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Working Principle, Application areas, and challenges for the Blockchain Technology

In the previous decade, cryptocurrencies gain massive attention from the public with the upswing of Bitcoin and Ethereum. The emergence and upswing of cryptocurrencies increase the awareness of the blockchain and its technology as cryptocurrencies are just one of the applications of blockchain technology. The paper reviews and discusses the journal article published in IEEE by (Madaan et al., 2020), entitled “Working principle, Application areas and Challenges for Blockchain Technology.”

Blockchain Technology
Geometric abstract background, technology concept, connecting dots design

The word blockchain, in simple terms, is an electronic ledger of the transactions that works using the protocols approved based on the group consensus. Blockchain authenticates, maintains, and hash events or digital records cryptographically over a distributed network  (Lemieux, 2016). Hence,  the blockchain as a technology includes maintenance of electronic transaction ledger, encryption of transactions using cryptographic hashes, validation & verification of the transaction, and timestamping of the digital records. (Zheng et al., 2018) explains that the noteworthy benefit of using blockchain technology includes decentralization, transparency of transaction, and immutability (Madaan et al., 2020).

The report incorporates an explanation of the unique features of blockchain technology, the types of blockchain technology, its challenges, and its application in various sectors.

How Blockchain Technology Will Change the World In the Future?

Unique features of the Blockchain Technology

Maintenance of the Electronic transactions ledger

         Blockchain technology records the list of transactions as the initial objective. Block is the set of transactions, and the register is the system that records the lists of transactions. The chain is the connected network distribution or nodes that expands dynamically. Each of the nodes includes information on the recently added blocks and partial information about the whole blockchain. The transaction details are broadcasted over the network that connects the blocks to a chain, and nodes stores information to verify these transactions. The block is successfully added to the chain after the node completes the verification of the transaction. The blockchain is identically at each node (Lemieux, 2016). (Madaan et al., 2020) explain that the electronic transaction ledger is distributed among participants that add redundancy with minimal risk of errors.

Data Encryption

            To ensure the security and privacy of the transaction, the data must be transmitted through a secured channel with no sources of readability except to the intended recipient. The process of encapsulating the data is known as encryption. The data is first encrypted using a cryptographic key and is decrypted at the recipient end to produce the original document. Blockchain technology utilizes cryptographic hashing technology to encrypt the data. The algorithm encrypts the information of the transaction and other relevant information about metadata results in creating the hash. All the electronic records that run on the encrypted hash with a specific key create a similar hash. Through the help of a specific key, the electronic records can be decrypted, and the primary document can be verified.

 Validation & Timestamping of the Transaction

       For every transaction, there is a private key that is kept secret and known only to the intended users and the public key. These keys are digital certificates stored in a computer system that helps used to encrypt and decrypt. The transaction is validated by the protocols of blockchain technology when the sender transmits the transaction using the private key, and the recipients use a public key to decrypt the. The technique is practically proven efficient in communication over insecure channels and is presently being used in private and public sectors (Lemieux, 2016).

The timestamp finally links each of the blocks together by stamping the time of the transaction. Nodes validate the transaction through the timestamps of the previous transactions and arrange the data in the chronicle order. 

Types of Blockchain

(Madaan et al., 2020) explains that there are two types of blockchain, namely, private and public. A private blockchain is a single entity network that runs based on the invitation-only. The entry in the network can be both edited and audited and includes various methods to access the information. Since a single corporation owns the private blockchain, they are more efficient, secured, and faster than public blockchain. A public blockchain is open to the public over the network. The participants connected in the chain can read, write, and access the information quickly. Bitcoin and other cryptocurrencies are an example of public blockchain. The public blockchain is not centralized; instead, they are decentralized and is distributed over the network with no one holding control of it. The public blockchain is slow relative to a private blockchain, but it is efficient, secured with all the transaction records transparent.

How can blockchain technology be used to solve major real-life problems?

Application of the Blockchain Technology

Blockchain technology, due to its prime feature of security using hashing cryptography and decentralization, serves the prime role in major financial & economic sectors. business. (Madaan et al., 2020) cites & explains the application of blockchain technology in various sectors of the business. The sectors include:

  • Land Registration
  • Medical & Health Care
  • Voting
  • Banking System
  • Supply Chain

All of the sectors utilize the decentralization and hashing encryption technique of the blockchain technology to secure transactions with fast execution and to maintain the secrecy of their clients.

Challenges faced by Blockchain technology

            Many industries already shifted towards blockchain technology as it is revolutionary in concept and technicalities, yet it still has many hurdles in the widespread. However, the benefits of using blockchain technology are long-term but incur initial costs. The initial costs are due to the initial requirements of the software and hardware that are sold by dedicated firms and are not readily available.  Additionally, the massive demand and restricted supplies further increase the initial costs of using the technology.

The other challenges that hurdle the spread include privacy and security concerns due to selfish mining, 50+% of attacks, including member pool  & DNA attacks, and consensus delay.

Conclusion    

Blockchain as a technology is highly praised due to its decentralized structure.  The paper discusses the critical aspects of how blockchain technology works. The essential benefit of using blockchain technology includes long-term cost reduction, speed, and efficiency in maintaining electronic ledger and security with hashing encryption techniques.  The applicability of blockchain technology is further enhanced due to the nature of blockchain technology as private and public. (Madaan et al., 2020) explains the application of blockchain technology in various sectors in detail. The success behind the acceptability of blockchain technology includes the timestamping of the data and the time of the transaction. At times, blockchain technology can eliminate the third party involved in between. The author finally explains the hurdles in the widespread of technology, including the initial massive cost, concerns of hacking/attacks, and other security concerns.

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