CRYPTO-CURRNCY AND DATA CHAIN TECHNOLOY

INTRODUCTION

The block chain is one of the most big and important thing happening now in various sectors from
Finance to even healthcare. Before starting of with block chain, it is important to know a bit about how
wealth is created. We all have heard about Share market and somewhere, even though we don’t have
any idea about its working, the concept of share market amuses each and everyone. Share market is one
of the biggest sources of wealth creation. People invest money and they get monthly or yearly return on
them. This was all traditional till the crypto currency came into market; It changed the traditional source
of wealth creation. The First mention of crypto currency date backs to the year 1983, But a crypto
currency was only developed is the year of 2009 in the most now famous “Bit coin”, and credit for
which goes to SATOSHI NAKAMOTO,this is not real name ,its just identification name used by creators
of crypto currency .It would not be wrong to say that the reason we are having crypto currency and
block chain technology Is perceived shortcomings of the traditional banking system. Let me explain the
“Short comings “I am talking about. Earlier when anyone used to transfer money to another person
through bank, the bank used to take a load of tie to complete such transaction and much of time was
spend in verification of such transactions, thus there would be considerable delay in payments. The
banks here used to play role of inter mediatory in financial transactions. The development of Block chain
technology totally removed the dependency on middleman and Inter mediators.

WHAT IS CRYPTO CURRENCY?

Unlike real hard money ( Fiat currency system )which can be physically touched and transferred hand to
hand, The crypto-currency is a digitalized currency .This digitalized currency uses cryptography for
security and anti-counterfeiting measures. A crypto currency has a Public key and private key which are
often used to transfer crypto currency between two individuals. Since crypto currency are not inked to
a single country or Individual, its value is not and cannot be determined by any central bank. Just like
prices of gold, silver and other precious metals is determined by demand and supply, the value of
crypto-currency is too determined by its demand and supply in the market. By taking centralized bank
out of option, the crpto currency is totally decentralized currency. The biggest feature of crypto currency
and its allure is its organic Nature.The word "Crypto" refers to the fact that various encryption
algorithms and cryptographic techniques, such as elliptical curve encryption, public-private key pairs,
and hashing functions, are employed.

HOW DOES CRYPTO CURRENCY WORK?

Since we have a slight idea about what is crypto currency, let’s understand its working. To do that we
are going to see following things;

1. Ledgers

-Each and every crypto –currency has a ledger, where each and every transaction that
happens around the globe in form of crypto currency is recorded and is made public. This ensure
transparency and public visibility to all, thus ensuring “fair-play”
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2. Verification
a) What happens next is when next when a person buys or sells the crypto currency, The
transaction at first is “un-confirmed” which means it’s not verified. The transaction goes
to all public ledgers and when it is verified and recorded in the ledgers, it becomes
verified. Once confirmed, that particular transaction becomes part of record of historical
transactions in Block chain. The verification is carried out by crypto-currency miners
and added by them in public ledgers

b) The verification process in itself involves many algorithms and complex mathematical
problems which needs to be solved by miners .The source of crypto-mining is open ,
which means it can be solved by anyone within the web of crypto-mining. The crypto
miners after solving the algorithms and verifying it add it to their legers for which they
are paid rewards. For example:- Bit coin used to pay 50 BTC to crypto –miners on
successfully solving and verifying the transaction. Often this reward is halved in present
time.

WHAT IS BLOCK CHAIN TEACHNOLOGY?

The block chain technology is a form of decentralized and digital ledger which records all the transaction
happening between the people who transacts in the form of crypto currency.Everytime, anywhere, if
someone buys, sells or transfer any crypto-currency, that such transaction is recorded in form of Blocks,
this in simple term is Block-chain technology. There is no need of middleman or intermediately to
process and verify these transactions, no third party is required.

The leader created here gets multiplied thousands of time and is available to everyone. When any
transactions happen, this transaction gets updated in all the replicated ledgers.It should be duly noted
that Block chain technology can really be applied to not just a cyptocurrency like bitcoin, but to any
“asset” that can be stored, distributed or transacted – property titles, music, insurance, physical goods
and assets, even your data.This simply widens the scope of block chain technology.

Since, we now know a bit about crypto currency and block chain technology, Lets step into a slightly
deeper understanding of Block chain technology.

HOW DOES BLOCK CHAIN TEHNOLOGY WORK?

Working of block chain can be explained in following process,

1) When a person does any transaction in crypto-currency , it creates a “ Block” of that transaction
2) When such block is created , it is broadcasted to all the nodes of the network.
3) All the nodes when receive such block , validates and verify the transaction
4) When the transaction get verified, The block is added to the chain.
5) The transaction after getting verified , It is executed.

-THE TRANSACTION PROCESS IN BLOCK-CHAIN

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The security in block chain of all the transaction process is through “Keys”. The Keys are of two types
such as following’

i. Public keys
ii. Private keys

By holding a set of encrypted keys, the person gets an Unique Identification which no can break.

An individual who is doing transactions holds both the private and public keys. By combining the
public and private keys, this aspect of cryptography allows individuals to generate a secure
digital identity reference point. This secure identity is a major component of blockchain
technology. Together, a public and a private key generate a digital signature, which is a useful
tool for certifying and controlling ownership.Their is large number of individual in block chain
technology which verfifies these transaction

-THE CONFORMATION

Since we have an idea about what is validation in crypto currency lets look in dept about it,
since It is considered as an important aspect of block chain technology. Lets look at athe
illustration to understand it better,

Suppose two individual wish to conduct a transaction between them each with both the private
and public key. Then person A uses its Private Key to attach information regarding the
transaction to the public key of person B. This formation of technology forms a part of “Block’
In block chain technology, which contain digital signatures, time stamp , Name of the persons,
their account number etc. It is necessary to be remembered that this information like name and
account number is all in form of codes which is to ensure the identity of the persons doing the
transactions. This block then is sended to all the nodes of the network for verification and for
execution.

The wallet which is often called as E-wallet is your public key , which can be used by any
individual to search for you and your Private key is particularly used to carry out the
transactions. If any hacker or person gets hold of your private keys than he can do any
transaction and has access to all the transactions and can misuse your wallet, that’s why it is
important to keep your private keys safe. The private key also authorizes the transaction rlated
to your public keys.

Thus , the person A when sends crypto-currency to person B , The transactions include Person
A’s private keys and public keys to authorize the transactions and public key of person B which
will enable to find him.
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After the transaction, the system nodes will verify it, and it’ll get added to the ledger with the
help of a unique id and time frame.

-BLOCK OF CHAINS

Each block will then be added to the chain and it create the chains of all the blocks .Each block
being created gets previous history of the block it is being attached to nodes within the block
chain network act as components of the ledger system itself, maintaining a history of
transactions for each coin in that network by working to solve complicated mathematical
problems. These nodes serve to confirm or reject blocks representing bits of information about
transactions. If a majority of node operators arrive at the same solution to a problem, the block
is confirmed and it is added to the chain of blocks that exist before it. This new block is time
stamped and is likely to contain information about various aspects of past transactions1. (Reiff,
2018)

-POINTERS

In every program, there are pointers available which stores the address of another variable. In
general programming language they store data. They are called pointers because point to the
directions of another pointer

-LINKED LIST

Linked list is sequence of blocks, each of which contains data. It is sequence of data which is
directly linked to another Block through way of pointers. In the last block of the chain, pointer is
null .Those pointer which are inside the chain has address of the very next node of the block.

-TYPES OF BLOCK CHAIN

The block chain is of following type divided upon basis of their network

1. Private block chain

2. Public block chain
3. Federated block chain

-PUBLIC BLOCK CHAIN

As the name suggest, Public block chain is open source and it open for participation by
anyone, no permission is needed to participate I public block chain. Any transaction through
public block chain is validated for all. Everyone has full rights to download and run codes or

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run any public node from their recourses. Anyone can check their status and add a block to
the chain.

-PRIVATE BLOCK CHAIN

In private block chain, Individual with permission can manage the database and add a block
or neither can audit the transactions. Prior permission is needed by the Individual to
become member of private block chain. Private block chain are centralized thus risk of
security also high in these block chains.

-FEDERATED BLOCK CHAIN

This is called by another name “Consortium block chain”. In this too people don’t get access
to ledgers or any kind of verification process of transactions. Everyone does not have right
to read block chains. This may seems familiar to private block chains but in federated block
chains, a group of people operate the block chain and beside that, no one has permission to
operate. The privacy of transaction is better in this system. They handle it with great care.
Even their scalability is higher than public ones.
The group of its leaders controls all its consensus processes. It’s extremely fast. Generally,
the banking sectors use the Federated blockchains, or you can say the Consortium
blockchains.

ASPECTS OF BLOCK –CHAIN TECHNOLOGY

There are two important aspects of block chain technology, they are as follow:-

1) Decentralization
2)Immutability

- DECENTRALIZATION

The normal network we use is “Server-client “ type, in which there is centralized server
which responds to clients who askes it query. Since , full system is dependednd on the lone
server, it is ery critical for server to work all the time , genereally bottle-neck.Since server is
centralized , it handles a lot of critically important information related to the clients, thus in
case of hacking, a hacker targeting the server itself can provide acces to all the critical
information to the hacker.To counter this, a new kind of system evolved called as
decentralized server, in which server itself is divided among participents called “Peers”, thus
hacker if try to hack server of one peer they will not be able to get all the information thus
restrict them to particular server, and also making it easier to track where hacker attacked.
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- IMMUTABILITY

In block chain technology, immutability is something entered in to block chain cannot be

tampered with. Immutability is through cryptogenic hash functions In simple terms, hashing
means taking an input string of any length and giving out an output of a fixed length. In the
context of crypto currencies like bit coin, the transactions are taken as an input and run through
a hashing algorithm (bit coin uses SHA-256) which gives an output of a fixed length.

- AVALANCH EFFECT

An avalanche effect is special property of cryptogenic has function in which a small change to
the input of block chain, the changes of which will seen in has of the block. Even a change in
alphabet will change the entire hash of the block. As we have known before that blocks are
linked to each other, and each block have history of previous transaction of block before it, thus
if input of block D is changed , the hash of Block B will also be changed and subsequesntly will
change block A and rest of other blocks in the chain. A small change brings about avalanche in
hash of other blocks in the chain.

For example if a hacker tries to change input of one block, then it will change hash value of all
other blocks , thus changing whole of block chain.

ADVANTAGE OF BLOCK CHAIN TECHNOLOGY

a) Transaperancy
b) Durability & Longitivity
c) High quality data
d) Process Integrity
e) Faster transactions
f) Lower transactions cost
g) No goverement Intervention
h) Less chances of frauds
i) Instant transactions

-DISADVANTAGES OF BLOCK CHAIN TECHNOLOGIES

a) Crimes
b) Extremely volatile
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c) Signature verification
d) Redundency
e) Large energy consumptions
f) Costly setup
g) Integration concern

HOW DOES DATA- CHAIN TECHNOLOGY PREVENTS CRIME OF “DOUBLE-SPENDING”?

In crypto-currency market, the crime double-spending is well known. The double spending is a
crime I n which