Blockchain Generations

There are 3 generation of blockchain

First-Generations Blockchain: Bitcoin

In the first-gen blockchain – specifically Bitcoin – was created which is a digital currency.

By empowering people with the technology to transact with one another (at a peer-to-peer level),
they don’t need to rely on centralized entities such as banks.

Bitcoin is the first real use case of blockchain technology and its main purpose is as a financial
application , any user can send Bill digital money and there is security in that transaction.

Blockchain and bitcoin both have strong privacy because the transaction is anonymous and they can
take peace in knowing that the system is secure in the technology and the trust lies in the algorithm
and not a centralized figure.

Second Generation Blockchain : Ehereum

After Bitcoin’s success, it was time for the next generation of blockchain, which was brought
about by Ethereum. Second-generation blockchain technology does more than just document
transactions. Using self-executing agreements between two parties, called smart contracts,
transactions are faster and more secure than first-generation blockchain technology. Another
advantage of second-generation blockchain technology is that it acts more like a digital
ecosystem instead of a system only for transactions.

Here we get an impressive variety of functional uses including decentralized finance

(DeFi),gaming, supply chain management, web browsing etc.

Third-generation blockchain: Cardano/ Polkadot /Ethereum 2.0

Even though Bitcoin and Ethereum are successful in their own ways, they will run into some
issues in the future. As crypto is more readily adopted, the issue of scalability in blockchains
becomes more prevalent. When too many people make transactions at a given time, fees can
skyrocket and transactions take longer. With third-generation blockchains like Cardano and
Polkadot, they automatically scale with demand, leading to lower fees overall. Another issue
that third-generation blockchains solve is interoperability, or the sharing of data across different
blockchains. While this is still being worked on, the idea is that multiple blockchains will be able
to interact with each other.

Types of blockchain

There are four different major types of blockchain namely, public blockchain, private
blockchain, hybrid blockchain, consortium or federated blockchain.
Public blockchain:
These blockchains are completely open to following the idea of
decentralization. They don’t have any restrictions, anyone having a computer
and internet can participate in the network.
 As the name is public this blockchain is open to the public, which means
it is not owned by anyone.
 Anyone having internet and a computer with good hardware can
participate in this public blockchain.
 All the computer in the network hold the copy of other nodes or block
present in the network
 In this public blockchain, we can also perform verification of
transactions or records.

Advantage of public blockchain

[Link] blockchains are good, however anyone can join the public blockchain.
[Link] brings trust among the whole community of users.
[Link] blockchain requires no intermediaries to work.
[Link] blockchains are brings transparency to the whole network as the
available data is available for verification purposes.

Disadvantage of public blockchain

[Link] blockchain go through from a lack of transaction speed.

[Link] blockchain is less scalability.
Use cases.
The most common use case for public blockchains is mining and exchanging
cryptocurrencies like Bitcoin. However, it can also be used for creating a fixed
record with an auditable chain of custody, such as electronic notarization of
affidavits and public records of property ownership.
This type of blockchain is ideal for organizations that are built on transparency
and trust, such as social support groups or non-governmental organizations.
Because of the public nature of the network, private businesses will likely want to
steer clear.
Private Blockchain
These blockchains are not as decentralized as the public blockchain only
selected nodes can participate in the process, making it more secure than the
others.
 These are not as open as a public blockchain.
 They are open to some authorized users only.
 These blockchains are operated in a closed network.
 In this few people are allowed to participate in a network within a
company/organization.
 Private blockchain networks are deployed for voting, supply chain
management, digital identity, asset ownership etc.

Advantages of Private blockchain

The rate of the transaction is high, due to its small size. Verification of each
node is less time-consuming.
We can modify the scalability. The size of the network can be decided
manually.

Disadvantage of private blockchain

1. Trust building is one of the main disadvantages due to its central nature.
Organizations can use this for malpractices.
2. Since there are few nodes if nodes go offline the entire system of
blockchain can be endangered.

Use Cases: With proper security and maintenance, this blockchain is a great
asset to secure information without exposing it to the public eye. Therefore
companies use them for internal auditing, voting, and asset management. An
example of private blockchains is Hyperledger, Corda.

Consortium blockchain
A consortium blockchain is a semi decentralized type where more than one
organization manages a Blockchain network.
This is opposite to private blockchain where in which that is managed by only
a single organization but in consortium blockchain, more than one
organization and banks etc. It is also known as Federated Blockchain.
Consortium blockchain are typically used by government organizations and
banks etc..
Advantage of consortium blockchain
[Link] blockchains are more secure and have better scalability
[Link] offers better customizability and control over resources.
[Link] is also more efficient compared to public blockchain networks.
Disadvantage of consortium blockchain
[Link] blockchain is less transparent.
[Link] and restrictions can have a more impact on network
functionality.
Use Cases: It has high potential in businesses, banks, and other payment
processors. Food tracking of the organizations frequently collaborates with
their sectors making it a federated solution ideal for their use. Examples of
consortium Blockchain are Tendermint and Multichain.

Hybrid Blockchain
It is the mixed content of the private and public blockchain, where some part is
controlled by some organization and other makes are made visible as a public
blockchain.
 It is a combination of both public and private blockchain.
 Permission-based and permission less systems are used.
 User access information via smart contracts

Hybrid blockchain architecture is entirely customizable. The hybrid blockchain

members can decide who can participate in the blockchain or which
transaction are made public.

Advantage of hybrid blockchain

1. Rules can be changed according to the user’s needs.
2. works in a closed ecosystem without the need to make everything public.
3. hybrid offers good scalability compared to the public network.
Disadvantage of hybrid blockchain
1. Upgrading to the hybrid blockchain can be challenge.
2. not completely transparent.

Use Case: It provides a greater solution to the health care industry,

government, real estate, and financial companies. It provides a remedy where
data is to be accessed publicly but needs to be shielded privately. Examples
of Hybrid Blockchain are Ripple network and XRP token

Benefits and Limitations of Blockchain

The benefits of blockchain technology are given below
[Link] freedom and decentralization:
The entire blockchain network is a decentralized one as it gives every users its
digital [Link] is no central authority that controls all the other users in
the network. Every node is independent in functioning.

[Link] :
Blockchain technology is highly [Link] security method in the blockchain
is cryptography that ensures that hackers cannot change or tamper with the data
records
[Link] and trust
As blockchains are shared and everyone can see what is on the blockchain, this
allows the system to be transparent and as a result trust is established.
[Link] secure
All transactions on a blockchain are cryptographically secured and provide
integrity.
[Link] Processing: Blockchain technology speed of the transaction increased
to a very extent.

6. Low transaction cost : As there are no intermediaries in a transaction within

the blockchain network, the transaction cost are also lowered.
[Link] Data : One cannot change a data record or information that is
once stored or added as a block in the blockchain .the data in the blockchain is
immutable that is no one can make changes in it and it gets a permanent place
in the blockchain.

[Link]-based:The blockchain concept is entirely consensus-based, that is

for every transaction that takes place between nodes in a blockchain, a request
for its verification is sent to all the other [Link] all the nodes verify a
transaction, it goes into the memory pool to make a new block.

Limitations of blockchain

[Link] cost: the underlying cost of implementing blockchain technology is

huge. The transaction cost is also high.
[Link] : It is one of the biggest drawbacks of blockchain technology as it
cannot be scaled due to the fixed size of the block for storing information. The
block size is 1 MB due to which it can hold only a couple of transactions on a
single block.
[Link]: In blockchain one cannot make any modification/ updations to
any of the records. The data once written in a block can not be removed or
erased.
[Link] keys: To access the assets or the information stored by the user in the
blockchain, they need private keys. If a user who forgets its private key in
blockchain are eventually logged out of their wallet and no one can get it back .

[Link] Knowledge :Implementing and managing a blockchain project is

hard. It requires knowledge from the business to go through the whole process.

[Link]:There are multiple types of blockchain networks which work

differently, trying to solve the problem in their own unique way which leads to
interoperability issues where these chains are not able to communicate
effectively.

Challenges of blockchain

[Link]: Blockchains are having trouble effectively supporting a large

number of users on the network. There is need to increase capacity of
blockchain.
[Link] Perception: The biggest drawback in the way of the success of
Blockchain is the perception it holds in the eyes of people. Firstly, people don’t
see it be a part of mainstream functioning. Secondly, most of the people
believe that this technology will not last long. The feature like the lack of
governance, easy access to become a member of public Blockchain and lack of
regulation further deteriorates the image of Blockchain in the eyes of people.
All these factors contribute as challenges for the growth of this Technology.
[Link]: The blockchain maintains confidentiality to protect users from
hackers and hence provides privacy. But the blockchain network can be used
for illegal activities and trade purpose.
Users who make online transaction using blockchain are not given blockchain
network and newer cryptocurrencies are prone to 51%attackers.
[Link]: The blockchain technology does not come [Link] validate transactions
,bitcoin uses the proof of work (PoW) system.
The bitcoin requires appreciable amount of computational power to validate
transactions. This energy is far from free and costs money.
[Link]: The bitcoin blockchain is designed to be publicly visible. All the
information pertaining to a transaction is available for anyone to view. While
this feature may be important in some context it becomes a liability if
distributed ledgers are to be used in sensitive environments for example
government data or financial data.

Application /usage of blockchain

[Link]: Blockchain distributed-ledger architecture has the potential to
enhance security, speed and operational efficiency for banks in several
business areas such as payments, asset management, loyalty and loans.
[Link] storage: Cloud storage allows for decentralised storage and for that
reason are less prone to attacks which will cause systemic harm and extensive
data loss.
[Link]: Blockchain technology acts as the backbone of
cryptocurrency systems like bitcoin. Cryptography is an encrypted digital
currency that everyone can use as a medium of exchange in transactions.

[Link]: With the help of blockchaining, we can store information about

patients and drugs in a database securely. Doctor can access patient records
and history to analyze a case better at a given point to ensure proper
treatment.
[Link] Chain Management: with blockchain ,as products change hands in a
supply chain from manufacturing to sales, transaction can be documented in a
permanent decentralized register, which reduces delays, additional costs and
human errors.
6. Smart contract: Smart contracts in blockchain are digital, self-executable
contracts recorded and stored in a blockchain once created. A smart contract is
a programmed file containing all the terms and conditions of a contract
between two parties and it automatically executes itself once all the condition
are met.
Layered Architecture of blockchain Ecosystem

[Link] or Infrastructure Layer

Blcokchain technology based on the peer to peer network of computers that computes
transactions validates and stores them in an ordered form in a shared ledger. This results in
a distributed database that records all the data, transactions and various relevant
information. Blockchains are based on peer-to-peer information sharing. The network of
computers which contribute to the computing power of the blockchain form the hardware
layer
Computer in a peer to peer network is known as node. Nodes are accountable for validating
transactions , organizing them in to blocks, broadcasting them to the blockchain network
and it keeps on.
Reaching agreement the nodes commit the block to the blockchain network and update
their local ledger copy. When device gets connected to a blockchain network then it is used
as node.

2. Data Layer:
The next layer after the hardware layer is the data layer where details of transactions are
stored. The transaction stored on a block ( the fundamental unit of a blockchain) has details
of the crypto sent, the public key of the receiver and the private key of the sender. Each
block which has data is connected to the previous block and the next block which is
generated. Only the genesis block, the first block of the network, is connected forwards and
not backward.
Within each block, there is another data structure referred to as the Merkle tree which is a
binary tree of hashes. Each block has a root hash which is a combination of all transaction
hashes in the block.
The Merkle tree is what prevents transactions from being mutated because if they are the
hash changes. Hashing produces a fixed-length string that is unique for any input meaning if
even a single character in a transaction changes, the hash is bound to change making the
transaction invalid. If the transaction is invalid, so is the block. If a block is invalid it is
rejected by other nodes and it is not part of the chain.

[Link] Layer
The network layer also known as a peer-to-peer layer .It is responsible for inter-node
communication and also called propagation layer.

Network layer takes care of block propagation, transactions and [Link] layer
ensures that nodes can reveal each other and able to communicate synchrinize and
propagate with each other to maintain valid current state of the blockchain network.

There are two kinds of node i.e full node and ligh node. Full nodes guarantee that validation
and verification of transaction , enforcement of consensus rules and mining whereas light
nodes only keep the header of the blockchain and can send transaction.

[Link] layer:

Consensus layer is essential to the existence of blockchain platforms.

Consensus layer is responsible for validating the blocks, ordering the blocks and ensuring
everyone agrees on it.

Consensus layer create a definite set of agreements between nodes across the distributed
peer to peer network.

Consensus layer ensures that power remains distributed and decentralized.

[Link] Layer

Application layer is divided into two sublayer i.e application layer and execution layer.
Application layer comprise of the application that are used by end users to interact with the
blockchain network. E.g smart contracs, chain code and dApps etc for these applications
blockchain network is the backendand they connect via APIs.

Execution layer is the sublayer which consist of chaincode ,smart contracts and underlying
rules.

Application send instructions to execution layer which ensure the deterministic nature of
the block chain and performs the execution of transactions.
Components of blockchain
The main components of any blockchain ecosystem are given below.

Node Application

Node Application specify that every computer ,connected to the internet, if its wants to
participate in. Node application not free from any restriction for example in case of
Bankchain as a block ecosystem only banks are allowed to participate.

Distributed /shared Ledger(Database)

The distributed ledger means the shared databases and contents accessible to the
participants of a particular blockchain ecosystem.

The shared ledger lists down the rules or guidelines that need to be followed ,for example if
wr are running a bitcoin node application, then we have to follow by all the rules set down
in the program code of the bitcoin node application.

[Link] Algorithm

The consensus algorithm provides stability and security to the data in the blockchain. It is
represent the status of the network and how the nodes in the network arrive at an
agreement regarding what transactions to accept.

Also what protection used the blockchain from tampering is the fact that changing block can
be done only by making a new block from its predecessor and it also requires regenerating
all successors and redoing their contents.

It is to be noted that every block in the blockchain contains a hash of its predecessor
blockthus having a chain of blocks with enormous amount work contained them.

Core components of blockchain architecture:

[Link] is the smallest building block of a blockchain system (recodes ,information

ec)that serves as the purpose of the blockchain.

2. Block is a data structure used for keeping a set of transactions which is distributed to all
nodes in the network.

[Link] is a sequence of blocks in a specific order.

[Link] is a user or computer within the blockchain architecture ( each has an independent
copy of the whole blockchain ledger)

[Link] is a set of rules and arrangements to carry out blockchain operations.

[Link] are the specific nodes which perform the block verification process before adding
anything to the blockchain structure.
Cryptography
Cryptography in Blockchain is a type of internet security that is used to
provide security and helps users maintain data on the web providing
credibility and data security. Cryptography technologies make use of
mathematical codes for storing and transmitting data values in a more
secure format. To clearly understand the application of cryptography in
blockchain.

 Encryption is the process of encrypting the plaintext so that the

cipher text can be produced plaintext is transformed into cipher text
using the encryption algorithm .
 Decryption is the reverse of the encryption process. In this the cipher
text is converted back to the plaintext (original) using a decryption
algorithm.

 Key: A key is usually a number or set of numbers on which the cipher

oprates. Encryption and Decryption algorithms make use of a key to
encrypt to decrypt messages respectively.

 Cipher: The mathematical function, i.e. a cryptographic algorithm

which is used to convert plaintext to ciphertext(Random sequence of
bits).

Objectives and Goals of cryptography in blockchain

[Link] Confidentiality assures that private or confidential information

is not made available to unauthorized users.

2. Data integrity assures that information and programs are changed

only in a specified and authorized manner.

[Link] ensuring timely and reliable access to and use of

information

4. Authentication ensures to the receiver that the data received has

been sent only by an identified and verified sender.

Types of Cryptography

The two types of cryptography are:

 Symmetric-key cryptography.
 Asymmetric-key cryptography.
1. Symmetric key Cryptography: Symmetric cryptography is a simple form of
cryptography which uses a single key to encrypt and decrypt data. This key can be
anything ranging from a number to a word to a random string of characters . This
key is then used to encypt the data after which the data can get sent across a
network safely.
To decrypt the data the receiver needs the key(the same one that the sender used
to encrypt the data)

2. Asymmetric key Cryptography (popularly known as public key cryptography).

Blockchains are mainly use asymmetric cryptography, also known as public key
cryptography. Public key cryptography uses the keys in pair, public and private key.
Asymmetric cryptography uses these key- pairs in order to encrypt and decrypt data.
The public key is for encryption that can be distributed commonly, but the private
key is not share with anyone. Public key cryptography is mostly used between two
users or two servers in a secure way.