With the invention of Bitcoin in 2008, the world was introduced to a new concept, which revolutionized the whole of society. It was something that promised to have an impact upon every industry. This new concept was blockchain; the underlying technology that underpins Bitcoin.

Some describe blockchain as a revolution, whereas another school of thought believes that it is going to be more evolutionary, and it will take many years before any practical benefits of blockchain reach fruition. This thinking is correct to some extent, but, in my opinion, the revolution has already begun. It is a technology that has an impact on current technologies too and possesses the ability to change them at a fundamental level.

Many prominent organizations all around the world have moved on from the proof-of-concept stage and are already writing production systems utilizing blockchain. The disruptive potential of blockchain has now been fully recognized. For...

Understanding distributed systems is essential to our understanding blockchain, as blockchain was a distributed system at its core. It is a distributed ledger that can be centralized or decentralized. A blockchain is originally intended to be and is usually used as a decentralized platform. It can be thought of as a system that has properties of the both decentralized and distributed paradigms. It is a decentralized-distributed system.

Distributed systems are a computing paradigm whereby two or more nodes work with each other in a coordinated fashion to achieve a common outcome. It is modeled in such a way that end users see it as a single logical platform. For example, Google's search engine is based on a large distributed system; however, to a user, it looks like a single, coherent platform.

A node can be defined as an individual player in a distributed system. All nodes are capable of sending and receiving messages to and from each other. Nodes...

Blockchain was introduced with the invention of Bitcoin in 2008. Its practical implementation then occurred in 2009. For the purposes of this chapter, it is sufficient to review Bitcoin very briefly, as it will be explored in great depth in Chapter 6, Introducing Bitcoin. However, it is essential to refer to Bitcoin because, without it, the history of blockchain is not complete.

The events that led to blockchain

Now we will look at the early history of computing and computer networks and will discuss how these technologies evolved and contributed to the development of Bitcoin in 2008. We can view this in chronological order:

• 1960s – Invention of computer networks
• 1969 – Development of ARPANET
• 1970s – Early work on secure network communication including public key cryptography
• 1970s – Cryptographic hash functions
• 1973 – Extension of ARPANET to other geographic locations...

In 2008, a groundbreaking paper, entitled Bitcoin: A Peer-to-Peer Electronic Cash System, was written on the topic of peer-to-peer e-cash under the pseudonym of Satoshi Nakamoto.

This paper is available at https://bitcoin.org/bitcoin.pdf.

It introduced the term chain of blocks. No one knows the actual identity of Satoshi Nakamoto. After introducing Bitcoin in 2009, he remained active in the Bitcoin developer community until 2011. He then handed over Bitcoin development to its core developers and simply disappeared. Since then, there has been no communication from him whatsoever, and his existence and identity are shrouded in mystery. The term "chain of blocks" evolved over the years into the word "blockchain."

As stated previously, blockchain technology incorporates a multitude of applications that can be implemented in various economic sectors. Particularly in the finance sector, significant improvement in the performance of financial transactions...

Consensus is the backbone of a blockchain, as it provides the decentralization of control through an optional process known as mining. The choice of the consensus algorithm to utilize is governed by the type of blockchain in use; that is, not all consensus mechanisms are suitable for all types of blockchains. For example, in public permissionless blockchains, it would make sense to use PoW instead of mechanisms that are more suitable for permissioned blockchains, such as Proof of Authority (PoA) or traditional Byzantine fault-tolerant consensus mechanisms. Therefore, it is essential to choose an appropriate consensus algorithm for a particular blockchain project.

Consensus is a process of achieving agreement between distrusting nodes on the final state of data. To achieve consensus, different algorithms are used. It is easy to reach an agreement between two nodes (in client-server systems, for example), but when multiple nodes are participating in a distributed system...

The CAP theorem, also known as Brewer's theorem, was introduced by Eric Brewer in 1998 as a conjecture. In 2002, it was proven as a theorem by Seth Gilbert and Nancy Lynch. The theorem states that any distributed system cannot have consistency, availability, and partition tolerance simultaneously:

• Consistency is a property that ensures that all nodes in a distributed system have a single, current, and identical copy of the data.

  Consistency is achieved using consensus algorithms in order to ensure that all nodes have the same copy of the data. This is also called state machine replication. The blockchain is a means for achieving state machine replication.

• Availability means that the nodes in the system are up, accessible for use, and are accepting incoming requests and responding with data without any failures as and when required. In other words, data is available at each node and the nodes are responding...

This chapter introduced blockchain technology at an advanced level. First, we discussed blockchain's progress toward becoming a mature technology, followed by some basic concepts about distributed systems, and then the history of blockchain was reviewed. Concepts such as e-cash were also discussed.

Various definitions of blockchain from different points of view were presented. Some applications of blockchain technology were also introduced. Next, different types of blockchain were explored. Finally, the benefits and limitations of this new technology were also examined. Some topics such as blockchain scalability and adaptability issues were intentionally introduced only lightly, as they will be discussed in depth in later chapters.

In the next chapter, we will introduce the concept of decentralization, which is central to the idea behind blockchains and their vast number of applications.