Top Blockchain Interview Questions and Answers-(2024)

1 .

A Blockchain is a constantly growing ledger(file) that keeps a permanent record of all the transactions that have taken place, in a secure, chronological, and immutable way. It can be used for the secure transfer of money, property, contracts, etc. without requiring a third-party intermediary like bank or government.

Blockchain is the backbone of the most famous cryptocurrency named Bitcoin. It is a peer to peer electronic cash system and a decentralized network which allows users to make transactions directly without the involvement of third-party to manage the exchange of funds.

Let's breakdown the definition :

Ledger : It is a file that is constantly growing.

Permanent : It means once the transaction goes inside a blockchain, you can put up it permanently in the ledger.

Secure : Blockchain placed information in a secure way. It uses very advanced cryptography to make sure that the information is locked inside the blockchain.

Chronological : Chronological means every transaction happens after the previous one.

Immutable : It means as you build all the transaction onto the blockchain, this ledger can never be changed.

A blockchain is a chain of blocks which contain information. Each block records all of the recent transactions, and once completed goes into the blockchain as a permanent database. Each time a block gets completed, a new block is generated..

2 .

What are 'blocks' in Blockchain?

A Blockchain comprises of many blocks consisting of financial transaction information. Each block has a timestamp, the transaction data, and a unique hash pointer that acts as a link between it and the block immediately before it. Together, all blocks combine to form a Blockchain.

3 .

What is Blockchain 'encryption'?

Blockchain assures a safe and secure ecosystem for data, and that it does through encryption. Essentially, encryption is the process where data is encoded or altered slightly before a user sends it out of a network. This ensures data safety and security since only the sender and receiver know the key to decode the encrypted code.

4 .

What are the two types of records present in a Blockchain database?

A Blockchain database has two types of records :

* Block records

* Transactional records.

Both of these records are easily accessible, and they can even be integrated with each other.

5 .

What are the key features of Blockchain?

The central characteristics of Blockchain are :

* Decentralized Systems

* Distributed ledger

* Safer & Secure Ecosystem

* Fast

* Low Transaction Fees

* Fault-Tolerant

* Minting

6 .

Why is Blockchain a trusted approach?

* Blockchain can be trusted due to so many reasons.

* Its compatibility with other business applications due to its open-source nature.

* Its security. As it was meant for online transactions, the developers have paid special attention to keeping up the pace when it comes to its security.

* It really doesn’t matter what type of business one owns, Blockchain can easily be considered.

7 .

What do you mean by blocks in blockchain technology?

Blockchain consists of a list of records. Such records are stored in blocks. These blocks are in turn linked with other blocks and hence constitute a chain called Blockchain.

Blockchain Blocks

8 .

How does a block is recognized in the Blockchain approach?

Every block in this online ledger basically consists of a hash pointer which acts as a link to the block which is prior to it, transaction data and in fact a stamp of time.

9 .

Is it possible to modify the data once it is written in a block?

No, it’s not possible to do so. In case any modification is required, the organization simply has to erase the information from all other blocks too. It is because of no other reason than this, data must be given the extreme care of while using this approach.

10 .

What is 'blind signature' and why is it used?

Blind Signature is a digital signature wherein all the information pertaining to a contract is made blind before it is actually agreed upon and sealed with a sign. This approach is a crucial component of cryptography and is mainly used for privacy-related protocols (for example, digital cash scheme) where the author and the signing parties are different.

11 .

Explain 'secret sharing'.

Secret Sharing is a method dedicated to protecting data integrity in Blockchain. In this method, the information or data is divided into different units and then transferred to the users on the Blockchain network. To complete the entire information, users who received the chunks of broken information must agree to share their pieces of information and combine them together.

12 .

Mention the steps involved in Blockchain project implementation.

In a Blockchain project implementation, there are a total of six steps :

* Requirement identification

* Screen ideas consideration

* Project development for Blockchain

* Feasible study on the security

* Implementation

* Controlling and monitoring the project

13 .

What exactly do you know about the security of a block?

Well, a block or the entire blockchain is protected by a strong cryptographic hash algorithm. Each block has a unique hash pointer. Any modification in the block constituents will result in the change in the hash identifier of the block. Therefore, it offers an excellent level of security. Thus, one needs not to worry about the safety as well as the security of data that is present in a block.

14 .

What is the difference between Bitcoin blockchain and Ethereum blockchain?

We can see the basic differences between Bitcoin blockchain and Ethereum blockchain in the below table.


Points	Bitcoin Blockchain	Ethereum Blockchain
Founder	Satoshi Nakamoto	Vitalik Buterin
Release Date	9 Jan 2008	30 July 2015
Release Method	Genesis Block Mined	Presale
Usage	Digital Currency	Smart Contracts
Cryptocurrency	Used	Bitcoin Ether
Algorithm	SHA-256	Ethash
Blocks Time	10 minutes	12-14 seconds
Scalable	Not yet	Yes

15 .

How does Blockchain differ from relational databases?

The blockchain differs from the relational database in the following ways.


Points	Blockchain	Relational Database
Unit of data	Block	Table
Failure	None	Can happen
Centralized Control	No	Yes
Modification in data	Not Possible	Possible
Single Point of Failure	Does not exist	Exists

16 .

Some of the popular platforms for developing blockchain are:

* Ethereum

* Hyperledger Sawtooth

* Quorum

* Ripple

* R3 Corda

* Qtum

* IOTA

* EOS
* ConsenSys Quorum

* Stellar

* Tezos

* IBM Blockchain

* Hyperledger Fabric etc,.

17 .

What are the major elements of a block?

The following are the major elements of a block :

* A hash pointer to the previous block

* Timestamp

* List of transactions

18 .

Is it possible to remove one or more blocks from the networks in blockchain?

Yes, it is possible. Sometimes, only a particular portion of this online ledger needs to be considered. By using default filters and options, we can remove the blocks.

19 .

What are ledgers and name the common types of ledgers that are considered by users in blockchain?

A ledger is a file that is growing continuously. It stores the permanent record of all the transactions taking place between the two parties on the blockchain network.

The common types of ledgers considered by the users in the Blockchain are as follows :

* Centralized Ledgers

* Decentralized Ledgers

* Distributed Ledgers

20 .

What is the difference between public and private keys?

In the blockchain, public keys are required for identification and private keys are used for encryption and authentication purposes.

The sender can send a message using the public key of the receiver and the receiver can decrypt the message or the transaction using a private key. By using both keys, communication or transaction is kept safe and tamper-proof.

21 .

What is encryption and what is its role in blockchain?

Encryption is one of the methods of data security that helps organizations keep their data secure. In encryption, any type of data can be converted from a readable format to an encrypted version and can only be decoded by another entity who actually has access to the decrypted key.

In the blockchain, this approach is useful as it adds more to the overall security and authenticity of blocks and keeps them secure.

22 .

What is the consensus algorithm?

A consensus algorithm is a method through which all the peers of the blockchain network reach a standard agreement of the present state of a distributed ledger.

It achieves high reliability and establishes trust between unknown peers in the distributed computing environment.

23 .

What are the types of consensus algorithms?

The most popular consensus algorithms available are listed below :

* Proof-of-Work(PoW)

* Proof-of-Capacity (PoC)

* Proof-of-Activity (PoA)

* Delegated Proof-of-Stake(DPoS)

* Proof-of-Stake(PoS)

* Proof-of-Authority

* Proof-of-Burn

* Unique Node Lists

* Proof-of-Weight

* Proof-of-Elapsed Time

* SIEVE

* Byzantine Fault Tolerance

24 .

Which cryptographic algorithm is used in Bitcoin Blockchain?

Different blockchains use different cryptographic algorithms. Bitcoin Blockchain uses a SHA256 Hashing algorithm.

25 .

Name a few of the most widely used cryptographic algorithms.

Some of the most extensively used cryptographic algorithms are :

* RSA

* AES

* Triple DES

* Twofish

* Blowfish

26 .

What type of records can be kept in the Blockchain? Is there any restriction on the same?

No, it is not possible to give restriction for keeping records in the blockchain approach. We can put any type of data on a blockchain such as Bank records, health records, images, Facebook messages, etc.

Some of the common types of records which can be kept in the blockchain are :

* Records of medical transactions

* Transaction processing

* Identity management

* Events related to organizations,

* Management activities

* Documentation

27 .

Name the components of a Blockchain ecosystem?

There are four primary components of a Blockchain ecosystem:

* Node application

* Shared ledger

* Consensus algorithm

* Virtual Machine

28 .

What is Cryptocurrency?

* A cryptocurrency is a digital asset that can be used as a medium of exchange for conducting financial transactions using cryptographic functions.

* Cryptocurrencies leverage blockchain technology to gain transparency, decentralization, and immutability.

* Cryptocurrencies can be sent directly between two parties using public and private keys with minimal processing fees.

29 .

What are the benefits of using blockchain technology?

The key benefits of using blockchain technology are as follows:

* Enhanced security

* Improved traceability

* Cost-saving

* User pseudonymity

* Immutability

* Transparency of transactions

* Automatic reconciliation of accounts

* Fraud control

* No payment for intermediaries services

30 .

What are the core components of blockchain architecture?

The below-mentioned ones are the core components of blockchain architecture :

Node - User/computer within the blockchain architecture.

Transaction - It is the smallest building block of the blockchain system.

Block - It is used for maintaining a set of transactions that are distributed to all the nodes in the network.

Chain - Sequence of blocks.

Miners - Specific nodes that perform a block verification process before adding to the blockchain structure.

Consensus protocol - Set of rules to carry out blockchain operations.

31 .

What is Merkel Tree?

Merkel Tree is a data structure that is used for verifying a block. It is in the form of a binary tree containing cryptographic hashes of each block. A Merkle tree is structured similarly to a binary tree where each leaf node is a hash of a block of transactional data and each non-leaf node is a hash of its leaf node. The Merkel root or hash root is the final hash root of all the transaction hashes. It encompasses all the transactions that are underlying all the non-leaf nodes.

32 .

What is a Genesis Block?

* The genesis block is the first block in the Blockchain which is also known as block 0

* In Blockchain, it is the only block that doesn’t refer to its previous block.

* It defines the parameters of the Blockchain such as,

* level of difficulty,

* consensus mechanism etc. to mine blocks

33 .

How is the hash (Block signature) generated?

The process of generating a block signature involves :

* Passing transaction details through a one-way hash function i.e., SHA-256.

* Running the output value through a signature algorithm (like ECDSA) with the user’s private key.

* Following these steps, the encrypted hash, along with other information (such as the hashing algorithm), is called the digital signature.

34 .

How are cryptocurrency transactions recorded?

Cryptocurrency transactions are recorded on a shared, digital ledger called a blockchain. This is a decentralized technology, spread across many computers, that records every transaction.

35 .

What is a crypto wallet?

Crypto wallets are places to store digital assets more securely than just on an exchange. You hold your wallet via an exchange account, custody wallet, or outside of the exchange. You can establish an online or “hot” wallet that is internet-connected—to your desktop, tablet, or mobile phone. There is also the option to store on a device that is not connected to the internet (“cold” wallet). Cold wallets are the most secure way to store your cryptocurrency, but they are meant for longer-term holdings as they are not connected to the internet. With cold storage, you must remember your private keys (identifier number for your cryptocurrency).

36 .

What is the difference between Proof-of-work and Proof-of-stake?

The main differences between the Proof of Work and Proof of Stake are :

Proof of Work : Proof of Work(PoW) algorithm is used to confirm the transaction and creates a new block to the chain. In this algorithm, miners compete against each other to complete the transaction on the network. The process of competing against each other is called mining. It defines an expensive computer calculation. In this, a reward is given to the first miner who solves each blocks problem.

Proof of Stake : In the case of PoS algorithm, a set of nodes decide to stake their own cryptocurrencies for the transaction validation. They are called 'stakers.' In proof of stake, the creator of a new block is chosen in a deterministic way, depending on its wealth, also defined as stake. It does not give any block reward, so miners take the transaction fees only. Proof-of-Stake can be several thousand times more cost-effective as compared to proof of work.

37 .

What is Secret Sharing? Does it have any benefit in Blockchain technology?

It is a well-known fact that security matters a lot in digital transactions. Secret sharing is an approach meant for same. In Blockchain technology it is an approach that divides secret or personal information into different units and sent them to the users on the network.

The original information can only be combined when a participant to whom a share of the secret is allocated agree to combine them together with others. There are several security-related benefits it can offer in Blockchain technology.

38 .

Can you explain what are off-chain transactions?

An off-chain transaction is the movement of value outside of the blockchain. While an on-chain transaction – usually referred to as simply ‘a transaction’ – modifies the blockchain and depends on the blockchain to determine its validity an off-chain transaction relies on other methods to record and validate the transaction.

39 .

How does bitcoin use blockchain?

A transaction is a transfer of value between Bitcoin wallets that gets included in the blockchain. Bitcoin wallets keep a secret piece of data called a private key. The private key is used to sign transactions and provide mathematical proof that they have come from the owner of the wallet.

40 .

What are the threats to the information you are familiar with?

There are lots of threats to information in the present scenario. Due to increase in online transactions over the internet, many hackers have become active and are adopting new approaches to hack information and servers that contain financial information.

The major threat is software attack, identity theft, information extortion, as well as sabotage. In addition to this, Trojan horses, worms, and viruses are other trouble creators.

41 .

What is 51% attack?

51% Attack refers to a situation where a group of miners who hold more than 50% of the Network Hash Rate could manipulate with the New transactions (Stopping the transactions to proceed or gaining conformations) or able to reverse the transactions that were recently confirmed and kind of doing Double spend. It is Highly unlikely to be able to do that today but it is possible.

42 .

What are the key principles in a blockchain that help in eliminating security threats?

The following are the key principles in a blockchain that help in eliminating security threats :

* Continuity planning

* Auditing

* Securing testing and similar approaches

* Database security

* Securing applications

* Digital workforce training

43 .

What is the difference between Proof-of-Stake and Proof-of-Work?

Proof-of-Work is the original Consensus algorithm in the blockchain. It is used for confirming transactions and producing new blocks to the chain. In this miners compete with each other to complete the transactions on the network and get rewarded.

Proof-of-Stake makes the consensus mechanism completely virtual. In this, a set of nodes decide to stake their cryptocurrencies of the transaction validation.

44 .

What is a Coinbase transaction?

A Coinbase transaction is a unique type of bitcoin transaction that is created by miners. It is the first transaction in the new block.

The miners use it to collect the block reward of their work. Any transaction fees collected by the miners are also sent in this transaction.

45 .

What is a trapdoor function in blockchain development?

A trapdoor function is a one-way function, i.e., easy to compute in one direction but hard to compute in the opposite direction unless you have the special information.

These functions are essential for public-key encryption and are most widely used in blockchain development to represent the ideas of addresses and private keys.

46 .

Why does Blockchain need coins or tokens?

Tokens/Coins are used as a medium of exchange between the states. They are digital assets built in to perform a specific function within a blockchain.

When someone does a transaction, there is a change of state, and coins are moved from one address to another address. Apart from that, transactions contain some additional data; this data can be mutated through the change of state.

For this reason, blockchains need coins or tokens to incentivize the participants to join their networks.

47 .

What is the difference between a scriptPubKey and a P2SH address?

* A scriptPubKey is found in transaction output and also known as a locking script.

* The P2SH address is a special type of address, i.e., it is used for replacing complex locking scripts with its hash. In addition to the unlocking scripts, the transactions must contain the script that matches the hash.

48 .

What is the Ethereum network and how many Ethereum networks are you familiar with?

Ethereum is a blockchain-based distributed computing platform featuring smart contract functionality that enables users to create and deploy their decentralized applications

There are three types of networks in Ethereum :

Live network (main network) : Smart contracts are deployed on the main network

Test network (like Ropsten, Kovan, Rinkeby) : Allow users to run their smart contracts with no fees before deploying it on the main network

Private network : Are those which are not connected to the main network. They run within the premises of the organization but carry the features of an Ethereum network.

49 .

Where do nodes run a smart contract code?

* Nodes run smart contracts code on Ethereum Virtual Machine (EVM). It is a virtual machine designed to operate as a runtime environment for Ethereum-based smart contracts.

* EVM is operated in a sandboxed environment (isolated from the main network). This is a perfect testing environment.

* You can download the EVM, run your smart contract locally in an isolated manner and once you have tested and verified it, you can deploy it on the main network.

50 .

What is a Dapp and how is it different from a normal application?

Dapp :

* A Dapp is a decentralized application which is deployed using smart contract

* A Dapp has its back-end code (smart contract) which runs on a decentralized peer-to-peer network

Process :

* Front-end

* Smart contract (backend code)

* Blockchain (P2P contract)

Normal application :

* Normal application has a back-end code which runs on a centralized server

* It’s a computer software application that is hosted on a central server

Process :

* Front-end

* API

* Database (runs on the server)

51 .

What is DApp or Decentralised Application?

A decentralized application (DApp, dApp, Dapp, or dapp) is a computer application that runs on a distributed computing system.

Decentralized applications don‘t necessarily need to run on top of a blockchain network. Tor, BitTorrent, Popcorn Time, BitMessage, are examples for decentralized applications that run on a P2P network, but not on a blockchain – which is a special kind of P2P network.

DApps have been mostly popularized by distributed ledger technologies (DLT), namely the Ethereum Blockchain, where DApps are often referred to as smart contracts. Its backend code runs on a decentralized peer-to-peer network, and all records of the applicationÊ¼s operation are stored on a blockchain. In most cases, the entire code base is Open Source.

52 .

What is RSA algorithm?

RSA (Rivest–Shamir–Adleman) is an algorithm used by modern computers to encrypt and decrypt messages. It is an asymmetric cryptographic algorithm. Asymmetric means that there are two different keys. This is also called public key cryptography, because one of the keys can be given to anyone. The other key must be kept private. The algorithm is based on the fact that finding the factors of a large composite number is difficult.

RSA involves a public key and private key. The public key can be known to everyone; it is used to encrypt messages. Messages encrypted using the public key can only be decrypted with the private key.

53 .

Why is the blockchain immutable?

Altering a single block requires a new signature for every other block that comes after it all the way to the end of the chain. This is considered to be near impossible. Why?

Let’s say a corrupt miner has altered a block of transactions and is now trying to calculate new signatures for the subsequent blocks in order to have the rest of the network accept his change. The problem for him is, the rest of the network is also calculating new signatures for new blocks. The corrupt miner will have to calculate new signatures for these blocks too as they are being added to the end of the chain. After all, he needs to keep all of the blocks linked, including the new ones constantly being added. Unless the miner has more computational power than the rest of the network combined, he will never catch up with the rest of the network finding signatures.

Millions of users are mining on the blockchain, and therefore it can be assumed that a single bad actor or entity on the network will never have more computational power than the rest of the network combined, meaning the network will never accept any changes on the blockchain, making the blockchain immutable.

54 .

How Can You Stop Double Spending?

With the support of the consensus algorithm, the blockchain prevents double-spending. The consensus algorithm verifies the transaction’s authenticity before recording it in the block. As a result, it is checked by several nodes, allowing for double-spending.

However, since more than 50% of the network is owned by one entity, a 51% network attack will make any blockchain vulnerable to double-spending.

55 .

What is Transparent and incorruptible in blockchain?

Every ten minutes, the blockchain network checks in with itself to ensure that it is in a state of consensus. The network, which functions as a self-auditing ecosystem of digital value, reconciles any transaction that occurs in ten-minute intervals. A “block” refers to a collection of these transactions. As a result, two critical properties emerge from this they are :

Transparency data is embedded in the network as a whole, and it is available by definition. It can’t be tampered with because changing every single unit of data on the blockchain will require a massive amount of computational power to circumvent the entire network.

56 .

What Do You Think About the Future of Blockchain?

Blockchain has a bright future. It is currently in its development phase, with both technical and adoption advancements. Its applications in almost every industry speak volumes about its future. We will see a big effect on the blockchain, both industrially and in day-to-day life, as more and more investors become interested in blockchain technology. other technologies, including AI, big data, etc., can also be used in conjunction to make it more effective and practical.

57 .

What Are the Drawbacks of Blockchain?

Some disadvantages of Blockchains are listed below.

* Some Blockchain Solutions Use So Much Energy Because Blockchain Isn’t a Distributed Computing System

* It’s difficult to incorporate and manage complex technologies.

* There are also problems with scalability.

* Data is unchangeable.

* It can be inefficient at times because network speed and transaction costs fluctuate.

* Human error has not yet been eradicated.

* Not entirely secure.

58 .

What is Mining?

In the context of blockchain technology, mining is the process of adding transactions to the large distributed public ledger by providing the proof of work to the network, i.e., generated block is valid.

It also adds new coins to the generated block. The term mining is best known for its association with bitcoin.

59 .

What is the fork? What are some of the types of forking?

In simple terms, updating a cryptocurrency protocol or code is called forking. Fork implies that a Blockchain splits into two branches. It can happen when the participants of the network cannot come to an agreement with regards to the consensus algorithm and new rules to validate transactions.

There are three types of forking :

* Hard forks

* Soft forks

* Accidental forks

60 .

What is the difference between hard fork and soft fork in blockchain?

Hard fork in blockchain refers to a radical change to the software protocol, that makes previously invalid transactions/blocks valid. It requires all the users/nodes to upgrade to the latest software protocol.

Soft fork refers to a change to the software protocol that makes previously invalid transactions/blocks invalid.

61 .

What is the difference between a centralized network, decentralized network, and distributed ledger?

Distributed ledger : It is a shared ledger and is not controlled by any central authority. It is decentralized by nature and acts as a database for financial, legal or electronic assets.

Centralized network : A centralized network has a central authority to facilitate its operations.

Decentralized network : The nodes connected in the decentralized network are not dependent on the single server point, and each node holds the entire copy of the network configurations.

62 .

Can RSA be attacked? If so, how?

Yes, hackers can attack the RSA algorithm. However, being attacked is not equal to weak protection.

Mostly, there are two ways employed for attacking RSA :

Brute force : Includes all potential secret keys.

Mathematical attacks : In this, we use different techniques that are similar to factor the product of two primes.

63 .

How will you handle risk management when it comes to securing the transaction records?

Based on the value of data, there are various approaches employed to handle risk management.

* First, identify the threats and vulnerabilities associated with the financial records of an organization and take the right countermeasures against them accordingly.

* Another approach is to pay attention to a backup plan.

* The third one is to buy a new risk management software.

64 .

How is a blockchain ledger different from an ordinary ledger?

The key distinction between blockchain ledger and ordinary ledger is that Blockchain is a distributed database that can be conveniently decentralized. This method has a much lower risk of error than a traditional ledger. An ordinary ledger is one that is created by hand or by human effort, while the Blockchain automates all of its processes. All you have to do now is set it up properly and according to the instructions.

65 .

What Is a Public Key and Private Key in Blockchain?

A public key is used in the cryptographic algorithm that allows peers in a blockchain to receive funds in his wallet. The public key is attached to a private key, creating a pair of keys. Both the private-public key pair is used to ensure that the security of the blockchain is ensured. A public key is an alphanumeric string that is unique to a particular node or address.

A private key is an alphanumeric phrase that is used in pair with a public key to provide encryption and decryption. It is part of cryptographic algorithms that are used in blockchain security. The key is assigned to the key generator and should stay with him only. If he fails to do so, anyone can access the details or data located within the wallet or the address for which the private key is assigned. You will face this type of interview question for a blockchain architect position.

66 .

What Is Cryptocurrency Mining?

Cryptocurrency mining is the process of validating transactions on a blockchain and ensuring it is validated and written on a block. Mining is carried out by miners who use costly computation equipment to provide consensus to a blockchain.

Mining is mostly used by Proof-of-Work (PoW) consensus algorithm where the miner has to solve complex mathematical puzzles. They are rewarded for their work.

67 .

What Is Atomic Swap?

Atomic swap enables faster transfers thanks to the use of smart contracts. It is a revolutionary technology that allows peers to exchange one cryptocurrency to another without any intermediary exchange. It is done off-chain and between two different blockchains.

68 .

Explain Versions of BlockChain.

BlockChain is buzzword in today’s technology. Thus, a BlockChain is defined as the digital record of transaction which is stored in the Chain of Blocks.

Each time a block is completed by storing Information, the next new block is created to store further information. BlockChain is a secure technology in which third party intermefdiary are not allowed. For example: in money transfer banks interference are not allowed. BlockChain technology is used in various fields like Banking, Finance, Government, Insurance, Healthcare, retail etc.

Different Versions of BlockChain :

There are Three Version’s of BlockChain as depicted below :

1. BlockChain 1.0 (Cryptocurrency) : BlockChain Version 1.0 was introduced in 2005 by Hall Finley, who implements DLT (Distributed Ledger Technology) represents its first application based on Crypto currency. This allows Financial Transaction based on BlockChain technology or DTL which is executed with the help of BitCoin. This type of Version is permissionless as any participant will perform valid transaction of Bitcoin. This type is mainly used in Currency and Payments.

2. BlockChain 2.0 ( Smart Contracts) : The new Version of BlockChain come because there is a problem in version 1.0 which was Mining of BitCoin was Wasteful and there was also lack of Scalability of Network in it. So problem is improved in Version 2.0. In this version, the BlockChain is not just limited to Cryptocurrencies but it will extend up to Smart Contracts.

Thus, Small Contracts are Small Computer’s which live in the Chains of Blocks. These Small Computer’s are free computer programs that executed automatically, and check the condition defined earlier like facilitation, verification or enforcement and reduce transactions cost efficiency.

In BlockChain 2.0, BitCoin is replaced with Ethereum. Thus, BlockChain 2.0 was successfully processing high number of Transactions on Public network rapidly.

3. BlockChain 3.0 (DApps) : After Version 2.0, new version was introduced which includes DApps which is known as Decentralized Apps. A DApp is like a conventional app, it can have frontend written in any language that makes calls to its backend, and its backend code is running on decentralized Peer-To-Peer Network. It makes use of decentralized storage and communication which can be Ethereum Swarm etc.

There are many decentralized Applications like BitMessage, BitTorrent, Tor, Popcorn, etc.

Advantages :

* Transaction takes place without requiring and Third Party Intermediary which ensures the security of Details and Data.

* BlockChain use Cryptography in order to make sure the information is locked inside the BlockChain.

* BlockChain removes Double records which accelerates Transactions.

Disadvantages :

* There is always risk of Error as long as human factor is evolved.

* Transaction cost of BitCoin is quite Higher.

* Blockchain technology is immutable it means we cannot make any changes when data or information is inserted.

69 .

How do crypto sidechains work?

A sidechain is a separate blockchain which runs in parallel to Ethereum Mainnet and operates independently. It has its own consensus algorithm (e.g. proof-of-authority, Delegated proof-of-stake, Byzantine fault tolerance). It is connected to Mainnet by a two-way bridge.

70 .

What are the types of blockchain networks?

There are four main types of decentralized or distributed networks in the blockchain :

Public blockchain networks : Public blockchains are permissionless and allow everyone to join them. All members of the blockchain have equal rights to read, edit, and validate the blockchain. People primarily use public blockchains to exchange and mine cryptocurrencies like Bitcoin, Ethereum, and Litecoin.

Private blockchain networks : A single organization controls private blockchains, also called managed blockchains. The authority determines who can be a member and what rights they have in the network. Private blockchains are only partially decentralized because they have access restrictions. Ripple, a digital currency exchange network for businesses, is an example of a private blockchain.

Hybrid blockchain networks : Hybrid blockchains combine elements from both private and public networks. Companies can set up private, permission-based systems alongside a public system. In this way, they control access to specific data stored in the blockchain while keeping the rest of the data public. They use smart contracts to allow public members to check if private transactions have been completed. For example, hybrid blockchains can grant public access to digital currency while keeping bank-owned currency private.

Consortium blockchain networks : A group of organizations governs consortium blockchain networks. Preselected organizations share the responsibility of maintaining the blockchain and determining data access rights. Industries in which many organizations have common goals and benefit from shared responsibility often prefer consortium blockchain networks. For example, the Global Shipping Business Network Consortium is a not-for-profit blockchain consortium that aims to digitize the shipping industry and increase collaboration between maritime industry operators.

71 .

What are blockchain protocols?

The term blockchain protocol refers to different types of blockchain platforms that are available for application development. Each blockchain protocol adapts the basic blockchain principles to suit specific industries or applications. Some examples of blockchain protocols are provided in the following subsections:

Hyperledger fabric : Hyperledger Fabric is an open-source project with a suite of tools and libraries. Enterprises can use it to build private blockchain applications quickly and effectively. It is a modular, general-purpose framework that offers unique identity management and access control features. These features make it suitable for various applications, such as track-and-trace of supply chains, trade finance, loyalty and rewards, and clearing settlement of financial assets.

Ethereum : Ethereum is a decentralized open-source blockchain platform that people can use to build public blockchain applications. Ethereum Enterprise is designed for business use cases.

Corda : Corda is an open-source blockchain project designed for business. With Corda, you can build interoperable blockchain networks that transact in strict privacy. Businesses can use Corda's smart contract technology to transact directly, with value. Most of its users are financial institutions.

Quorum : Quorum is an open-source blockchain protocol that is derived from Ethereum. It is specially designed for use in a private blockchain network, where only a single member owns all the nodes, or in a consortium blockchain network, where multiple members each own a portion of the network.

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How did blockchain technology evolve?

Blockchain technology has its roots in the late 1970s when a computer scientist named Ralph Merkle patented Hash trees or Merkle trees. These trees are a computer science structure for storing data by linking blocks using cryptography. In the late 1990s, Stuart Haber and W. Scott Stornetta used Merkle trees to implement a system in which document timestamps could not be tampered with. This was the first instance in the history of blockchain.

The technology has continued to evolve over these three generations

First generation – Bitcoin and other virtual currencies : In 2008, an anonymous individual or group of individuals known only by the name Satoshi Nakamoto outlined blockchain technology in its modern form. Satoshi's idea of the Bitcoin blockchain used 1 MB blocks of information for Bitcoin transactions. Many of the features of Bitcoin blockchain systems remain central to blockchain technology even today.

Second generation – smart contracts : A few years after first-generation currencies emerged, developers began to consider blockchain applications beyond cryptocurrency. For instance, the inventors of Ethereum decided to use blockchain technology in asset transfer transactions. Their significant contribution was the smart contracts feature.

Third generation – the future : As companies discover and implement new applications, blockchain technology continues to evolve and grow. Companies are solving limitations of scale and computation, and potential opportunities are limitless in the ongoing blockchain revolution.

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What are AWS Blockchain services?

AWS Blockchain services provide purpose-built tools to support your requirement. You can use them to build everything from a centralized ledger database that maintains an immutable record of transactions to a multi-party, fully managed blockchain network that helps eliminate intermediaries.

AWS has numerous validated blockchain solutions from partners who support all major blockchain protocols, including Hyperledger, Corda, Ethereum, Quorum, and more. As a result, you can develop blockchain and ledger applications more easily, quickly, and efficiently with AWS. Some useful AWS Blockchain services are as follows:

Amazon Quantum Ledger Database (QLDB) is a fully managed ledger database that provides a transparent, immutable, and cryptographically verifiable transaction log. It has a built-in journal that stores an accurate and sequenced entry of every data change. The journal is append-only, meaning that users can add data to the journal but cannot overwrite or delete it.

Amazon Managed Blockchain is a fully managed service that makes it easy to join public networks or create and manage scalable private networks using Hyperledger Fabric and Ethereum.

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How is blockchain different from the cloud?

The term cloud refers to computing services that can be accessed online. You can access Software as a Service (SaaS), Product as a Service (PaaS), and Infrastructure as a Service (IaaS) from the cloud. Cloud providers manage their hardware and infrastructure and give you access to these computing resources over the internet.

They provide many more resources than just database management.If you want to join a public blockchain network, you need to provide your hardware resources to store your ledger copy. You could use a server from the cloud for this purpose too. Some cloud providers also offer complete Blockchain as a Service (BaaS) from the cloud.

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What is the difference between a database and a blockchain?

Blockchain is a special type of database management system that has more features than a regular database. We describe some significant differences between a traditional database and a blockchain in the following list :

* Blockchains decentralize control without damaging trust in the existing data. This is not possible in other database systems.

* Companies involved in a transaction cannot share their entire database. But in blockchain networks, each company has its copy of the ledger, and the system automatically maintains consistency between the two ledgers.

* Although in most database systems you can edit or delete data, in blockchain you can only insert data.

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How do different industries use blockchain?

Blockchain is an emerging technology that is being adopted in innovative manner by various industries. We describe some use cases in different industries in the following subsections :

Energy : Energy companies use blockchain technology to create peer-to-peer energy trading platforms and streamline access to renewable energy. For example, consider these uses:

Blockchain-based energy companies have created a trading platform for the sale of electricity between individuals. Homeowners with solar panels use this platform to sell their excess solar energy to neighbors. The process is largely automated: smart meters create transactions, and blockchain records them.
With blockchain-based crowd funding initiatives, users can sponsor and own solar panels in communities that lack energy access. Sponsors might also receive rent for these communities once the solar panels are constructed.

Finance : Traditional financial systems, like banks and stock exchanges, use blockchain services to manage online payments, accounts, and market trading. For example, Singapore Exchange Limited, an investment holding company that provides financial trading services throughout Asia, uses blockchain technology to build a more efficient interbank payment account. By adopting blockchain, they solved several challenges, including batch processing and manual reconciliation of several thousand financial transactions.

Media and entertainment : Companies in media and entertainment use blockchain systems to manage copyright data. Copyright verification is critical for the fair compensation of artists. It takes multiple transactions to record the sale or transfer of copyright content. Sony Music Entertainment Japan uses blockchain services to make digital rights management more efficient. They have successfully used blockchain strategy to improve productivity and reduce costs in copyright processing.

Retail : Retail companies use blockchain to track the movement of goods between suppliers and buyers. For example, Amazon retail has filed a patent for a distributed ledger technology system that will use blockchain technology to verify that all goods sold on the platform are authentic. Amazon sellers can map their global supply chains by allowing participants such as manufacturers, couriers, distributors, end users, and secondary users to add events to the ledger after registering with a certificate authority.