International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395-0056

Volume: 07 Issue: 07 | July 2020 www.irjet.net p-ISSN: 2395-0072

AN INTRODUCTION TO BLOCKCHAIN TECHNOLOGY

Haritha R1, Shyma Kareem2
1Student, Master of Computer Application, Department of CSE, Musaliar College of Engineering and Technology,
Pathanamthitta, Kerala, India
2Assistant. Professor, Department of CSE, Musaliar College of Engineering and Technology, Pathanamthitta,

Kerala, India
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Abstract - Blockchain is a technology that was born with the Besides the financial industry, we have also seen a significant
cryptocurrency Bitcoin and that can provide secure rise of interest in blockchain technology in other domains
communications, data privacy, resilience, and transparency. A [5], [6]. This interest has become evident in complex
blockchain acts as a distributed ledger-based on a chain of engineering domains such as energy and the Internet of
data blocks linked by hashes that allow for sharing Things (IoT). The key components of a blockchain system
information among peers that do not necessarily trust each include: 1) linked linear data structures to incrementally
other, thus providing a solution for the double-spending append data items (termed as transactions) in existing valid
problem. Such features have popularized blockchain in the last blockchains, 2) cryptographic algorithms to generate hash
years and it has already been suggested as a key technology. keys to anonymously access the data items on the
Blockchains are tamper-resistant digital ledgers implemented blockchain, 3) consensus algorithms to ensure the validity of
in a distributed fashion and usually without a central changes in already stored data, and 4) message passing
authority. In contrast with the conventional processes, in protocols to enable P2P communication over the underlying
Blockchain, there are multiple shared copies of an network. Blockchain technologies use a variety of consensus
equivalent database which makes it challenging to wage a algorithms such as proof-of-work [7], proof-of-stake [4].
data breach attack or cyber attack. Anything that is built on Comparing to traditional payment systems such as Visa,
the blockchain is by its very nature transparent and everyone PayPal, and so on; Bitcoin is very much time-consuming. But
involved is responsible for their actions. This technology has as blockchain works in a decentralized and distributed peer-
become the backbone of a new type of internet by allowing the to-peer network, it has no third-party involvement to control
distributed information. Originally devised for the digital over the assets of customers, and the powerful computers
currency, Bitcoin, (Buy Bit coin) the tech community has now involved in the mining process are contributing in securing
found other potential uses for the technology for different the blockchain bit by bit, the blockchain-based systems are
applications related to smart health, measuring systems, and considered as safe, secure and reliable. Furthermore, it also
logistics, e-voting, or smart factories. provides a tamper-proof ledger of technologies by
replicating the same copy of the blockchain in the overall
Key Words: Blockchain, Bitcoin, Peer to Peer Architecture, network. However, this security and elimination of third-
Public Key Cryptography, Hashing, Digital Signature, Merkle party involvement have to pay in terms of delayed
Tree, Consensus Protocol, Proof of Work, Proof of Stake. transactions for maybe a long period, currently, there are
thousands of transactions are pending in memory pool. To
1. INTRODUCTION overcome the latency issues still preserving the security and
discouraging third-party involvement, several platforms
In 2008 a pseudo name Satoshi Nakamoto introduced a have come into play. Most of those platforms are using
cryptocurrency Bitcoin [3]. Along with open-source Bitcoin blockchain technology by relaxing its time consuming and
software, the underlying technology Blockchain was also processing hungry PoW algorithm [10].
released later in 2009. Blockchain technology is showing a
significant potential to disrupt several information 1.1 Background
technology domains. With its biggest success, the Bitcoin
system, blockchain technology has drawn attention to its Blockchain is a public ledger to record all the transactions
distinct features, including decentralization, transparency over the peer-to-peer network, the transactions are waiting
and openness, immutability and tamper detection, for a specified time in the memory pool, which is a shared
provenance, peer-to-peer (P2P) transactions, smart memory space of all the nodes in the network to get bundled
contracts, incentive mechanisms, distributed ledger as a block. Once the block is generated it gets signed by
technology, correctness, support of cryptocurrencies, and cryptographic signature also known as a hash, blockchain in
threatening users from double-spending[1]. Any Bitcoin uses SHA256 (Secure Hash Algorithm) a
transactions are completely recorded in the public ledger in cryptographic hash function to secure the transactions [8].
a permanent and verifiable way. Blockchain technology has After block generation it is forwarded to the network, all of
massive potential to convert the working methodologies of the nodes of the blockchain network can participate in the
several industries and government organizations [2]. competition of mining the block to discover the correct hash

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key by iterating through different nonce each time. The address, (s)he is the only one capable of generating a
miner who successfully finds out the correct nonce transaction for this address via signing, thus spending the
broadcasts the nonce and block to the network as their Bitcoin value associated with this address. To avoid double-
Proof-of-Work (PoW), where the other nodes in the network spending of Bitcoins, the system adopts blockchain as the
verify the block by applying the received nonce, if the block public ledger.
is correct it is added to the main blockchain, and if not then it
is discarded, this verification process is known as Consensus 2. KEY ELEMENTS OF BLOCKCHAIN
[9]. The miner whose block is added to blockchain receives a
reward in terms of freshly released bitcoins for his efforts 2.1 Peer to Peer Architecture
[10]. The addition of a new block in blockchain works as a
data structure, where every new block is referenced to its A peer-to-peer (P2P) network is a group of computer systems
previous block. in which they can share information and resources. Instead of
having a central server to act as a shared drive, each
Once the block is added to the blockchain it is computer acts as the server for the files stored upon it. In
probabilistically impossible to edit or delete that block. In peer to peer architecture, all the autonomous and distributed
Bitcoin, every 10 minutes a new block is added to the system is aggregate in a large number of heterogonous nodes
blockchain, thus tampering with existing block requires called peers, which incorporate each other to fulfill some
incredible computation power to mine all the succeeding objectives. Blockchain technology works on the principle of
blocks before the addition of another new block. The mining P2P architecture which helps the technology to be more
operation is an expensive operation, in Bitcoin, the secure and efficient. Blockchain technology can be used in
complexity of the mathematical puzzle of generated hash is many industries but mostly used is ‘Cryptocurrencies’. A P2P
adjusted after every 2 weeks [11]. The addition of the latest network is a central point when it comes to doing a
hardware technologies to speed up the mining process has transaction within a blockchain. All the nodes can transact
increased the difficulty level of the mathematical puzzle so with each other in the blockchain. Now, all the P2P networks
that a normal computer would take more than a year to are decentralized and that is why blockchain is also known as
solve it, this is the reason why ASIC machines have come in decentralized applications. This characteristic makes
to play [12]. There are 144 blocks added every day in blockchain more secure and hard to hack or break into.
blockchain, the average number of transactions per block
depends on the number of transactions that can fit in 2 MB of
memory. A single transaction roughly requires 570 bytes,
which means the number of transactions is approximately
3500 per block [13].

1.2 Bitcoin Concept

Bitcoin is a digital currency and payment system introduced

by the pseudonymous Satoshi Nakamoto in 2008 [14]. The
system functions as a peer-to-peer decentred network in
which payments are sent directly between the parties
involved, instead of relying on central institutions to settle
payments. Bitcoin uses cryptographic proof to make this Fig -1: Peer to Peer Architecture
happen. Hence, Bitcoin is also considered to be a
cryptocurrency. 2.2 Public Key Cryptography
Each user in the Bitcoin network owns public and private Blockchain users interact securely with the blockchain by
key pairs. Bitcoin value is associated with a chain of leveraging public-key/asymmetric cryptography. Public-key
transactions in which each transaction consists of the private cryptography is also essential for the so-called wallets, which
key signature of the hash of the input transaction and the are private key containers that store files and simple data.
payee’s public key. If the payer wants to send these Bitcoins Thus, in a blockchain system each user has a wallet that is
to the payee owning a public/private key. To do so, the payer associated with at least a public address (usually a hash of the
takes the hash of the input transaction – proof that he/she user public key) and a private key that the user needs for
owns the Bitcoin value – and the public key of the payee. signing transactions. For instance, in blockchains like Bitcoin
He/she then hashes these values and signs the hash with its every transaction ends up being ’sent’ to the public address of
private key, thus creating a new transaction to the payee. the receiver and is signed with the private key of the sender.
The transaction consists of the hash of the input transaction, In order to spend bitcoins, their owner has to demonstrate
the output address, and the payer’s signature. Since only the the ownership of a private key. To verify the authenticity of
payer has the private key corresponding to the public the received currency, every entity that receives bitcoins

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verifies its digital signature by using the public key of the 2.4 Merkle Tree
sender.
2.3 Hash Function The cryptographic hash function employed by Bitcoin is the
SHA-256 algorithm. This stands for “Secure Hashing
Information security uses cryptography on several levels. The Algorithm”, whose output is a fixed 256 bits in length. The
information cannot be understood without a key to decrypt it. basic functions of Merkle trees in Bitcoin are to store, and
The information maintains its integrity during conversion eventually prune transactions in every block. Merkle trees
and while being stored. Cryptography also aids in are created by continuously hashing pairs of nodes until there
nonrepudiation. This means that the sender and the delivery is only one hash left (this hash is called the Root Hash, or the
of a message can be verified. Merkle Root. They are constructed from rock bottom up, from
Hash functions like SHA-256 is commonly used by hashes of individual transactions.
blockchains because they are easy to check, but really difficult
to forge, thus allowing the generation of digital signatures
that blockchain users need to authenticate themselves or
their data transactions in front of others. When a user sends a
secure message, a hash of the message is generated and
encrypted, and is sent along with the message. When the
message is received, the receiver decrypts the message and
hash value. Then, the receiver creates another hash from the
received message. If the two hashes are same, then a secure
transmission has occurred. This process ensures that the
message is not altered by an unauthorized end user.
Hash functions are also used by blockchains to link their
blocks (i.e., groups of transactions that are considered to
occur at the same time instant). Such blocks are linked in
chronological order, containing each block the hash of the Fig -2: Peer to Peer Architecture
previous block. Finally, it is worth mentioning that hash
functions are used in blockchains for generating user Four transactions in a block: A, B, C, and D. Each of those is
addresses (i.e., user public/private keys) or for shortening hashed, and therefore the hash stored in each leaf node,
the size of public addresses [16], [15]. leading to Hash A, B, C, and D. Consecutive pairs of leaf nodes
are then summarized in a parent node by hashing Hash A and
2.3 Digital Signature
Hash B, resulting in Hash AB, and separately hashing Hash C
and Hash D, resulting in Hash CD. The two hashes (Hash AB
Digital Signatures are used for authentication where private and Hash CD) are then hashed again to supply the basis Hash
key is used for signing and public key is used for verification. (the Merkle Root).This process are often conducted on larger
A blockchain usually makes use of public-key cryptosystems data sets, too: consecutive blocks are often hashed until
for securing information exchanges between parties by there's just one node at the highest . Hashing is typically
authenticating transactions through digital signatures. During conducted using the SHA-2 cryptographic hash function,
the signature process, the signer signs with a private key, though other functions also can be used. The Merkle Root
while the public key, which is shared publicly, is used to summarizes all of the info within the related transactions,
verify that the signature is valid. Thus, when a signing and is stored within the block header. It maintains the
algorithm is secure, it is guaranteed that only the person with integrity of the data. Using a Merkle tree allows for a fast and
a private key could have generated certain signature. Initially straightforward test of whether a selected transaction is
a message is signed with digital signature by sender before included within the set or not.
transmitting to recipient. It also contains hash of values to
detect illegal modifications by malicious human
intermediaries.

Digital Signature Algorithm (DSA) has been used for

transmission of electronic funds, interchange of data,
distribution of software, storage of data Digital signature’s
security depends upon the private key of the signer. Digital
signature consists of the signature generation and
verification algorithms. Comparing with the physical
signature, digital signature has the capability that, it cannot
be changed nor copied by someone else, and also the signers
of the signature cannot repudiate signature later.

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3. CORE COMPONENTS OF BLOCKCHAIN 4. WORKING

Fig -3: Component of Blockchain

1. Node

User or computer within the blockchain architecture

(each has an independent copy of the entire blockchain
ledger).

2. Block Fig -4: Working of Blockchain

A data structure used to keep a group of transactions When the individual transfer money the following things will
distributed to all nodes in the network. It includes data, happen:
block header, Time stamp (when block is created), version of 1. That request for the transaction first represents online to
blockchain, hash of the block, Merkle root, Proof of work that the block itself.
used to verify the block. 2. Once that information receives by the block then it again
sends to the parties of the users.
3. Chain 3. Once this request received by the parties it then analyzed
and approved by all the parties.
A sequence of blocks in a specific order. 4. After approval of request that new block can now officially
added to the chain.
4. Miners
5. After adding block money is transferred to the second
Specific nodes which perform the block verification process individual.
before adding anything to the blockchain structure.
4.1 Consensus Algorithm
5. Consensus
A consensus algorithm may be a procedure through
A set of rules and arrangements to carry out blockchain which all the peers of the Blockchain network reach a
operations. standard agreement about this state of the distributed
ledger. In this way, consensus algorithms achieve
reliability within the Blockchain network and establish
trust between unknown peers during a distributed
computing environment. Essentially, the consensus
protocol makes sure that each new block that's added to
the Blockchain is that the one and only version of the
reality that's prescribed by all the nodes in the
Blockchain. The Blockchain consensus protocol consists
of some specific objectives like coming to an agreement,
collaboration, co-operation, equal rights to each node,
and mandatory participation of every node in the
consensus process. Thus, a consensus algorithm aims at
finding a standard agreement that's a win for the
whole network. Consensus algorithm is the most important
factor of the entire blockchain system, for the reason that its
efficiency determines the blockchains performance directly.

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With the continuous development of blockchain technology, 4.1.2 Proof of Stake

the consensus algorithm is constantly adapting to the
emerging requirements from the earliest Proof of Work Proof of Stake (PoS) was firstly implemented by Sunny
(PoW) to the later Proof of Stake (PoS), Delegated Proof of King’s Peer coin and its mining difficult is adjusted based on
Stake (DPoS) [19], Practical Byzantine Fault Tolerance the number of stakes held by workers. Simply put, the more
(PBFT) [18] and some other improved consensus algorithms stakes you have, and the easier it is to generate the block.
such as Proof of Burn (PoB) [21], Proof of Activity PoS are an improved version of PoW, based on the
(PoA) [22], Proof of Luck (PoL) [20], and Stellar Consensus assumption that the people with more stakes will not attack
Protocol) (SCP) [23]. The computation cost, security and the network. Although PoS is more energy saving and
consensus efficiency of the above are different [17]. efficient than PoW, the assignment mechanism to generate
Performance of blockchain networks significantly relies on blocks is extremely unfair, for the reason that the assignment
the performance of the adopted consensus mechanisms, e.g., in PoS is based on the number of stakes the node
in terms of data consistency, speed of consensus finality, owning [24].
robustness to arbitrarily behaving nodes (i.e., Byzantine
nodes [25]) and network scalability. Compared with the 5. APPLICATIONS
classical Byzantine consensus protocols allowing very
limited network scalability [25], [26] 5.1 Internet of Things
4.1.1 Proof of Work The internet of things was by far the most popular
“application” field. IoT was initially discussed, with
Proof of Work (PoW) mechanism, first used for spam blockchains ability to leverage its user privacy protection
filtering, now is applied to achieve the consistency of node through public key anonymization which was identified as a
data in Bitcoin. And if a participant wants to generate and valuable resource for maintaining privacy in a future with
write a new block into the blockchain in the Bitcoin system, millions of interconnected devices sharing data and engaging
it must solve the puzzle of proof-of-work given by the in constant communication. Furthermore, the decentralized
blockchain network. PoW competes to generate blocks and immutable nature of the blockchain ledger allows IoT
through owning more computing resources than others. In based devices quick, easy and distributed access to the
order to add blocks to a blockchain, some proof of work has information while permitting constant contributions and
to be communicated. Bitcoin uses PoW concept as consensus additions to the data set from various parties due to the
mechanism, which scales over 1000 of nodes. PoW requires integral security of the information. Finally, smart contracts
the initiator to solve a puzzle, a mathematical or were found very valuable in allowing IoT devices to interact
cryptographic operation by brute forcing and to produce a directly with one another, helping further push the
value (also called wining value), which is less than a defined boundaries of automation and remove steps of human
one as set forth by the network. At times, more than one intervention from the process of communications and
node produces winning value at the same time to add block processing.
and thereafter ask for reward. This situation creates a fork
and is resolved by the network by analyzing the maximum
5.2 Energy
value of prove-of-work i.e. maximum work done by a node.
The update request by the node with minimum proof-of-
work is discarded. This way the consistency of state among Blockchain research on energy predominately focused on the
all nodes is ensured. PoW fits best for those networks that usefulness of blockchains decentralized nature in
requires scalability. Mostly permission less blockchains democratizing the energy supply and demand industry while
utilize PoW as they have authenticity of the participating accommodating a more scalable and flexible solution for the
node, as a result the network size becomes very large. It world with consumers alternating as providers on the
suffers from few drawbacks, it requires every node to invest energy grid. The blockchains privacy and anonymity features
huge amount in purchasing equipment used in the mining allow for the induction of multiple consumers and providers
process. It is more vulnerable to attack because of its open in the market and the creation of micro grids within the
nature. It supports very low transaction rate of only 7 per energy sector while preserving the data consumption and
second, which is far less as compared to Visa or Master card, pricing preferences of the individuals engaging in the
which offers 10000 transactions per second. In case of fork, transactions. Finally, smart contracts allow the energy sector
the transaction confirmation takes too much time. Beside it to automate and self-execute transactions between the
requires significant energy expenditure, and high latency; various participants, enabling machine to machine
however, to ensure safety of consensus process, the interactions and allowing government authorities to reliable
operation is quite acceptable. identify green energy sources and provide the appropriate
motivation incentives to their producers.

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5.3 Finance immutability will also allow for the creation of a proper
digital identity capable of removing the obligation of physical
In Finance, blockchains decentralized ledger allows for easy proof documents as the ledger will be trustable enough to
and convenient access to user’s financial information from confirm the information. The enhance privacy through
multiple locations while limiting the impact and loss of public/private keys will allow the government to more freely
wealth and information due to the shutdown or bankruptcy grant access to its data to other government agencies and
of a central authority. The decentralization also allows global research groups allowing for a better understanding of
currencies tied to international market values rather than current problems and proposals of solutions as needed. The
national banks and currency systems. Furthermore, the added privacy will also improve the voting process by
ability to anonymize transactions and maintain privacy providing regulators and the government access to all voting
allows for greater interaction between the various parties information but maintaining the private identity of the
within the financial system and facilitates the exchange of voters themselves. Smart contracts will help alleviate the
goods and services directly between individuals rather than bureaucratic process of government systems by simplifying
through businesses as the private identity is kept multi-step basic procedures thereby improving the overall
confidential while allowing a secure exchange. Smart efficiency and quality of services provided.
contracts allow the creation of level 3 ledgers capable of not
only executing certain financial contracts and commitments 5.6 Blockchain in Cloud – Outsourcing
but also automating the execution process and criteria given Blockchain solutions are adopted in cloud computing, such
preset conditions and values, thereby allowing a more as, in the author adopted blockchain for providing trusted
sustainable and flexible financial system. solution for outsourcing of services and for their customer’s
secure payment. Trust is a real concern in cloud computing
5.4 Healthcare adoption. However, by enabling blockchain underlying the
cloud services it will strengthen the outsourcing business
Blockchain is also suggested as a method to spur and grow and will get more customers. Similarly, in the author has
innovation in the healthcare sector, with the decentralization given more detailed analysis and results regarding the
of patient data allowing users immediate and quick access to trusted payment system among the users and outsourcing
their important medical information from anywhere in the service providers.
world rather than having to go through the service provider,
furthermore, the immutability of the ledger would allow 5.7 Vehicular Industry
patients and their health service providers to freely update
the ledger without concerns over data integrity and any Automobile industry is also adopting blockchain technology
party modifying the information for nefarious purposes. This due to its cutting edge benefits. Volkswagen has shown the
will also increase accountability in the medical field, as use of IOTA Tangle system for autonomous cars. BMW is
mistakes would not be hidden; in addition, the enhanced using blockchain technology for managing its asset and
privacy and anonymity of interaction within the blockchain logistics. BMW, Ford, Renault and General Motors are among
will strengthen doctor-patient confidentiality while also the 30 companies in Mobility Open Blockchain Initiative
allowing medical professionals open access to massive (MOBI) along with IBM, Bosch and Blockchain at Berkeley.
amounts of medical data previously walled off for privacy MOBI’s mission is to accelerate the adoption of blockchain
concerns. and to make sure that the industry is on the same page, not
only by changing the mode of transportation, but also
5.5 Government through use cases ranging from autonomous payment to ride
sharing .Toyota is investing in blockchain supply chain
Whether through aspects of eGovernment, digital identity, management since 2016 through R3CEV consortium.
voting or measuring instruments; governments stand to gain Renault working on its car passport system based on
significantly from the potential of blockchain applications. blockchain suggests Blockchain technology is also effective
Through the decentralization of the dataset, governments in tracking vehicles transporting goods. It will allow all
can expand and enhance the quality of their services by stakeholders involved in transporting process to check
removing the need for database administration and relevant data and status while providing traceability and
maintenance. It will also allow for proper digital voting as it transparency. However, in best of our knowledge there is no
solved the important problem of entrusting the voting data work so far which uses blockchain technology for vehicle life
in the hands of a single company or database with the cycle tracking. The authors of this paper are currently
motivation to manipulate the information. Decentralization working on a project related to implementing a blockchain
will also help better run measuring instruments and the data based prototype system for vehicle life cycle tracking in
they capture and run by removing the obstacle of costly Saudi Arabia. The project consists of designing and
computing and storage equipment and securing the implementing a complete life cycle of vehicle tracking,
information from manipulation through the blockchain, the starting from manufacturing, customs, registration,

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