ENRICHMENT REPORT
Blockchain Overview
What is Blockchain?
A decentralized, distributed ledger that stores transaction records across
multiple nodes in a secure, immutable, and transparent way.
Example:
Imagine a Google Sheet shared with multiple users. Each time a transaction
happens, the sheet updates, and everyone can see the latest version. However,
no one can delete or alter past records.
How Transactions Work?
Step 1: Transaction Creation
• A user sends Bitcoin (or any asset) to another user.
• The transaction is digitally signed using the sender’s private key.
• The transaction is broadcasted to the network.
Step 2: Validation (PoW or PoS)
• Nodes (computers) validate transactions using either:
o Proof of Work (PoW) → Solving complex puzzles (Bitcoin).
o Proof of Stake (PoS) → Validators are chosen based on their stake
(Ethereum 2.0).
Step 3: Block Formation & Mining
• Once validated, multiple transactions are grouped into a block.
• A miner/validator competes to solve the cryptographic puzzle by finding
the correct nonce that produces a hash with the required leading zeros
(Difficulty Target).
Step 4: Block is Added to the Chain
• The new block is linked to the previous block using the hash of the
previous block.
• This ensures immutability (if one block is altered, all following blocks
become invalid).
Example:
• Block 1: Hash = 00abc123...
• Block 2: Prev Hash = 00abc123... | New Hash = 00xyz456...
• Block 3: Prev Hash = 00xyz456... | New Hash = 00pqr789...
If Block 2 is tampered with, Block 3 will no longer match, breaking the chain.
How is Security Maintained?
Hashing (SHA-256 in Bitcoin) → Converts transaction data into a fixed-
length cryptographic hash.
Merkle Tree → Organizes transactions efficiently so any tampering is easily
detected.
Decentralization → No single point of failure (data is stored on thousands of
nodes).
Consensus Mechanisms → Ensures only valid transactions are added to the
chain.
Types of Blockchain:
1 Public Blockchain → Open to everyone (Bitcoin, Ethereum).
2 Private Blockchain → Controlled by one organization (Hyperledger Fabric).
3 Consortium Blockchain → Multiple organizations share control (Ripple).
4 Hybrid Blockchain → Combines features of public & private (Dragonchain).
Forks in Blockchain:
• Soft Fork → Minor updates, backward-compatible.
• Hard Fork → Major changes, not backward-compatible, creating a new
chain.
o Example: Bitcoin Cash forked from Bitcoin in 2017.
Real-World Applications Beyond Cryptocurrencies
✔Supply Chain Management → Tracks goods from production to delivery
(IBM Food Trust).
✔ Healthcare → Secures patient records.
✔ Voting Systems → Transparent elections.
✔ Smart Contracts → Automates legal agreements (Ethereum).
✔ NFTs (Non-Fungible Tokens) → Digital ownership (OpenSea,
CryptoPunks).
Example of Bitcoin Mining Process:
1 A miner gets a new block with transactions.
2 It tries different nonces until it finds a valid hash:
Block Data + Nonce 0 → Hash (x8gh2j3...) (Invalid)
Block Data + Nonce 1 → Hash (9fdl1o2...) (Invalid)
Block Data + Nonce 15829 → Hash (0000f3d...) (Valid - Has Leading 4 Zeros)
3 The miner broadcasts the block, and it gets added to the blockchain.
4 The miner receives a block reward (e.g., 6.25 BTC for Bitcoin).
