My first encounter with Blockchain

This post is authored by Rajat Nigam and Harsh Garg. Here we talk about our first encounter with Blockchain. This work is done under the mentorship of Dr. Ram P Rustagi.

Currently, most applications available on the Internet work on client server architecture where the centralized server acts as a dictator, having an inordinate amount of power to maintain control over the clients who exchange data. Such an infrastructure has some limitations, including security and involvement of middleman(here server) which levy significant charges for the services they provide.

Contrary to the traditional model of centralized system, blockchain uses a decentralized, i.e. peer to peer network model which helps overcome the limitations of the former model. Having such a decentralized network eliminates the role of middlemen like in banking sector, social networks, content providers and other centralized applications.

Blockchain in simple terms, is a chain of blocks that contain information. The information stored in so called “blocks” depends on the type of application deployed on the blockchain, like transaction data in case of cryptocurrency(like Bitcoin), information related to shares owned in stock certificates, etc. For example, in Bitcoin, each block comprises of public key of the receiver, hash value of the previous block and digital signature of the sender. The coin is transferred from one owner to the other by digitally signing the hash value of the previous transaction and public key of the subsequent owner. Such mechanism of generating the new hash value (of the current block) using the hash of the previous block leads to the formation of so called “block chains”.

Blockchain achieves decentralization using a distributed ledger that is open to public. Everyone who participates in the network gets a copy of the ledger. Blockchain works on the principle of proof of work where the chain having the maximum consensus is preferred. Miner nodes validates the transaction and competes with other mining nodes to obtain a special value by incrementing the nonce to a value which generates the block’s hash with the required number of zero bits. This step is computationally expensive and helps in making the block immutable. This is based on the assumption that the majority of nodes doing computation are honest.

The winning node adds a new block to its copy of the ledger and then broadcasts the transaction along with the key to other participating miner nodes. The other miner nodes update their copy of the ledger and wait for other transactions to happen. The winning node is rewarded with an incentive, in this case with bitcoins. Such updating of ledgers leads to a synchronized ledger.

There’s still a lot to be explored by us. We look forward to hear from you. Stay tuned with us for upcoming post on Ethereum.

Image credits : Dataquest.

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