Blockchain Technology: Its History, Introduction to underlying Methods and Techniques

Introduction

The question of safety and security of data was a question mostly challenged by the critics of centralized systems. In centralized system, data is stored and transactions are executed in the presence of mediators. This gives the government an edge to control the transactions. Governments retain complete details and can trace whenever they want. Apart from its weaknesses, there are strengths too like providing security to funds if lost due to any inconvenience. However, an individual can never enjoy full freedom. Some rules and regulations must be followed by them. Evolution is indispensable. The growing popularity of Bitcoin raised questions about the centralized system. Technology of Blockchain is widely appreciated by those who want to enjoy full freedom related to their financial decisions. Blockchain technology varies in its applications. In this writing, we will explore the history of Blockchain, the cryptographic techniques employed in blockchain, the functionality of blockchain and its decentralization, the introduction to consensus mechanism, and the benefits and use of Blockchain Technology.

History of Blockchain: Cryptography an initial start

The history of Blockchain is not just limited to development of Bitcoin. Roots of Blockchain is dug deeply in cryptography. Cryptography enables the security of data from unauthorized access. For general understanding of cryptography, it is necessary to know that in cryptography, a normal or plain text is converted into a random sequence of bits, the process is called encryption, and its inverse process is called decryption. Modern cryptography evolved over centuries but we will look at its modern form which started after WWII.

• Modern concept of cryptography started with its mathematical foundation. For better secure communication, information theory of Claude Shannon provided a mathematical framework.
• One of pioneering development in cryptography was the Whitfield Diffie and Martin Hellman’s “New Directions in Cryptography”, which introduced the concept of asymmetric cryptography. It was done in 1970s. For encryption and decryption, both, public and private, keys were used.
• In 1977, after the development of asymmetric cryptography, RSA algorithm was introduced which was the first practical implementation of Public-key cryptography (asymmetric cryptography). This implementation of asymmetric was introduced by Rivest, Shamir, and Adleman. It was a turning point in the field of cryptography because of its adoption in variables, especially for better security of Digital Communication. After this, public-key cryptography evolved, and more algorithms develop with time.
• Here comes the work of Stuart Haber and W. Scott Stornetta, considered as one of the pioneering works in this field. Modern day Blockchain is based on the concept involved in their work. Their work “How to time-stamp a digital document” is considered as the first prototype of Blockchain technology. For preventing data from tempering, they employed Cryptographic Techniques in chain of blocks through Cryptographic hashing technique for security. Their work was limited to the timestamping of digital documents, but the concept of the security of the chain of blocks laid the foundation and create basis for Blockchain technology.
• Nick Szabo, a cryptographer, laid major contribution in the field of digital currency. In 1998, he proposed a phenomenal concept of bit gold and also known as conceptual predecessor of Bitcoin.
• Finally, comes the most famous Satoshi Nakamoto with its development of bitcoin. In 2008, a white paper was published by Satoshi Nakamoto, whether he is an individual or entity. The word “Chain of Blocks” was introduced in bitcoin’s whitepaper and a notion of decentralized Digital Currency was introduced in his paper. Blockchain technology is used to record transactions. The decentralized nature of Bitcoin, and Blockchain as technology captured the attention of investors and technology enthusiasts. First transaction of 10 Bitcoin is made in 2009 to Hall Finney, a computer Programmer and cryptographer. He was an early supporter of bitcoin.
• In 2014, other applications of Blockchain technology were explored and Blockchain 2.0 was introduced for other uses beyond currency.

This is a short background and history of cryptography. Evolution in this field led to its popularity and usage in different fields. The above used concept will be discussed in more detail on this website.

Introduction to Cryptographic Methods: Techniques and types

Data security is an important problem which cryptography solves. Security of data from unauthorized access is done by employing cryptographic techniques of Cryptography. Cryptography was an old method of developing secrecy of data. In general, cryptography contains encryption and decryption of text. In encryption, a normal text in converted into a cipher text or random sequences of bits. In decryption, reverse process of encryption is applied.

There two types of cryptographic methods are mostly used. These are: Symmetric-key Cryptography and Asymmetric key cryptography.

• Symmetric Cryptography, also known as Private-key Cryptography, is a method in which a single key is used for application. The same very key is used for both encryption and decryption. This is an old method, and its security features are criticized.
• Asymmetric Cryptography, also known as public-key cryptography, brings phenomenal change in the field of online payment. In this method, for encryption and decryption, public and private key is used. Algorithms are used to generate private key, and unique public key using same public key.
• Hash function is different from the previous two. It does not use key of any sort. It is a unique identifier of any content. By using hash function, a piece of text or data of any sort is transformed into specific cipher text of any length. This process is not encryption because it is nearly impossible to recollect the data from hashes. Hashing function does not require decryption of text. Data simply converted, through algorithm, an unreadable output. The generated output is called hash digest, hash value or code which is a unique identifier. In simple, hash function has no key and plain text is not recoverable from plain text.

These concepts played an important role in development of modern day “Blockchain” technology.

Introduction to Blockchain Technology

With the evolvement of cryptography, blockchain emerged as a new and special kind of database, also known as decentralized digital ledger. That is maintained and preserved through nodes (computers) around the world. The data is collected in blocks and secured with the methods of cryptography (especially the modern ones). Earliest model and conceptual predecessor of modern blockchain was the work of Stuart Haber and W. Scott Stornetta in which they discussed the security of digital document. With the development of Bitcoin, these concepts are used for maintaining record of cryptocurrency transaction. However, it can also be used for maintaining other records and data of various types. The use of blockchain is dynamic and more and more evolution will happen in this field.

Blockchain is a digital storage of data. So, the following will happen when user initiates transaction:

• After initiation of transaction, that transaction is transmitted to the network of computer (node).
• Transaction is verified by each node by verifying digital signatures and other transaction data.
• After the verification of transaction, it is added to the blocks with other verified transaction.

Consensus mechanism is used in verification and adding of transactions in blockchain, and cryptographic methods (public-key, hashing) are used in forming chain of blocks.

With its decentralized nature, consensus algorithms are used for verification of transaction. Algorithms used for verification depends on different mechanism used for verification known as Consensus Mechanism. Well known consensus mechanisms are: Proof of Work, and Proof of Stake. Although there are other types of it but our concern in this writing is limited to these two.

Proof of work is used by Bitcoin. This consensus mechanism uses mining process for the validation of transaction. In this process, miners compete to solve complex mathematical puzzles for the addition of new blocks. This first one with solution gets the right and adds new block to the chain. The same is rewarded with the cryptocurrency. The process is criticized because of its major drawback of excessive use of computational power and energy.

Proof of stake, on the other hand, is rather simple and more environment friendly. In this consensus process, investors with more coins, who are willing to stake, are selected as validators and participator of verification process. They are selected randomly for creation of new blocks and transaction verification. Validators are provided with the transaction fees as an incentive.

Conclusion

This writing is designed to make reader understand the general understanding about its history, cryptography, and how blockchain works when combined with the cryptography and consensus mechanism. This combination is evolution in promoting decentralization. The intention behind this writing is to build a general mindset about blockchain and what things are included in the process and functionality. A general understanding is indispensable when it comes to full understanding of anything.

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