Introduction

Key Blockchain Concepts:

• Blockchain is a decentralized, distributed ledger technology that
securely records transactions across a network of computers. Here
are key concepts associated with blockchain:
• 1. Decentralization
• No Central Authority: Instead of relying on a single central entity (like
a bank or government), blockchain is decentralized, meaning multiple
parties (nodes) control the network.
• 2. Distributed Ledger
• Shared Database: A blockchain is a shared database where each
participant has a copy of the entire chain of records, ensuring
transparency and accountability.
• 3. Blocks
• Transaction Groups: A blockchain consists of blocks, which are
containers of transaction data. Each block contains:
• Data: Information about the transactions.
• Hash: A unique identifier for the block, generated using cryptographic
algorithms.
• Previous Block Hash: Link to the hash of the previous block, forming the
"chain."

• 4. Hashing
• Cryptographic Function: Hashing is a process of converting data into a
fixed-length string (hash). Each block has a hash, and if data within a
block is altered, its hash changes, signaling tampering.
• 5. Consensus Mechanisms
• Agreement Process: Consensus algorithms ensure that all participants
in the network agree on the validity of transactions. Common
mechanisms include:
• Proof of Work (PoW): Miners solve complex mathematical problems to add a
block.
• Proof of Stake (PoS): Validators are chosen based on the number of coins
they hold and are willing to "stake."
• Delegated Proof of Stake (DPoS): A variation of PoS where stakeholders elect
delegates to validate transactions.
• 6. Smart Contracts
• Automated Agreements: Self-executing contracts with the terms of
the agreement directly written into code. When predefined
conditions are met, the contract is automatically executed without
intermediaries.
• Public vs. Private Blockchains
• Public Blockchains: Open to anyone to join and participate (e.g.,
Bitcoin, Ethereum).
• Private Blockchains: Access is restricted to certain participants, often
used by businesses for internal processes.
• 8. Mining
• Adding New Blocks: In proof-of-work blockchains like Bitcoin, miners
compete to solve computational puzzles. The first to solve it gets the
right to add a new block and is rewarded with cryptocurrency.
• 9. Nodes
• Network Participants: A node is a computer that participates in the
blockchain network. It can either be a full node (stores the entire
blockchain) or a lightweight node (stores only part of it).
• 10. Public and Private Keys
• Cryptography: Public and private keys are used for secure
transactions. The public key is shared, while the private key is kept
secret to authorize actions like sending cryptocurrency.
• 11. Forks
• Blockchain Divergence: A fork occurs when there is a change in the
blockchain protocol, leading to two different versions of the chain.
Forks can be:
• Hard Fork: Incompatible changes that create two separate blockchains.
• Soft Fork: Backward-compatible changes that don’t split the blockchain.
• 12. Tokenization
• Digital Representation of Assets: Tokenization refers to converting
real-world assets like property, shares, or art into digital tokens on the
blockchain, allowing for easier transfer and ownership verification.
• 13. Immutable and Transparency
• Immutability: Once a block is added to the blockchain, it cannot be
altered or deleted, ensuring the integrity of the transaction history.
• Transparency: Every participant can view the transaction history,
providing openness and accountability.
• 14. Interoperability
• Cross-Blockchain Communication: Interoperability allows different
blockchains to communicate and share information, making them
compatible with each other (e.g., transferring assets from one
blockchain to another).
• These concepts work together to create a secure, decentralized
system that has applications beyond cryptocurrency, such as supply
chain tracking, voting systems, and identity verification.
Cryptocurrency:
• What are Cryptocurrencies?
• Cryptocurrencies are digital tokens. They are a type of digital currency that
allows people to make payments directly to each other through an online
system.
• Cryptocurrencies have no legislated or intrinsic value; they are simply
worth what people are willing to pay for them in the market.
• How Does a Cryptocurrency Transaction Work?
• Cryptocurrency transactions occur through electronic messages that are
sent to the entire network with instructions about the transaction.
• The instructions include information such as the electronic addresses of
the parties involved, the quantity of currency to be traded, and a time
stamp.
• EX: Suppose Alice wants to transfer one unit of cryptocurrency to
Bob. Alice starts the transaction by sending an electronic message
with her instructions to the network, where all users can see the
message.
• Alice's transaction is one of a number of transactions that have
recently been sent.
• Since the system is not instantaneous, the transaction sits with a
group of other recent transactions waiting to be compiled into a block
(which is just a group of the most recent transactions).
• The information from the block is turned into a cryptographic code
and miners compete to solve the code to add the new block of
transactions to the blockchain.
• Once a miner successfully solves the code, other users of the network
check the solution and reach an agreement that it is valid.
• The new block of transactions is added to the end of the blockchain, and
Alice's transaction is confirmed.
• This confirmation is not instant as it takes time for six blocks of transactions
to be processed so that users can be certain that their transaction has been
successful.
• 1. Alice sends instructions to transfer cryptocurrency to Bob. Anyone using
the network can view the message.
• 2. Miners group the transaction together into a 'block' with other recently
sent transactions.
• 3. Information from the new block is transformed into a cryptographic code.
• 4. Miners compete to find the code that will add the new block to
the blockchain.
• 5. Once the code is solved, the block is added to the blockchain and the
transaction is confirmed.
• 6. Bob receives the cryptocurrency.
Tokens:
• What are blockchain tokens?
• Tokens are a key primitive used in blockchain applications. Tokens can be used
to represent anything.
• For example, they can represent a store of value, digital or real-world asset
such as property, art, goods on a supply chain and securities.
• There are no limits to what can be represented as a token.
• Tokens can be divided into two general categories, fungible and non-fungible.
• Fungible Tokens
• Fungible tokens are tokens that are non-unique, one token of the same type is
interchangeable with another token of the same type. For instance, money is a
type of fungible asset. You can change one dollar bill for another and they both
have the same utility.
• Fungible token properties include a name, short name or symbol, a total supply
and decimal precision supported by it.
• Non-fungible tokens (NFTs)
• Non-fungible tokens (NFTs) are tokens where every token is unique.
One token may be similar to another, but they have properties that
ensure no two tokens can ever be the same. Dollar bills have a serial
number on them which can uniquely identify them, although in terms
of utility very few people care about serial numbers on them.
Public Ledger:
• A public ledger is a transparent and immutable record of all
transactions on a blockchain network.
• It serves as the foundational data structure for decentralized systems,
ensuring that all participants can verify and trust the transaction
history.
• Public ledgers are maintained by a decentralized network of nodes,
which work together to validate and confirm transactions through
consensus mechanisms, such as proof-of-work (PoW) or proof-of-
stake (PoS).
• Each transaction on a blockchain is grouped into blocks, and these
blocks are linked together in a chronological order to form a secure
and tamper-resistant chain.
• The transparency and security of public ledgers make them ideal for
applications that require permanent and verifiable records.
• For example, in financial transactions, public ledgers ensure that all
participants can see the movement of assets, reducing the risk of
fraud and enabling greater trust in the system.
• In supply chain management, public ledgers can track the movement
of goods from production to delivery, providing real-time visibility and
accountability.
• Additionally, public ledgers are used in decentralized identity systems,
where individuals can control and share their personal information
without relying on a central authority.
Why Do We Need Different Types of Blockchain?
• To carry out transactions or data transfers across a secure network.
• The way people use Blockchain and distributed ledger technologies or
networks, on the other hand, differs from context to situation.
• For example, Bitcoin is a digital cryptocurrency transacted using
Blockchain and DLT technology.
• Because anyone from anywhere in the world can become a node, verify
other nodes, and exchange bitcoins, this form of a blockchain network is a
public network.
• Assume a bank, on the other hand, is using a private blockchain network.
• The network, which will be password-protected, will be accessible only to
those the bank has approved. As a result, bank data is accessible only
within the local network.
• Similar to these instances, the blockchain network can be set up in various
ways based on usage and requirements.
Types of Blockchain:
• There are four main types of blockchain networks:
-public blockchains
-private blockchains
-consortium blockchains
-hybrid blockchains
Public Blockchain:
• It is a permissionless distributed ledger on which anybody can join
and conduct transactions.
• It is a non-restrictive form of the ledger in which each peer has a copy.
This also means that anyone with an internet connection can access
the public Blockchain.
• This user has access to historical and contemporary records and the
ability to perform mining operations.
• These complex computations must be performed to verify
transactions and add them to the ledger.
• On the blockchain network, no valid record or transaction may be
altered. Because the source code is usually open, anybody can check
the transactions, uncover problems, and suggest fixes.
Advantages of Public Blockchain
:-
• Trustable: Public Blockchain nodes do not need to know or trust each
other because the proof-of-work procedure ensures no fraudulent
transactions.
• Secure: A public network can have as many participants or nodes as it
wants, making it a secure network. The higher the network's size, the
more records are distributed, and the more difficult it is for hackers to
hack the entire network.
• Open and Transparent: The data on a public blockchain is transparent
to all member nodes. Every authorized node has a copy of the
blockchain records or digital ledger.
Disadvantages of Public
Blockchain: -
• Lower TPS: The number of transactions per second in a public
blockchain is extremely low. This is because it is a large network with
many nodes which take time to verify a transaction and do proof-of-
work.
• Scalability Issues: Its transactions are processed and completed
slowly. This harms scalability. Because the more we try to expand the
network's size, the slower it will become.
• High Energy Consumption: The proof-of-work device is expensive and
requires lots of energy. Technology will undoubtedly need to develop
energy-efficient consensus methods.
Uses of Public Blockchain:
• Voting: Governments can use a public blockchain to vote, ensuring
openness and trust.

• Fundraising: Businesses or initiatives can use the public Blockchain to

improve transparency and trust.
Private Blockchain:
• A blockchain network operates in a private context, such as a restricted
network, or is controlled by a single identity.

• While it has a similar peer-to-peer connection and decentralization to a

public blockchain network, this Blockchain is far smaller.

• They are often run on a small network within a firm or organization

rather than open to anybody who wants to contribute processing
power.

• Permissioned blockchains and business blockchains are two more terms

for them.
Advantages of Private
Blockchain:-
• Speed: Private Blockchain transactions are faster. This is because a
private network has a smaller number of nodes, which shortens the
time it takes to verify a transaction.

• Scalability: You can tailor the size of your private Blockchain to meet
your specific requirements. This makes private blockchains
particularly scalable since they allow companies to easily raise or
decrease their network size.
Disadvantages of Private
Blockchain :-
• Trust Building: In a private network, there are fewer participants than
in a private network.

• Lower Security: A private blockchain network has fewer nodes or

members, so it is more vulnerable to a security compromise.

• Centralization: Private blockchains are limited in that they require a

central Identity and Access Management (IAM) system to function.
This system provides full administrative and monitoring capabilities.
Uses of Private Blockchain :-
• Supply Chain Management: A private blockchain can be used to
manage a company's supply chain.

• Asset Ownership: A private blockchain can be used to track and verify

assets.

• Internal Voting: Internal voting is also possible with a private

blockchain.
Hybrid Blockchain:
• Organizations who expect the best of both worlds use a hybrid
blockchain, which combines the features of both private and public
blockchains.

• It enables enterprises to construct a private, permission-based system

alongside a public, permissionless system, allowing them to choose
who has access to certain Blockchain data and what data is made
public.

• In a hybrid blockchain, transactions and records are typically not

made public, but they can be validated if necessary by granting access
via a smart contract.
Advantages of Hybrid
Blockchain :-
• Secure: Hybrid Blockchain operates within a closed environment,
preventing outside hackers from launching a 51 percent attack on the
network.

• Cost-Effective: It also safeguards privacy while allowing third-party

contact. Transactions are inexpensive and quick and scale better than
a public blockchain network.
Disadvantages of Hybrid
Blockchain :-
• Lack of Transparency: Because information can be hidden, this type
of blockchain isn't completely transparent.

• Less Incentive: Upgrading can be difficult, and users have no incentive

to participate in or contribute to the network.
Uses of Hybrid Blockchain: -
• Real Estate: Real-estate companies can use hybrid networks to run
their systems and offer information to the public.

• Retail: The hybrid network can also help retailers streamline their
processes.

• Highly Regulated Markets: Hybrid blockchains are also well-suited to

highly regulated areas like the banking sector.
Consortium Blockchain:
• In the same way that a hybrid blockchain has both private and public
blockchain features, a Consortium blockchain, also known as a federated
blockchain, does.

• However, it differs because it involves various organizational members

working together on a decentralized network.

• Predetermined nodes control the consensus methods in a consortium

blockchain.

• It has a validator node responsible for initiating, receiving, and validating

transactions. Transactions can be initiated or received by member
nodes.
Advantages of Consortium
Blockchain :-
• Secure: A consortium blockchain is more secure, scalable, and
efficient than a public blockchain network. It, like private and mixed
blockchains, has access controls.

• Disadvantages of Consortium Blockchain: -

• Lack of Transparency: The consortium blockchain has a lower degree

of transparency. If a member node is infiltrated, it can still be hacked,
and the Blockchain's rules can render the network inoperable.
Uses of Consortium Blockchain:
-
• Banking and Payments: A consortium can be formed by a group of
banks working together. They have control over which nodes will
validate transactions.

• Research: A consortium blockchain can be employed to share

research data and outcomes.

• Food Tracking: It is also apt for food tracking.

Permissioned Block chain
Model:
• A permissioned blockchain is a type of distributed ledger that requires
‘permission’ to access and is not open to the public.

• This layer of access control and security allows only permissioned

users to perform actions that have been set by the ledger
administrators, while also having to identify themselves digitally or
through certificates.

• Such a blockchain maintains records of everyone involved in the

transactions that occur on it.
Key features of permissioned
blockchains:
• No defined decentralization

• Has a centralized authority

• Invitation to join necessary

• Lack of anonymity

• Scalability is manageable
Advantages:
• Security: only authenticated users can participate.
• Flexible Decentralization: can either be incremental or fully
centralized.
• Performance: it works faster since it has limited accessibility.

Disadvantages:
• Risk of Corruption: with limited users there is a risk of overriding
consensus.
• Regulation: Transactions can be restricted from being executed.
• Vulnerable to attacks: Fewer validators make it more prone to
malicious attacks.
Permission-less Blockchain
Model:
• Permissionless blockchains are open networks that allow anyone to
participate in the consensus process without the need to obtain approval,
permission, or authorization.
• The key characteristics of permissionless blockchains are but not limited to:
• Transparency of transactions
• Anonymity
• Absence of central authority
• Open-source code
• Some examples of permissionless blockchains include Bitcoin (BTC),
Ethereum (ETH), and BNB Smart Chain (BNB).
• Any user with an internet connection has the ability to join the network,
send and receive transactions, view and contribute to the code, operate a
node, and participate in the consensus process.
Blockchain Construction:
• How to create a Blockchain network?
• Step 1: Identify a Suitable Use-case
• before you get involved in the creation of your blockchain, you need
to figure out a business use case that makes business sense.
• There are 3 things that blockchains can do very well:
• 1.Data Authentication & Verification:
• It includes immutable storage, digital signatures, and encryption. The
blockchain network may store data or information in nearly any
format. Blockchains may be used to create a public-private key pair as
well as for creating and verifying digital signatures.
• 2. Smart Asset Management:
• Issuance, payment, exchange, escrow, and retirement are all included. A
tokenized form of a real-world asset, like gold, silver, oil, or land, is referred to
as a smart asset.
• 3. Smart Contracts:
• In blockchain technology, smart contracts are used to digitally execute
agreements and eliminate the chance of loss.
• Step 2: Identify the Most Suitable Consensus Mechanism
• Proof of work was utilized as a consensus method in the first blockchain, which
drives the bitcoin crypto-currency. However, today's distributed ledger systems
include Proof of Stake, Byzantine Fault Tolerance, Deposit based consensus,
Federated Byzantine Agreement, Proof of Elapsed Time, Derived PBFT,
Redundant Byzantine Fault Tolerance, Simplified Byzantine Fault Tolerance,
Federated consensus, Round Robin, and Delegated Proof of Stake, among
others.
• Depending on your use case, you must select the most appropriate consensus
technique.
• Step 3: Identify the Most Suitable Platform
• Today, there are several distributed ledger systems available, most of
which are free and open source.
• You must choose the most suitable blockchain platform based on the
consensus algorithms and mechanism you choose in step 2.
• Step 4: Designing the Nodes
• Another thing to think about here is whether the nodes will run on
the cloud, on-premises, or both.
• After that, there are hardware configuration issues like processors,
memory, and disc space to consider.
• You must also choose the base operating systems that will be used as
a foundation (usually Ubuntu, CentOS, Debian, Fedora, Red Hat, or
Windows).
• Step 5: Design the Blockchain Instance
• Most blockchain platforms need very carefully planned configuration for the following
elements:
• Permissions
• Asset issuance
• Asset re-issuance
• Atomic exchanges
• Key management
• Multi signatures
• Parameters
• Native assets
• Address formats
• Key formats
• Block signatures
• Hand-shaking
• Some parameters may be updated during runtime, but some cannot, therefore this is an
important step.
• Step 6: Building the APIs
• Some immutable blockchain platforms have pre-built APIs, whereas
others do not. The most common APIs you'll need for your
development project are:
• Creating address and key pairs
• Acting in audit-related functions
• Data verification using hashes and digital signatures
• Storage and retrieval of data
• Smart-asset lifecycle management like issuance, payment, exchange,
escrow, and retirement
• Smart contracts
• Step 7: Layout of the Admin and User Interface
• You'll need to decide on the front end and programming languages at
this step. You'll also need to choose external databases and servers
(including Web servers, FTP servers, mail servers).
• Step 8: Adding Future Tech
• Integrating AI, Biometrics, ChatBots, Cloud, Cognitive services,
Containers, Data Analytics, IoT, and ML into your Blockchain system
may significantly increase its power.
• blockchain technology, when implemented correctly, can assist
society in addressing a variety of pressing concerns.