Blockchain

A blockchain is a distributed ledger that connects a decentralized network on which users can send transactions and build applications without the need for a central authority or server. It is a continuously growing list of records, called blocks, which are linked and secured using cryptography. As of 2022, there are more than 10,000 active cryptocurrencies based on blockchain, with several hundred more non-cryptocurrency blockchains.

Early Beginnings & Bitcoin Development
The first work on a cryptographically secured chain of blocks was described in 1991 by Stuart Haber and W. Scott Stornetta. In 1992, Bayer, Haber, and Stornetta incorporated Merkle trees into the blockchain as an efficiency improvement to be able to collect several documents into one block. In 1993, Proof-of-Work (PoW) mechanism was proposed to protect against spam and other network failures.

In 2004 Hal Finney, a computer scientist and cryptography expert developed a system known as RPoW (Reusable Proof of Work). The system created a transferrable verified and signed (RSA) token by receiving a non-exchangeable (or non-fungible) hash cash based on a proof-of-work (PoW) token.

The first distributed blockchain was then conceptualized by an anonymous person or group known as Satoshi Nakamoto in 2008 and implemented the following year as a core component of the digital currency bitcoin, which served as the public ledger for all transactions. Through the use of a peer-to-peer network and a distributed timestamping server, a blockchain database is managed autonomously. The use of the blockchain for bitcoin made it the first digital currency to solve the double spending problem without requiring a trusted administrator.

The words block and chain were used separately in Satoshi Nakamoto's original paper in October 2008, and when the term moved into wider use it was originally blocked chain, before becoming a single word, blockchain, by 2016.

Blockchain 2.0: Ethereum Development
Around 2013, Vitalik Buterin, who was one of the first contributors to the Bitcoin codebase, felt Bitcoin didn't use the full capabilities of blockchain technology. He started working on his own project and Ethereum was born out as a new public blockchain in 2014 with added functionalities compared to Bitcoin. Buterin differentiated Ethereum from Bitcoin blockchain by expanding Ethereum functionalities from being a cryptocurrency to being a platform for developing decentralized applications as well. Ethereum featured a scripting functionality, called smart contracts which are programs or scripts that can be used to make a transaction if certain conditions are met. Smart contracts are written in specific programming languages and compiled into bytecode, which a decentralized Turing-complete virtual machine, called the Ethereum virtual machine (EVM) can then read and execute. It allowed programmers around the world to develop decentralized applications and software on the existing blockchain platforms. Soon, the industry saw a surge in growth in decentralized autonomous organizations (DAOs), redeemable tokens for ICOs or governance controls, and identifiers for unique items such as NFTs (non-fungible tokens). Examples of applications and platforms of this blockchain generation include crypto platforms such as Lisk, and Neo, dApps like MakerDAO and Uniswap, and crypto wallets like MetaMask.

Blockchain 3.0
Blockchain 3.0 technology increases the transaction processing rate and eliminates block times. As a result, newer blockchain platforms, such as Solana and Avalanche, can execute several thousand transactions every second, which is higher than Bitcoin and Ethereum do. Another significant change that the third-generation blockchains introduced is the popularization of the proof-of-stake (PoS) model. This consensus mechanism eliminated the use of highly-complex computing devices and the enormous energy consumption required to create new blocks. Examples of Blockchain 3.0 technology include Chainlink and Algorand.

Overview
A blockchain facilitates secure online transactions. A blockchain is a decentralized and distributed digital ledger that is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network. This allows the participants to verify and audit transactions inexpensively.

Transactions or codes are batched into blocks, verified, and subsequently accepted as part of the blockchain by a network of distributed users (nodes) through a consensus mechanism. Because each block of verified data contains a unique signature of data from the previous block, they are linked together into a "block-chain." A network-based consensus mechanism is a way a blockchain protocol agrees on how its underlying technical architecture will operate. Some blockchains create a new block as frequently as every five seconds.

Features

 * Transparency: The blockchain is transparent. All users have access to and may see the information in blockchains, which cannot be changed. In addition to building trust, this will lower risk and fraud.
 * Faster processes: Transactions on blockchains are fast and easy. Blockchain enables quicker transactions that are not constrained by business hours and can accelerate the execution of multi-party processes.
 * Fewer intermediaries: Due to the real peer-to-peer nature of the blockchain, there will be less need for some sort of third-party intermediaries. Processes become more effective as a result, and there are also fewer chances for data entry mistakes and transaction costs.
 * Data privacy: Data on the blockchain is stored privately. The data itself is converted into a series of letters and numbers using a hash code, but it is verified and added to the blockchain by a consensus process. Without a key, network participants are unable to translate such data.

Hard Forks
A hard fork term refers to a situation when a blockchain splits into two separate chains as a consequence of the use of two distinct sets of rules trying to govern the system. These rules create certain parameters and standards for mining, staking, node connections, transaction specifics, and more that must be adhered to by all participants. So there appr]ears two networks running in parallel. All nodes had an identical blockchain until the point of the fork (and that history remains), but they have different blocks and transactions afterward.

Cryptocurrencies like Bitcoin Cash and Bitcoin Gold evolved out of the original Bitcoin blockchain via a hard fork.

In October 2022, BNB Chain, the smart contract-enabled blockchain of crypto exchange Binance, underwent a hard fork upgrade named Moran as a fix for the exploit that happened the same month.

Soft Fork
A soft fork is a rule modification to the blockchain whereby newly implemented changes remain backward-compatible with older versions. A soft fork convinces the old blockchain network to accept the altered rules, thus allowing both the upgraded and old blocks of transactions to be accepted at the same moment.

Public Blockchain
Public blockchain involves no gatekeeper, and anybody can engage with the consensus mechanism. This means that applications can be added to the network without the approval or trust of others, using the blockchain as a transport layer. Anyone can read, write, and audit the ongoing activities on a public blockchain network, which helps achieve a self-governed, decentralized nature. For example, Ethereum is one of the public blockchain platforms examples.

Private Blockchain
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 ledger. A private blockchain can be run behind a corporate firewall and even hosted on-premises.

Permissioned Blockchain
Permissioned blockchains are blockchain networks that require access to be part of. In these blockchain types, a control layer runs on top of the blockchain that governs the actions performed by the allowed participants. A permissioned system makes networks highly by the owners.

Consortium
The consortium blockchain blends elements from both public and private chains, bridging the gap between them. In a consortium chain, a few equally strong parties serve as validators as opposed to an open system where anybody can validate blocks or in a closed system where only a single company selects block producers.

Mining (Proof-of-Work)
Mining is the process of adding transactional details to the present digital/public ledger. Proof of work is a consensus mechanism cryptocurrencies use to verify new transactions, add them to the blockchain, and create new tokens. The most widely used consensus algorithm is by far mining. A Proof of Work (PoW) algorithm is used in mining. Users must sacrifice their processing power in order to attempt to solve a problem that the protocol has set forth.

Proof-of-work blockchains are secured and verified by virtual miners around the world racing to be the first to solve a math puzzle. The winner gets to update the blockchain with the latest verified transactions and is rewarded by the network with a predetermined amount of crypto.

All of the other nodes utilize a fresh block that a miner transmits to the rest of the network as the input to a hash function. To confirm that the block complies with blockchain regulations, they only need to run it once. If it isn't, the miner won't get paid and their electricity will have been wasted in vain.

The Bitcoin blockchain was the first Proof of Work network. Since its inception, the PoW mechanism has been used by numerous additional blockchains.

Staking (Proof of Stake)
In a proof of stake system, staking serves a similar function to proof of work’s mining, in that it’s the process by which a network participant gets selected to add the latest batch of transactions to the blockchain and earn some crypto in exchange.

There are no outside expenses with Proof of Stake (PoS). They include validators that suggest blocks in place of miners. They can generate new blocks using a standard computer, but they must risk a large percentage of their resources to do so. Each protocol's regulations specify how much of the native cryptocurrency of the blockchain must be used for staking.

Although there are numerous implementations and variations, once a validator stakes their units, the protocol can choose them at random to announce the next block. They'll get rewarded if they complete it correctly. Alternately, if many validators concur on the following block, a reward is given out in proportion to the stakes that each validator has contributed.