ABOUT BLOCK CHAIN TECHNOLOGY

Introduction

Blockchain is a distributed database solution that maintains a continuously growing list of data records that are confirmed by the nodes participating in it. The data is recorded in a public ledger, including information of every transaction ever completed. Blockchain is a decentralized solution which does not require any third party organization in the middle. The information about every transaction ever completed in Blockchain is shared and available to all nodes. This attribute makes the system more transparent than centralized transactions involving a third party. In addition, the nodes in Blockchain are all anonymous, which makes it more secure for other nodes to confirm the transactions. Bitcoin was the first application that introduced Blockchain technology. Bitcoin created a decentralized environment for crypto currency, where the participants can buy and exchange goods with digital money.

However, even though Blockchain seems to be a suitable solution for conducting transactions by using cryptocurrencies, it has still some technical challenges and limitations that need to be studied and addressed. High integrity of transactions and security, as well as privacy of nodes are needed to prevent attacks and attempts to disturb transactions in Blockchain. In addition, confirming transactions in the Blockchain requires a computational power.

Bitcoin

Blockchain, mostly known as the technology running the Bitcoin cryptocurrency, is a public ledger system maintaining the integrity of transaction data. Blockchain technology was first used when the Bitcoin cryptocurrency was introduced. To this day, Bitcoin is still the most commonly used application using Blockchain technology. Bitcoin is a decentralized digital currency payment system that consists of a public transaction ledger called Blockchain. The essential feature of Bitcoin is the maintainability of the value of the currency without any organization or governmental administration in control. The number of transfers and users in the Bitcoin network is constantly increasing. In addition, the conversions with traditional currencies, e.g. KRW, EUR and USD, occur constantly in currency exchange markets. Bitcoin has therefore gained the attention of various communities and is currently the most successful digital currency using Blockchain technology

Bitcoin uses the public key infrastructure (PKI) mechanism. In PKI, the user has one pair of public and private keys. The public key is used in the address of the user Bitcoin wallet, and the private key is for the authentication of the user. The transaction of Bitcoin consists of the public key of the sender, multiple public keys of the receiver, and the value transferred. In about ten minutes, the transaction will be written in a block. This new block is then linked to a previously written block. All blocks, including information about every transaction made, are stored in the disk storage of the users, called nodes. All the nodes store information about all recorded transactions of the Bitcoin network and check the correctness of each new transaction made by using previous blocks. The nodes are rewarded by checking the correctness of transactions. This method is called mining, and it is confirmed with Proof-of-Work, which is one of the main concepts of Blockchain technology. When all transactions are successfully confirmed, a consensus exists between all the nodes. The new blocks are linked to previous blocks and all the blocks are aligned in one continuous chain. This chain of blocks is the public ledger technique of Bitcoin, called Blockchain.

Blockchain is the decentralized managing technique of Bitcoin, designed for issuing and transferring money for the users of the Bitcoin currency. This technique can support the public ledger of all Bitcoin transactions that have ever been executed, without any control of a third party organization. The advantage of Blockchain is that the public ledger cannot be modified or deleted after the data has been approved by all nodes. This is why Blockchain is well-known of its data integrity and security characteristics.