What is a Block Chain?

Blockchain is a decentralized collection of records, which can be transaction data, stored in the form of blocks. Each new block takes its reference from the previous block. Each block is linked to the previous block, and a collection of blocks together forms a chain known as a ledger. This ledger is publicly distributed among all members of the blockchain network and is called the publicly distributed ledger .

Key Features of Blockchain:

1. Decentralization: Unlike traditional databases controlled by a central authority, blockchain operates on a peer-to-peer network where all participants (nodes) have a copy of the entire ledger. This eliminates the need for a central intermediary and distributes power across the network.
2. Immutability: Once a block is added to the blockchain, altering the data within it is highly resistant due to cryptographic hashing. Each block contains a unique hash and the hash of the previous block, creating a secure chain that is difficult to tamper with.
3. Security and Cryptography: Blockchain uses advanced cryptographic techniques to secure data. Each transaction is encrypted and linked to the previous transaction, ensuring the integrity and security of the data.
4. Transparency: Every transaction on a blockchain is visible to all participants, providing complete transparency. This openness helps build trust among users as all actions are verifiable.
5. Consensus Mechanisms: Blockchain networks use consensus algorithms to validate transactions and add them to the ledger. Common mechanisms include Proof of Work (PoW), Proof of Stake (PoS), and others, ensuring agreement among participants on the validity of transactions.

Applications of Blockchain:

• Cryptocurrencies: The most well-known application of blockchain is cryptocurrencies like Bitcoin and Ethereum, which operate on blockchain technology. These digital currencies enable peer-to-peer transactions without the need for intermediaries.
• Smart Contracts: Platforms like Ethereum allow the creation of smart contracts, which are self-executing contracts with the terms of the agreement directly written into code. These contracts automatically execute transactions when predefined conditions are met.
• Supply Chain Management: Blockchain can enhance supply chain transparency by providing an immutable record of product movement from origin to destination. This helps in verifying the authenticity of products and tracking their journey.
• Healthcare: Blockchain can securely store patient records, ensuring data integrity and privacy. It allows for seamless sharing of information among healthcare providers, improving patient care.
• Voting Systems: Blockchain can be used to create secure and transparent voting systems, reducing the risk of fraud and ensuring accurate vote counts.

Encryption applied to block chain transactions

• In Bitcoin, the hashing method primarily used for encryption and securing transactions is called SHA-256 (Secure Hash Algorithm 256-bit). Here’s a brief overview of how SHA-256 is used in Bitcoin:
• SHA-256 is a cryptographic hash function that produces a 256-bit (32-byte) fixed-size hash value from an input of any size. It is a one-way function, meaning it is computationally infeasible to reverse the process and retrieve the original input from the hash value.

Bitcoin Transactions:

Bitcoin transactions within a blockchain network require each user to possess a public key, similar to an email address, which is known publicly, and a private key, similar to a password, which only the respective user knows.

Process of Adding Transactions to Blockchain:

1. Validation: Each transaction is validated by nodes in the network to ensure its legitimacy. This involves checking the digital signatures and ensuring the sender has sufficient funds.
2. Proof of Work: Miners, who are participants in the network, compete to solve complex mathematical problems. This process, called Proof of Work (PoW), requires significant computational power and ensures that adding new blocks is difficult and resource-intensive.
3. Mining: Once a miner solves the problem, they add the validated transaction to a new block. The new block is then added to the existing blockchain. The miner is rewarded with newly created bitcoins and transaction fees.
4. Consensus: The newly added block is broadcasted to the entire network. Nodes verify the block and update their copies of the ledger, ensuring consistency across the network.