1.1 Overview of Blockchain: Blockchain and Its Importance

Blockchain and Its Importance

Define Blockchain

Blockchain is a decentralized ledger of all transactions across a peer-to-peer network. The technology enables bitcoin and is applied to many business processes. It not only performs transactions but also ensures the anonymity and security of users.

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Why is blockchain important?

Blockchain can operate in a peer-to-peer fashion with zero intervention from third parties.

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What are the drawbacks of the current banking system?

• High Transaction Cost
• Account Hacking
• Net Frauds
• Financial Crisis

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What features of blockchain can be the solution and alternative to using banks?

• Decentralized system
• Distributed ledger
• Incentives of Validation
• Consensus Algorithm
• Cryptography of Algorithm

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Block Creation

What are the parts of a blockchain block structure?

Header: contains the version information, nonce, previous block id, and timestamp.

Merkle: a hash built from the block's transaction identifiers.

List of Records: an identification of hashes that were included in the block's Merkle tree.

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What are the two types of blockchain identifiers?

• Block Header
• Block Height

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What is a Block Header?

The primary identifier of a block Digital fingerprint that is twice the size of a block header Unique identification of a block of 32-byte hash

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What is Block Height?

Position of the block in Blockchain The first digit is of height 0 Each node dynamically identifies a block

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Define Blockchain Merkle Tree

The data structure is used for summarizing and verifying the integrity of large sets of data. It is also known as the Binary Hash Tree.

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Advantages of Merkle Tree

Less memory is required Proofs are computed quickly and easily Less information is required Integrity Provides validation of data

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Define Distributed Ledger

Ledgers store the copy of transactions that have happened. Every single person in the network has a copy of the ledger.

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