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Blockchain

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A block chain or blockchain is a distributed database, introduced in Bitcoin, that maintains a continuously-growing list of data records that each refer to previous items on this list and is thus hardened against tampering and revision.[1]

The initial and most widely known application of block chain technology is the public ledger of transactions for bitcoin,[2] which has been the inspiration for other cryptocurrencies[3] and distributed database designs.[4]

Etymology

The block chain consists of blocks that hold timestamped batches of recent valid transactions. Each block includes the hash of the prior block, linking the blocks together. The linked blocks form a chain, with each additional block reinforcing those before it,[1] thus giving the database type its name.[5] The original definition was written by Satoshi Nakamoto and found in the original source code of bitcoin.[6]

Model

A block chain implementation consists of two kinds of records: transactions and blocks.

Transactions

Transactions are the content to be stored in the block chain. Transactions are created by participants using the system. In the case of cryptocurrencies, a transaction is created any time a bitcoin owner sends cryptocurrency to another.

System users create transactions that are passed from node to node on a best-effort basis. The system implementing the block chain defines a valid transaction. In cryptocurrency applications, a valid transaction must be digitally signed, spend one or more unspent outputs of previous transactions, and the sum of transaction outputs must not exceed the sum of inputs.

Blocks

Blocks record and confirm when and in what sequence transactions enter and are logged in the block chain. Blocks are created by users known as "miners" who use specialized software or equipment designed specifically to create blocks.

In a cryptocurrency system, miners are incentivized to create blocks to collect two types of rewards: a pre-defined per-block award, and fees offered within the transactions themselves, payable to any miner who successfully confirms the transaction.

Decentralisation

Every node in a decentralized cryptocurrency system has at least a partial copy of the block chain. This avoids the need to have a centralized database.[7] Transactions of the form payer X sends Y currency to payee Z are broadcast to this network using software applications. Network nodes can validate transactions, add them to their copy and then broadcast these ledger additions to other nodes.[8]: ch. 8 

Cryptocurrencies use various timestamping schemes, such as proof-of-work, to avoid the need for a trusted third party to timestamp transactions. This prevents users from double-spending their coins.[9]

Whereas a conventional ledger records the transfers of actual bills or promissory notes that exist apart from it, the block chain is the only place that cryptocurrency can be said to exist, in the form of unspent outputs of transactions.[8]: ch. 5 

Advantages

The core advantages of the block chain architecture include the following:

  • The ability for independent nodes to converge on a consensus of the latest version of a large data set such as a ledger, even when the nodes are run anonymously, have poor interconnectivity and have operators who are dishonest or malicious (see Sybil attack).
  • The ability for any node that creates a transaction to, after a confirmation period, determine with a reasonable level of certainty whether the transaction is valid, able to take place and become final (i.e., that no conflicting transactions were confirmed into the block chain elsewhere that would invalidate the transaction, such as the same currency units "double-spent" somewhere else).
  • A prohibitively high cost to attempt to rewrite or alter transaction history.
  • Automated conflict resolution that ensures that conflicting transactions (such as two or more attempts to spend the same balance in different places) never become part of the confirmed data set.

Debates

An ongoing debate disputes whether a private system with verifiers tasked and authorized (permissioned) by a central authority, should still be considered a block chain.[10][11][12][13][14]

Proponents of permissioned or private chains argue that the term "blockchain" is rightly applied to any data structure which batches data into blocks which are timestamped and that these blockchains serve as a distributed version of multiversion concurrency control (MVCC) in databases.[15] Just as MVCC prevents two transactions from concurrently modifying a single object in a database, block chains prevent two transactions from spending a single output in a blockchain.

The opponents say that the permissioned systems look like traditional corporate databases, not supporting decentralized verification of the data, and that such systems are not hardened against tampering and revision by its operators.[12][10]

Applications

Sidechains

Sidechains are networks based on the bitcoin protocol that are isolated from the block chain, allowing activity to exist in isolation until confirmation on the block chain, at which point transferability becomes bidirectional.[16] Examples:

  • Liquid – Exchange sidechain developed by Blockstream[17]
  • ChromaWay – Sidechain platform for colored coins
  • DIONS – Digital I/O sidechain concept for identity
  • tØ (tee-zero) – SEC-approved sidechain developed by Overstock.com
  • Openchain – NoConsensus NoP2P modular distributed ledger technology for asset management, bidirectional pegging, and chain anchoring (or "sidechaining").

Alternative block chains

Alternate block chains (altchains) are based on bitcoin technology in concept and/or code.[18] These designs generally add functionality to the block chain design. Altchains can provide solutions including other digital currencies, although tokens used in these designs are not always considered to be such. Altchains target performance, anonymity, storage and applications such as smart contracts.[19] Starting with a strong focus on financial applications, block chain technology is extending to activities including decentralized applications and collaborative organizations that eliminate a middleman.[20][non-primary source needed] Notable designs include:

Trusted timestamp

The bitcoin block chain can be used as a trusted timestamp for arbitrary messages. Third party application services store messages directly in the block chain, allowing anyone who has the block chain to read the message.[24][25][26][27] Bitcoin Core developer Mike Hearn among others discouraged embedding large messages in the bitcoin block chain, criticizing it as "bloat".[28][29][30]

Other applications store a hash value in the block chain, recording data existence and confirming data integrity without revealing data and without bloating the block chain.[31][32] This information can be used to implement "colored coins" or side chains to support functionality such as smart contracts.

Other uses

Cooperative storage cloud solutions sometimes employ block chain technology to regulate exchange of data or actual payments for storage space.

See also

References

  1. ^ a b Satoshi Nakamoto (2008). "Bitcoin: A Peer-to-Peer Electronic Cash System" (PDF). Bitcoin.org. Retrieved 31 October 2008.
  2. ^ Antonopoulos, Andreas (December 2014). Mastering Bitcoin - Unlocking Digital Cryptocurrencies. O'Reilly Media. ISBN 1-4493-7403-4. Retrieved 3 November 2015.
  3. ^ "Blockchains and the Internet of Things". Postscapes.
  4. ^ "40 Banks Trial Commercial Paper Trading in Latest R3 Blockchain Test - CoinDesk". CoinDesk. Retrieved 2016-03-21.
  5. ^ "How does Bitcoin work?". Bitcoin.org. Retrieved 20 May 2015.
  6. ^ Nakamoto, Satoshi. "original-bitcoin main.h". Satoshi Nakamoto. Retrieved 2009. {{cite web}}: Check date values in: |accessdate= (help)
  7. ^ Jerry Brito and Andrea Castillo (2013). "Bitcoin: A Primer for Policymakers" (PDF). Mercatus Center. George Mason University. Retrieved 22 October 2013.
  8. ^ a b Andreas M. Antonopoulos (April 2014). Mastering Bitcoin. Unlocking Digital Crypto-Currencies. O'Reilly Media. Retrieved 23 October 2014.
  9. ^ Joshua Kopstein (12 December 2013). "The Mission to Decentralize the Internet". The New Yorker. Retrieved 30 December 2014. The network's "nodes"—users running the bitcoin software on their computers—collectively check the integrity of other nodes to ensure that no one spends the same coins twice. All transactions are published on a shared public ledger, called the "blockchain"
  10. ^ a b "It's All About the Blockchain - Money and State". Money and State. Retrieved 2015-11-02.
  11. ^ Reutzel, Bailey. "A Very Public Conflict Over Private Blockchains". Payments Source. SourceMedia.
  12. ^ a b "Blockchain".
  13. ^ "Blockchain Bandwagon Lesson". dinbits. 2015.
  14. ^ "Why the Bitcoin Blockchain Beats Out Competitors". American Banker. 2015.
  15. ^ Greenspan, Gideon. "Ending the bitcoin vs blockchain debate".
  16. ^ Adam Black, Matt Corallo, Luke Dashjr, Mark Friedenback, Gregory Maxwell, Andrew Miller, Andrew Poelstra, Jorge Timon, and Pieter Wuille (2014). "An explanation of Bitcoin Sidechains". Retrieved 22 October 2014.{{cite web}}: CS1 maint: multiple names: authors list (link)
  17. ^ SAMBURAJ DAS (2015). "The First SideChain for Bitcoin Exchanges". CrryptoCoinsNews.
  18. ^ "Blockchain". Investopedia. Retrieved 19 March 2016. Based on the Bitcoin protocol, the blockchain database is shared by all nodes participating in a system.
  19. ^ "Why Bitcoin may herald a new era in finance". www.economistinsights.com. The Economist Group. Retrieved 9 June 2015.
  20. ^ "Primavera De Filippi: From competition to cooperation". TEDxCambridge. Retrieved 8 October 2015.
  21. ^ Coppola, Benmeleh, Gabrielle, Yaacov. "This Israeli Ride-Sharing App Is the Utopian, Hippie Uber". Bloomberg. Retrieved 27 January 2016.{{cite web}}: CS1 maint: multiple names: authors list (link)
  22. ^ Ayral, Sandrine. "Bitcoin 2.0 Crowdfunding Is Real Crowdfunding". Techcrunch. Retrieved 27 January 2016.
  23. ^ Miller, Carl. "In 2015 social media companies strengthened their rule. In 2016 they will face rebellion". The Telegraph. Retrieved 27 January 2016.
  24. ^ Aaron van Wirdum. "Student Aims to Boost Free Speech with Bitcoin Messaging App".
  25. ^ Ken Shirriff. "Hidden surprises in the Bitcoin blockchain and how they are stored: Nelson Mandela, Wikileaks, photos, and Python software".
  26. ^ "Bitcoin Strings: blockchain in words"
  27. ^ "CryptoGraffiti".
  28. ^ Daniel Cawrey. "Why New Forms of Spam Could Bloat Bitcoin's Block Chain".
  29. ^ "What are the key differences between different ways of embedding messages in the blockchain?".
  30. ^ Danny Bradbury. "Bitcoin, schmitcoin. Let's play piggyback on the blockchain".
  31. ^ "What is proof of existence?".
  32. ^ Danny Bradbury."Developers Battle Over Bitcoin Block Chain".
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