NAME:

MAHNOOR QAISER
Subject:
computer application in education
Roll no:
1056(evening)
Submitted to:
Naseer Ahmad
Blockchain defined: Blockchain is a shared, immutable ledger that facilitates the
process of recording transactions and tracking assets in a business network.
An asset can be tangible (a house, car, cash, land) or intangible (intellectual property,
patents, copyrights, branding). Virtually anything of value can be tracked and traded
on a blockchain network, reducing risk and cutting costs for all involved.

Why blockchain is important: Business runs on information. The faster it’s received

and the more accurate it is, the better. Blockchain is ideal for delivering that
information because it provides immediate, shared and completely transparent
information stored on an immutable ledger that can be accessed only by permissioned
network members. A blockchain network can track orders, payments, accounts,
production and much more. And because members share a single view of the truth,
you can see all details of a transaction end to end, giving you greater confidence, as
well as new efficiencies and opportunities.

key elements of a blockchain:

Distributed ledger technology:
All network participants have access to the distributed ledger and its immutable record of
transactions. With this shared ledger, transactions are recorded only once, eliminating the
duplication of effort that’s typical of traditional business networks.
Immutable records:
No participant can change or tamper with a transaction after it’s been recorded to the shared
ledger. If a transaction record includes an error, a new transaction must be added to reverse the
error, and both transactions are then visible.
Smart contracts:
To speed transactions, a set of rules — called a smart contract — is stored on the blockchain and
executed automatically. A smart contract can define conditions for corporate bond transfers,
include terms for travel insurance to be paid and much more.

How blockchain works:

As each transaction occurs, it is recorded as a “block” of data
Those transactions show the movement of an asset that can be tangible (a product) or intangible
(intellectual). The data block can record the information of your choice: who, what, when,
where, how much and even the condition — such as the temperature of a food shipment.
Each block is connected to the ones before and after it
These blocks form a chain of data as an asset moves from place to place or ownership changes
hands. The blocks confirm the exact time and sequence of transactions, and the blocks link
securely together to prevent any block from being altered or a block being inserted between two
existing blocks.
Transactions are blocked together in an irreversible chain:
a blockchain Each additional block strengthens the verification of the previous block and hence
the entire blockchain. This renders the blockchain tamper-evident, delivering the key strength of
immutability. This removes the possibility of tampering by a malicious actor — and builds a
ledger of transactions you and other network members can trust.

Benefits of blockchain:
What needs to change: 
Operations often waste effort on duplicate record keeping and third-party validations.
Record-keeping systems can be vulnerable to fraud and cyberattacks. Limited
transparency can slow data verification. And with the arrival of IoT, transaction
volumes have exploded. All of this slows business, drains the bottom line — and
means we need a better way. Enter blockchain.
Greater trust:
With blockchain, as a member of a members-only network, you can rest assured that you are
receiving accurate and timely data, and that your confidential blockchain records will be shared
only with network members to whom you have specifically granted access.
Greater security:
Consensus on data accuracy is required from all network members, and all validated transactions
are immutable because they are recorded permanently. No one, not even a system administrator,
can delete a transaction.
More efficiencies:
With a distributed ledger that is shared among members of a network, time-wasting record
reconciliations are eliminated. And to speed transactions, a set of rules — called a smart contract
— can be stored on the blockchain and executed automatically.

Types of blockchain networks:

There are several ways to build a blockchain network. They can be public, private, permissioned
or built by a consortium.

Public blockchain networks:

A public blockchain is one that anyone can join and participate in, such as Bitcoin. Drawbacks
might include substantial computational power required, little or no privacy for transactions, and
weak security. These are important considerations for enterprise use cases of blockchain.
Private blockchain networks:
A private blockchain network, similar to a public blockchain network, is a decentralized peer-to-
peer network. However, one organization governs the network, controlling who is allowed to
participate, execute a consensus protocol and maintain the shared Blockchain formation.
ledger. Depending on the use case, this can significantly boost trust
and confidence between participants. A private blockchain can be Blockchain formation.
run behind a corporate firewall and even be hosted on premises. The main chain (black)
consists of the longest
Permissioned blockchain networks: series of blocks from the
Businesses who set up a private blockchain will generally set up a genesis block (green) to
permissioned blockchain network. It is important to note that public the current block.
blockchain networks can also be permissioned. This places Orphan blocks (purple)
restrictions on who is allowed to participate in the network and in exist outside of the main
chain.
what transactions. Participants need to obtain an invitation or
permission to join.
Consortium blockchains:
Multiple organizations can share the responsibilities of maintaining a blockchain. These pre-
selected organizations determine who may submit transactions or access the data. A consortium
blockchain is ideal for business when all participants need to be permissioned and have a shared
responsibility for the blockchain.
Blockchain security
Risk management systems for blockchain networks :
When building an enterprise blockchain application, it’s important to have a comprehensive
security strategy that uses cybersecurity frameworks, assurance services and best practices to
reduce risks against attacks and fraud.

Structure and design

A blockchain is a decentralized, distributed, and often public, digital ledger consisting of records
called blocks that are used to record transactions across many computers so that any involved block
cannot be altered retroactively, without the alteration of all subsequent blocks. This allows the
participants to verify and audit transactions independently and relatively inexpensively. A blockchain
database is managed autonomously using a peer-to-peer network and a distributed timestamping
server. They are authenticated by mass collaboration powered by collective self-interests Such a
design facilitates robust workflow where participants' uncertainty regarding data security is marginal.
The use of a blockchain removes the characteristic of infinite reproducibility from a digital asset. It
confirms that each unit of value was transferred only once, solving the long-standing problem
of double-spending. A blockchain has been described as a value-exchange protocol. A blockchain
can maintain title rights because, when properly set up to detail the exchange agreement, it provides
a record that compels offer and acceptance.
Logically, a blockchain can be seen as consisting of several layers:

 infrastructure (hardware)
 networking (node discovery, information propagation and verification)
 consensus (proof of work, proof of stake)
 data (blocks, transactions)
 application (smart contracts/decentralized applications, if applicable)

Blocks
Blocks hold batches of valid transactions that are hashed and encoded into a Merkle tree Each block
includes the cryptographic hash of the prior block in the blockchain, linking the two. The linked
blocks form a chain. This iterative process confirms the integrity of the previous block, all the way
back to the initial block, which is known as the genesis block (Block 0). To assure the integrity of a
block and the data contained in it, the block is usually digitally signed.
Sometimes separate blocks can be produced concurrently, creating a temporary fork. In addition to a
secure hash-based history, any blockchain has a specified algorithm for scoring different versions of
the history so that one with a higher score can be selected over others. Blocks not selected for
inclusion in the chain are called orphan blocks. Peers supporting the database have different
versions of the history from time to time. They keep only the highest-scoring version of the database
known to them. Whenever a peer receives a higher-scoring version (usually the old version with a
single new block added) they extend or overwrite their own database and retransmit the
improvement to their peers. There is never an absolute guarantee that any particular entry will
remain in the best version of history forever. Blockchains are typically built to add the score of new
blocks onto old blocks and are given incentives to extend with new blocks rather than overwrite old
blocks. Therefore, the probability of an entry becoming superseded decreases exponentially as more
blocks are built on top of it, eventually becoming very low. For example, bitcoin uses a proof-of-work
system, where the chain with the most cumulative proof-of-work is considered the valid one by the
network. There are a number of methods that can be used to demonstrate a sufficient level
of computation. Within a blockchain the computation is carried out redundantly rather than in the
traditional segregated and parallel manner..

Block time:
The block time is the average time it takes for the network to generate one extra block in the
blockchain. By the time of block completion, the included data becomes verifiable. In cryptocurrency,
this is practically when the transaction takes place, so a shorter block time means faster
transactions. The block time for Ethereum is set to between 14 and 15 seconds, while for bitcoin it is
on average 10 minutes.

Decentralization:
By storing data across its peer-to-peer network, the blockchain eliminates some risks that come with
data being held centrally. The decentralized blockchain may use ad hoc message
passing and distributed networking.
In a so-called "51% attack" a central entity gains control of more than half of a network and can then
manipulate that specific blockchain record at will, allowing double-spending.
Blockchain security methods include the use of public-key cryptography. A public key (a long,
random-looking string of numbers) is an address on the blockchain. Value tokens sent across the
network are recorded as belonging to that address. A private key is like a password that gives its
owner access to their digital assets or the means to otherwise interact with the various capabilities
that blockchains now support. Data stored on the blockchain is generally considered incorruptible.
Every node in a decentralized system has a copy of the blockchain. Data quality is maintained by
massive database replication and computational trust. No centralized "official" copy exists and no
user is "trusted" more than any other. Transactions are broadcast to the network using the software.
Messages are delivered on a best-effort basis. Early blockchains rely on energy-intensive mining
nodes to validate transactions, add them to the block they are building, and then broadcast the
completed block to other nodes Blockchains use various time-stamping schemes, such as proof-of-
work, to serialize changes Later consensus methods include proof of stake. The growth of a
decentralized blockchain is accompanied by the risk of centralization because the computer
resources required to process larger amounts of data become more expensive.
Permissionless (public) blockchain:
An advantage to an open, permissionless, or public, blockchain network is that guarding against bad
actors is not required and no access control is needed This means that applications can be added to
the network without the approval or trust of others, using the blockchain as a transport layer.
Bitcoin and other cryptocurrencies currently secure their blockchain by requiring new entries to
include proof of work. To prolong the blockchain, bitcoin uses Hashcash puzzles. While Hashcash
was designed in 1997 by Adam Back, the original idea was first proposed by Cynthia
Dwork and Moni Naor and Eli Ponytails in their 1992 paper "Pricing via Processing or Combatting
Junk Mail".
In 2016, venture capital investment for blockchain-related projects was weakening in the USA but
increasing in China Bitcoin and many other cryptocurrencies use open (public) blockchains. As of
April 2018, bitcoin has the highest market capitalization..
Permissioned (private) blockchain:
Permissioned blockchains use an access control layer to govern who has access to the network It
has been argued that permissioned blockchains can guarantee a certain level of decentralization, if
carefully designed, as opposed to permissionless blockchains, which are often centralized in
practice.

Disadvantages of permissioned blockchain

Nikolai Hampton argued in Computerworld that "There is also no need for a '51 percent' attack on a
private blockchain, as the private blockchain (most likely) already controls 100 percent of all block
creation resources. If you could attack or damage the blockchain creation tools on a private
corporate server, you could effectively control 100 percent of their network and alter transactions
however you wished." This has a set of particularly profound adverse implications during a financial
crisis or debt crisis like the financial crisis of 2007–08, where politically powerful actors may make
decisions that favor some groups at the expense of others, and "the bitcoin blockchain is protected
by the massive group mining effort. It's unlikely that any private blockchain will try to protect records
using gigawatts of computing power — it's time-consuming and expensive." He also said, "Within a
private blockchain there is also no 'race'; there's no incentive to use more power or discover blocks
faster than competitors. This means that many in-house blockchain solutions will be nothing more
than cumbersome databases.