Austrian Association for the sustainable promotion of Distributed-Ledger-Technologies

In the simplest sense, a blockchain can be described as a data structure that contains transaction records while ensuring security, transparency, and decentralization. You can also think of it as a chain of records, which are stored in the form of blocks that are basically not controlled by any single entity.

A blockchain is a distributed ledger that is completely open to everyone on the network. Once information is stored in a blockchain, it is extremely difficult to change or delete it. Each transaction is secured with a digital signature that confirms its authenticity. Due to the use of encryption and digital signatures, the stored data is tamper-proof and cannot be changed.

Blockchain technology allows all network participants to reach an agreement, commonly referred to as consensus. All stored data is recorded digitally and has a common history that is available to all network participants. This eliminates the risk of fraudulent activity or duplicate transactions ("double spending") without the need for a third party.

A blockchain is a chain of blocks. These blocks can contain any type of data or information. A new block consists of the hash of the previous block and the new data. Together these form the hash for the next block.

The Hash

Ein Hash ist ein eindeutiger mathematischer Code, der zu einem bestimmten Block gehört. Wenn die Informationen im Block geändert werden, dann ändert sich auch der Hash des Blocks. Die Verbindung von Blöcken über eindeutige Hash-Schlüssel macht Blockchain Manipulations- und Fälschungssicher. A hash is a unique mathematical code that belongs to a specific block. If the information in the block is changed, the hash of the block also changes. The connection of blocks via unique hash keys makes blockchain tamper-proof and forgery-proof.

Transaction validation

Each transaction must be validated by a node on the network. In the Bitcoin blockchain, these nodes are called "miners" and use the concept of proof-of-work to process and validate transactions in the network. For a transaction to be valid, each block must refer to the hash of the previous block. The transaction only takes place if the hash is correct.

This ensures that the blockchain is immutable. Every change that is made to the block chain is reflected in the entire network, easily recognized and thus classified as invalid.

Decentralized

The basic idea is that each blockchain is managed in a decentralized manner. This means that no single person or group has control over the entire network. While everyone in the network has a copy of the distributed ledger, nobody can change it themselves. This unique function of the blockchain enables transparency and security.

Peer to Peer Transaction

The blockchain makes it possible for two parties to interact securely without them knowing each other and makes a third party, which normally serves as a guarantee of trust, obsolete. Since the entire network keeps an identical copy of the transactions and is also validated by the network, the question of trust does not arise for the second party, because this is checked by the network and ensures that everything is compliant with the rules.

Immutable and tamper-proof

The immutability property of a blockchain refers to the fact that data once written to the blockchain cannot be changed. If you try to change the data of a block, the entire subsequent blockchain has to be changed, as each block stores the hash of the previous block. A change in one hash results in a change in all subsequent hashes. It is extremely complicated and computationally expensive to change all hashes and would also require the consensus of the entire network. Therefore, the data stored in a blockchain are not susceptible to changes or hacker attacks due to their immutability and can therefore also be viewed as tamper-proof.

Although the blockchain has developed on many levels since its inception, there are two main categories in which it can mainly be classified:

* Public blockchain

* Private Blockchain

Both a public and a private blockchain have decentralized peer-to-peer networks. All participants in the network keep a copy of the shared ledger with them and verify each new transaction by consensus.

Public blockchain - This is a so-called "permissionless" blockchain, anyone who has access to the Internet can download and access it and become a node in the blockchain. Therefore, the control is incumbent on the general public. An example of a public blockchain is the Bitcoin blockchain.

Private Blockchain - In contrast to the public blockchain, the “permissioned” blockchain requires a permit or invitation to participate. Overall control of the network is in the hands of the owners. Private blockchains can be run independently of one another or integrated into other blockchains. These are typically used by businesses and organizations. Therefore, the level of trust required by the participants in private blockchains is higher.

The cryptocurrency

The first application was that of the cryptocurrency. The security that everyone only spends the amount they own and that they can be trusted without knowing them, makes the whole thing so revolutionary.

Smart Contracts

Smart contracts perform similar functions to paper-based agreements. The distinguishing feature of intelligent contracts is that they can be executed both digitally and personally. Self-executable means that if certain pre-determined conditions are met, these contracts are then automatically considered to be fulfilled and trigger an action.

Intellectual property protection

Digital content or information can be easily reproduced and distributed using the Internet. Because of this, people from all over the world have the opportunity to copy, replicate, and use them without giving credits to the actual producer of the content. There are copyright laws to protect such issues, but in the current scenario these laws are not adequately defined according to common global standards. With the help of blockchain technology, all copyrights can be saved in the form of intelligent contracts. Since blockchain is immutable, an entry that has once been stored in the blockchain cannot be changed or modified. The owner of the work has overall authority over ownership and distribution of the content.

Identity management

The world is becoming more digital every day. For example, if you want to conduct financial transactions online, you can easily access your money using your log-in details. In this case, however, no one can ensure the identity of the person moving the money. If someone compromises your username and password, they can do anything with your money. The need of the hour is to have a system that manages individual identification on the web. The distributed ledger technology used in blockchains gives you advanced methods of public-private encryption that you can use to prove your identity and digitize your documents. This unique secure identity can serve as your savior when conducting financial transactions or online interactions in a shared economy. In addition, the gap between different government agencies and private organizations can be closed by a universal online identity solution that blockchain can offer.