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Blockchain Technology: Concepts and Applications

Hermehar Pal Singh Bedi1*, Valentina E. Balas2, Sukhpreet Kaur1 and Rubal Jeet1

1Department of Computer Science and Engineering, Chandigarh Engineering College, Landran, Mohali, Punjab, India

2Department of Automatics and Applied Software, University of Arad, Arad Romania

Abstract

Many new technologies evolve and deplete over time, but the most significant technological innovation in recent years has been blockchain technology, which not only has changed almost all aspects of life but also could incorporate all the existing technologies. In this chapter, we will be elaborating all the concepts of blockchain technology and try to understand its purpose in today’s world. We will also look into its use cases especially from a security point of view. As we delve a bit more into the details, we will be looking into the workings of blockchain technology, the different types of blockchains available depending on the network and the consensus mechanism, its structure, and the opportunities for blockchains. Lastly, we will also be exploring some of the challenges that blockchain is facing due to public perception and also the future prospects of blockchain technology.

Keywords: Blockchain, cryptocurrency, smart contracts, decentralized applications

1.1 Introduction

The proposal of a protocol similar to that of blockchain was proposed by cryptographer David Chaum in his dissertation “Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups” in 1982 [1]. In 1991, researchers Haber et al. and Stornetta et al. have illustrated the algorithms on a secured chain of blocks very effectively using cryptography [2, 3]. Nakamoto et al. introduced the method of decentralized blockchain in 2008. He used blockchain for all the transactions made on the Bitcoin network using a ledger in a public domain. Originally, Satoshi Nakamoto used the words “block” and “chain” as two different words, but later were combined to make a single word, “blockchain”.

Blockchain technology is interpreted by many IT professionals as the biggest innovative technological research in today’s digital world in terms of secured assets. Blockchain is the technique of sharing the ledger, which is also one of the best techniques of decentralization of both catalogs and accounts on big data [4]. It is a shared and immutable, i.e., unchangeable and incorruptible, ledger that clears the path for the procedure of documenting the transactions made and tracking the different transactions and assets of any network related to any business. Assets can be of two types: tangible and intangible.

• Tangible assets: These are the physical assets that can be touched such as property, money, vehicles, etc.
• Intangible assets: These are the assets that do not exist in real life but have real-life monetary value such as the crypto-currency, patents, trademarks, etc.

When the defined network is decentralized, then different nodes are used to write, share, and lock the consistent transactions in a distributed ledger [5]. Blockchain works similarly, with the difference being that the data in blockchain are organized into chronological and cryptographical linked blocks, and it also uses different types of mechanisms based on consensus and smart contracts [6].

1.2 Blockchain Types

Broadly, there are four types of blockchains available, which are shown in Figure 1.1.

Figure 1.1 Types of blockchains available.

• Public blockchains are the blockchains that do not require any permissions and are not managed by any company or individual. In public blockchains, anyone can become the node. Public blockchains are purely decentralized and hence allows equal access of blockchains to each and every node. Moreover, each node has the right to create and validate a block of data. There are different blockchains available in the public domain, including Bitcoin, Ethereum, and Litecoin. Mostly, the public blockchains are used for exchanging and mining cryptocurrencies. Public blockchains are criticized by many because of security reasons as the information in the public domain can be accessed by anyone joining the network [7]. In public blockchains, all the nodes are treated equally and none of the nodes available on the network have any special privileges. We can interchangeably use permissionless and public blockchain [8]. The public blockchain features access in real-life examples [9].
• Private blockchains or managed or permissioned blockchains are blockchains that require some permissions, which are managed or controlled by some company or an individual. In managed blockchains, the company or the individual who owns the blockchain grants permissions and makes the decision in creating the nodes. It is not necessary that each node enjoys the same rights similar to public blockchains. They are not purely decentralized as not all the information is available to the public. Ripple and Hyperledger are the examples of permissioned or managed blockchain technologies available. The terms “permissioned” and “private” are used interchangeably [8]. All the nodes in this blockchain have different rights for using the services of the network, which includes data accessing, reading, and making transactions, all limited to an individual or some company. The use cases of private blockchains have been increasing [8].
• Consortium blockchain is a managed and permissioned blockchain that is managed by a group of organizations rather than an individual. Consortium blockchain is more decentralized as compared to private blockchain, which results in high security. Consortium blockchain is mostly used in the financial services industry and supply chain sectors. Quorum and Corda are examples of consortium blockchains. In a consortium blockchain, all the nodes have different rights for using the services of the network, and it is all limited to the company.
• Hybrid blockchain is a singly managed blockchain, which also requires the oversight of some other public blockchains for the validation of transactions. Transactions made in hybrid blockchains are kept private, which can be verified whenever required by enabling access through a smart contract. A hybrid blockchain allows organizations to establish a private and secured system that requires permissions alongside a public permissionless system, which enables them to administer and decide about the level of rights to be given to each member for accessing the data. Either it can be made private with restricted rights or it can be made public [10]. XinFin is an example of a hybrid blockchain.

Some of the papers also divide the blockchain into only two types, depending on their architecture:

• Permissioned
• Permissionless

Permissioned blockchains include the blockchain networks, in which all the nodes do not have the right to access, read, write, and transact, but all these facilities are limited to some company or individual. Permissioned blockchains include both private and consortium blockchains discussed above and are also sometimes referred to as private blockchains [8]. They use QuorumChain and majority voting consensus, because of which they are faster than permissionless blockchains [11]. Permissioned blockchains are comparatively more secured than public or permissionless blockchains as not all the nodes can access the data available on the network.

Figure 1.2 Types of blockchains.

Table 1.1 Comparison of different blockchains [13].

Permissionless blockchains include the blockchain networks, in which all the nodes are treated equally, have access to all the information on the network, and can broadcast the transaction on the network. Public blockchains include the public blockchain discussed above and are also sometimes referred to as permissionless blockchains [8]. It uses proof-of-work (PoW) consensus, which ensures that all the nodes are only permitted to take any decision if they reach consensus. This also has an adverse effect of slowing down the network [11].

Thus, the types of blockchains available can be classified into two types and then further divided into subtypes as shown in Figure 1.2.

The differences between different types of blockchains...