully applied to both
database of records or public ledger of all financial and non-financial world applications. Last
transactions or digital events that have been year, Marc Andreessen, the doyen of Silicon
executed and shared among participating parties. Valley’s capitalists, listed the blockchain distributed
Once entered, information can never be erased. The consensus modelas the most important invention
blockchain contains a certain and verifiable record since the Internet itself. Johann Palychata from BNP
of every single transaction ever made. Bitcoin, the Paribas wrote in the Quintessence magazine that
decentralized digital currency, is the most popular bitcoin’s blockchain, the software that allows the
example that uses blockchain technology. The digital currency to function should be considered as
digital currency bitcoin itself is highly controversial an invention like the steam or combustion engine
but the underlying blockchain technology has that has the potential to transform the world of
worked flawlessly and found wide range of finance and beyond. The fact is that we live our life
applications in both financial and nonfinancial precariously in the digital world by relying on a third
world. entity for the security and privacy of our digital
assets. The fact remains that these third party
Keywords - Blockchain, Bitcoins, Peers, sources can be hacked, manipulated or
Decentralized, Transactions, Cryptocurrencies. compromised. This is where the blockchain
1. INTRODUCTION technology comes handy. It has the potential to
revolutionize the digital world by enabling a
The main hypothesis of blockchain technology is distributed consensus where each and every online
that the blockchain establishes the system of transaction, past and present, involving digital assets
creating a distributed consensus in the digital online can be verified at any time in the future. It does this
world. This allows the participations of entities to without compromising the privacy of the digital
know for certain that a digital event happened by assets and parties involved. The distributed
creating an irrefutable record in a public ledger. consensusand anonymityare two important
Bitcoin is the most popular example that is characteristics of blockchain technology.
intrinsically tied to blockchain technology. It is also
the most controversial one since it helps to enable a 2. A BRIEF HISTORY OF BITCOINS
multibillion-dollar global market of anonymous
transactions without any governmental control. 1998 – 2009 - Before the bitcoin
Hence it has to deal with a number of regulatory
issues involving national governments and financial Although it was an established cryptocurrency, there
institutions. Bitcoin works on eliminating the middle had been previous attempts at creating online
man concept of having a bank control and view the currencies with ledgers secured by encryption. Two
transactions which are being made throughout the examples of these were B-Money and Bit Gold,
which were formulated but never fully developed.
world. Once the middle man is eliminated
transactions become more secure and confidential.
However, Blockchain technology itself is non- 2008 – Satoshi Nakamoto, the Mystery Man
controversial and has worked flawlessly over the
A paper called Bitcoin – A Peer to Peer Electronic Thus the ownership of corresponding “private key”
Cash System was posted to a mailing list discussion on the transaction using the “public key” of the
on cryptography. It was posted by someone calling sender.
themselves Satoshi Nakamoto, whose real identity
remains a mystery to this day. Each transaction is broadcast to every node in the
Bitcoin network and is then recorded in a public
2009 – Bitcoin begins ledger after verification. Every single transaction
needs to be verified for validity before it is recorded
The Bitcoin software is made available to the public in the public ledger. Verifying node needs to ensure
for the first time and mining – the process through two things before recording any transaction:
which new Bitcoins are created and transactions are
recorded and verified on the blockchain – begins. 1. Spender owns the cryptocurrency—digital
signature verification on the transaction.
The popularity of the Bitcoin has never ceased to
increase since then. The underlying BlockChain 2. Spender has sufficient cryptocurrency in his/her
technology is now finding new range of applications account: checking every transaction against
beyond finance. spender’s account (“public key”) in the ledger to
make sure that he/she has sufficient balance in
3. HOW DOES BLOCKCHAIN WORK? his/her account.
5. Faster Transactions
7. DISADVANTAGES OF BLOCKCHAIN
TECHNOLOGY FIGURE 3
1. Signature verification