Blockchain technology now attracts interest not only from technologists but also from national and organisational leaders. Readers interested in business or cryptocurrency over the past decade will probably have encountered the term. It is particularly familiar in the cryptocurrency world.
A blockchain is a ledger whose records are linked in sequence to resist alteration. Broadly, it is a system for protecting information against hacking, cheating and theft. More specifically, it is a digital ledger that communicates transactions across its network. Because records are distributed rather than controlled by one person, it is known as decentralised ledger technology. Transactions are stored using a cryptographic value called a hash. The source explains that unnoticed alteration would require changing very many network copies, making tampering impractical. Bitcoin and Ethereum use chains of blocks for security. This distributed digital ledger has the potential to transform the storage of value, record-keeping and technology.
The following introduction explains what blockchain is, how it works and how it can be used for different purposes.
What Is Blockchain Technology?
Simply put, a blockchain is a database. A database stores information electronically and provides ways to search and filter it. Spreadsheets generally serve individuals or small teams, while databases are designed for larger amounts of information that many users can view, filter and modify simultaneously. Large databases use powerful servers, which may be built from hundreds or thousands of computers to support concurrent access.
Although spreadsheets and databases can be accessible to many users, they are generally owned by a company and administered by someone with full authority over operations and data. A blockchain is described here as a timestamped series of immutable records: once a transaction or file is recorded, it cannot simply be changed. Multiple computers manage the network rather than a central entity. Cryptographic techniques protect the data. The article emphasises decentralisation, transparency and visibility of transactions to network participants, describing records as resistant to alteration, copying or deletion.
How Does Blockchain Work?
Consider a web-based spreadsheet such as Google Sheets shared with thousands of users, where everyone can see changes. Blockchain is much more complex, but this analogy helps introduce three concepts: blocks, miners and nodes.
Blocks
A block represents current activity while linking earlier and subsequent records. Once complete, it becomes a permanent part of the past and a basis for a new block. The process repeats, retaining the data. Each block contains transaction records and refers to earlier records, which users cannot simply modify. A chain consists of many blocks. The article describes three principal elements:
1.Data stored in the block.
2.A 32-bit nonce, generated when the block is created and used in producing the block header.
3.A 256-bit hash linked to the nonce, required to begin with a series of zeros in the mining example described.
When the first block is created, the nonce contributes to its cryptographic hash. Once mined, the block’s data is validated and associated permanently with its nonce and hash.
Miners
Mining is the process of adding new blocks. Each block has its own hash and nonce and refers to the preceding block’s hash. Mining can be difficult, especially in large chains. Miners use specialised software to solve the mathematical problem of finding an acceptable hash. The source describes a 256-bit hash and 32-bit nonce, with nearly four billion nonce–hash combinations potentially examined before finding a valid one.
Finding this “golden nonce” allows a block to be added. Modifying an earlier block would require re-mining it and the subsequent chain, explaining why manipulation is difficult.
This can be viewed as “safety in mathematics”, because the search takes time and computing resources. After successful mining, network nodes validate the block and the miner receives a reward.
Nodes
Decentralisation is central to blockchain. No single computer or organisation owns the chain; the ledger is distributed through its nodes.
These devices retain copies of the blockchain and operate the network. Newly mined blocks must be accepted algorithmically to update and validate the chain. Transparency makes transactions verifiable, and each user has a distinct alphanumeric identifier. Blockchain therefore offers a technological approach to trust that attracts interest in business, administration, finance and manufacturing.
Consensus in Blockchain Systems
Consensus mechanisms coordinate nodes and validate transactions, allowing a network to produce its intended results with available resources. They keep participants in agreement and ensure transactions are checked. The article introduces eight approaches.
1.Proof of Work
Proof of Work (PoW), commonly associated with mining, requires substantial computing power. Miner nodes may use GPUs, CPUs, FPGAs, ASICs or other technologies. The first miner to solve the mathematical puzzle obtains the block. Trial and error make greater computing power useful for finding solutions quickly.
2.Proof of Stake
Proof of Stake (PoS) uses a defined process to select who can produce the next block. Participants lock tokens to become validators. Selection depends on the blockchain’s design; the amount or duration of a stake may influence the chance of creating a block.
3.Delegated Proof of Stake
Participants’ staked coins determine their voting weight. If X stakes 20 coins for a delegate and Y stakes two, X has more voting power. Delegates receiving the most votes can produce new blocks and receive transaction fees or cryptocurrency rewards.
4.Proof of Elapsed Time
This mechanism assigns random waiting periods and selects a block producer fairly according to when the waiting period expires. The design described prevents one participant from operating many nodes simultaneously and relies on genuinely random waiting times.
5.Proof of Capacity
Complex mathematical solutions are stored on devices such as hard disks through a process called plotting. The stored solutions are then used to create blocks. The participant who finds the required solution first creates the next block; greater storage capacity increases that opportunity.
6.Proof of Identity
Proof of Identity compares a participant’s private key with verified identity information, linking the key and a transaction cryptographically. The article describes participants creating or viewing data blocks while identity verification supports authenticity and integrity. Smart cities may use such mechanisms to establish residents’ identities.
7.Proof of Authority
Proof of Authority adapts the staking concept by relying on verified validators’ identities and reputations. Official documents establish identity, and authorised nodes produce blocks. Validators put their reputations at stake, giving them an incentive to maintain network security.
8.Proof of Activity
Proof of Activity combines Proof of Work and Proof of Stake. Miners solve puzzles, initially producing templates containing a reward address and header information. Randomly selected validators sign the block; those with larger stakes have a greater chance of selection. A signed block joins the chain. If sufficient validators do not sign, another block is used. The successful miner shares network fees with validators.
Blockchain Applications
Banking
Blockchain can provide a secure, tamper-resistant transaction trail for international payments. In April 2018, Santander launched Santander One Pay FX, using Ripple’s technology for same-day or next-day international transfers. The article describes automation and fewer intermediaries as ways to speed payments and lower costs. Banks and customers can benefit from reduced manual settlement work.
Anti-Money-Laundering Controls
Encryption and record-keeping can support anti-money-laundering work, including Know Your Customer (KYC) processes used to establish and verify customers’ identities.
Supply Chain Management
An immutable ledger can track goods and events throughout a supply chain. It provides a shared record of where products originated and how they moved. Coffee, for example, can be traced to its farm. A consumer buying Myanmar’s Sein Ta Lone mangoes exported to Australia could scan a QR code to see the farm on a map, the harvesting date and subsequent handling stages. Such records help investigate food safety for products ranging from fruit to sausages. Unlike an ordinary database whose entries an operator can edit, the blockchain model described preserves records as entered at their original time and supports quick enquiries.
Government Record Management
National, state and local governments maintain records of births, deaths, marital status and property transfers. Managing them can be difficult, particularly when records remain on paper and citizens must visit offices to make changes. Blockchain could make information more secure and simplify record management.
Voting
The article proposes blockchain as a possible way to strengthen voting security. Compromising one terminal would not automatically change other nodes’ records. Linking votes to verified identifiers is presented as a way to support accurate counting and resist fabricated identities.
Real Estate
The source cites frequent property sales and moves as reasons blockchain could assist the property market. Faster financial checks, encryption to reduce fraud and clearer transaction histories could make the process more efficient and transparent.
Decentralised Finance
DeFi refers to financial products on decentralised public blockchain networks, reducing reliance on brokers or banks. The article contrasts this model with conventional accounts requiring an address, government documents or identification. Blockchain software can act as an intermediary between borrowers, buyers, lenders and sellers in peer-to-peer transactions.
Decentralised exchanges (DEXs) allow users to trade cryptocurrencies directly without entrusting funds to an intermediary. Stablecoins link their value to assets such as the euro or Canadian dollar to seek price stability. Lending platforms use smart contracts to perform functions traditionally handled by banks.
What Comes Next for Blockchain?
Applications are already being developed and researched. Blockchain has gained recognition for its potential technical benefits and remains a prominent topic among technology enthusiasts. It may help businesses and governments develop more accurate, efficient, secure and cost-effective services.
Hein Min Latt (Pyinmana)
References
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Atzori, M., & Ph, D. (2015). Blockchain Technology and Decentralized Governance: Is the State Still Necessary?
Cachin, C. (2016). The architecture of the Hyperledger Blockchain Fabric.
Czepluch, J. S., & Malone, S. (2016). Blockchain – The Gateway to Trust-Free Cryptographic Transactions.
Damsika, A., Ranasinghe, D., & Kulkarni, D. (2013). A novel mechanism for secure e-tendering in an open electronic network. Proceedings of the 8th International Conference on Computer Science and Education, ICCSE 2013, 545–550. https://doi.org/10.1109/ICCSE.2013.6553970.