Blockchain Technology: Architecture, Features, Applications and Challenges

This report evaluates the Blockchain Technology. The architecture of the Blockchain has been discussed and several features of the Blockchain technology has been evaluated. In this report, the challenges that Blockchain technology is facing has been discussed in detail. In the next section, the applications of Blockchain has been discussed.

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Name of the University
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Author Note

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Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Part 1: Blockchain..................................................................................................................2
Architecture........................................................................................................................2
Features..............................................................................................................................3
Challenges..........................................................................................................................4
Part 2: Applications of Blockchain........................................................................................4
Currency.............................................................................................................................4
Smart contracts...................................................................................................................6
Part 3: Socio-Technical aspects.............................................................................................6
Conclusion..................................................................................................................................7
References..................................................................................................................................7

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Introduction
Blockchain is a universal ledger where all transactions of cryptocurrencies are
maintained. Unlike traditional ledgers, the Blockchain ledger is however public,
decentralized and digitised. The technology includes the transactions as blocks and records
them in a chronological order (in a chain) which allows the users to keep track of their
transactions without a third party [1]. This technology eradicates the need for a centralized
authority to maintain the transactions.
In this assignment, the Blockchain Technology has been evaluated. The architecture
of the Blockchain has been discussed and several features of the Blockchai technology has
been evaluated. In this report, the challenges that Blokchain technology is facing has been
discussed in detail. In the next section, the applications of Blockchain has been discussed.
One of the most renowned application of Blockhain is smart contracts. The other application
is its use in currency especially cryptocurrency. Both of these applications have been
discussed in this report in detail. With the move towards decentralised architecture of
Blockchain from the traditional storage and computing power, a social bearing can be
expected from its users and how these applications are perceived by them. In the last section
of the report, the socio technical aspects of Blockchain has been discussed.
Discussion
Part 1: Blockchain
Architecture
The architecture of Blockchain consists of a Blockchain platform, nodes, blocks and
security implementation. It is an application that runs on a network of servers which are
distributed. Blockchain is applied as a transactional database that acts like a secure ledger.

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The data base is shared by all the servers (nodes). This makes the system totally decentralized
allowing any node that runs the software to locally run the Blockchain [3]. The LevelDB
database of Google is used for metadata storage by the Blockchain client. The data of the
Blockchain can be stored in a relational database or in a flat file. Once the Blockchain client
is installed in a server it syncs with the rest of the nodes that are present in the network. After
that all the transactions are maintained by the particular server using cryptocurrencies.
The technology relies on P2P or peer to peer network which does not have any
centralized node and has a flat topology [7]. Through a consensus mechanism, all the nodes
consume and provide services equally. The nodes play the role of a trusted third party. In
each node, the entire history of every Bitcoin that has been created is stored as a database
copy with the ownership information. A full copy of the database is saved in the full nodes
where the external lookup is not needed. The transactions are packed in a data format and
structure known as block for the transactions to be confirmed as valid. The block has to go
through strict cryptographic rules that are mentioned by the Blockchain network. To maintain
system integrity, the cryptography also makes sure that the blocks are not modified [16]. Due
to the Blockchain overlay network, increased level of semantics is provided which allows for
various crypto currencies to co-exist together and offer management abstraction.
Features
Some features of Blockchain are written as follows:-
Faster settlement- The settlement process in traditional banking system is very slow
and can take days. With Blockchain, the transaction can be completed at real time speed. This
helps the financial institution to save money as well as time [11].

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Immutability- Blockchain has the capability to create immutable ledgers. Centralized
databases need to be checked by a third party for accurate information exchange. Blockchains
can help the ledger to stay in a forward momentum. For changing the ledger, hackers will
need to control over fifty one per cent of the hashing power [4]. Moreover, as the number of
attacks increases on the ledger, the more expensive the attacks would turn out to be. The
ledger can only be changed with a joint collaboration between individual users, exchanges,
operators of node, miner and developer. It removes the mediator to speed up the process.
Improved security- As there is no single point of failure, Blockchains are incredibly
secure. Traditional financial institutions have been hacked time and time again but
Blockchains like Bitcoin has never been hacked [6]. As multiple computes run the nodes and
provide confirmation for the transactions, Blockchain provides increased level of security.
More capacity- Unlike traditional systems which has a few centralized servers,
Blockchain have thousands of computers that increases the capacity of the Blockchain
network.
Decentralized system- Blockchain is a decentralized system or in other words, the
assets can be stored and accessed over the internet. The system grants individuals their own
right to their own assets and mitigates trusting a third party such as banks and governments.
The system is free from scams, has a high transaction rate with low transaction costs and is
transparent.
Challenges
There are several challenges that needs to be addressed by Blockchain before it is
touted as a mainstream mode of transaction. The first challenge comes with an environmental
cost. The computing power needed to run Bitcoin last year was more than the energy

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consumed by around 160 nations. As several cryptocurrencies like Bitcoin are immensely
valuable, it takes a lot of computational power and energy to keep it running safe and secure.
The second challenge comes from the lack of regulation [5]. With the latest scam of Onecoin
which resulted in the loss of millions of dollars for investors, people are reluctant to use thus
volatile system. Another challenge is that the complexity of Blockchain technology is
difficult for many individuals to understand their true benefits and risks. During the financial
crisis, many people expressed their distrust against the existing institutions but such global
crisis was unexpected. Maybe someday Blockchain could pose as a threat for these potential
users [15]. The final challenge is the difficulty that institutions face in replacing their existing
legacy systems with Blockchain technology. The process in the transitioning can take
significant funding, human expertise and timing.
Part 2: Applications of Blockchain
Currency
One of the applications of Blockchain technology is the utilization of digital
currencies. Due to the relative advantages of new revenue streams, lower costs and
streamlining the existing systems, financial institutions are working hard to introduce token
systems and Blockchain platforms [14]. Due to its decentralized nature, Blockchain
technologies is used for conducting transactions with the help of Bitcoins, Ethereum and
other crytpocurrencies.

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Figure 1: How Blockchain works with Bitcoins
(Source: [15])
The Blockchain technology is used with Bitcoins to make every transaction visible
my making the online ledger publicly visible [2]. The system is maintained with the help of
miners who conduct calculations for every transaction preventing the spending of the same
currency twice. After Bitcoin was introduced in 2009, several other currencies have cropped
out which are collectively called as alternative coins or Altcoins [10].

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Smart contracts
It is a computer protocol which is used to simplify the process of enforcing, verifying
and facilitating a contract negotiation. The smart contracts are used to facilitate transactions
without the need for a third party [13]. The decentralization protocols and algorithms
(Byzantine fault tolerant) of Blockchain technology has allowed for the implementation of
smart contracts. The technology can be used by replicating contract execution and asset
registries using replication with Byzantine fault tolerant and hash chains [8]. The advantages
of smart contracts over its traditional counterparts are that it helps to minimize risks form
counterparty, settlement time reduction and more transparency. This Blockchain technology
has its some drawbacks though. Smart contracts are used to manage agreements between
individuals, used as multi signature accounts, provide other contracts with utility and store
informations such as membership records and registration information of domain.
The smart contracts were initially used by Bitcoins to transfer value from on
individual to the next but the applications were not abundant due to Bitcoin’s limited use case
of currency and restrictive language. Ethereum on the other hand, allowed programmers to
write their own contracts or autonomous agents [9]. Turing complete language is used for this
purpose which supports a wide set of computational instructions.
Recently, issues with smart contracts devised by Ethereum was found which lead to
insecure constructs and ambiguities. Moreover, Virtual machine bugs, compiler bugs and
absence of proper documentation of the known vulnerabilities.
Part 3: Socio-Technical aspects
The socio technical aspects of Blockchain will open up social impact investment
where public assets such as solar farms and wind turbines will be opened up for public

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ownership. The socio technical aspects will be just like crowd funding but instead social
contracts will be used to automatically pay-out shareholder profits. The need for financial and
legal intermediaries will be negated and the technology will be used to accurately measure
investment outcome variations. With local peer to peer services, the delivery of renewable
energy to the common people will become more transparent and distributed [13]. Extra
energy can be traded off with local companies and neighbours. Another socio-technical
aspect includes control of personal data. People can use this technology at their discretion to
distribute or store their personal information to health officials, insurance companies and
financial institutions. The technology will be used with big data to create effective delivery of
information. The technology can be implemented in smart watch technology where the user
can send their health data to prospective health officials without any one’s discretion in a
tokenised incentive method with Blockchain. Blockchain technology can be used to offer
proper responsiveness, greater accuracy and increased speed of their prescription.
Other socio technical aspects include direct funding access to charity services. The
Blockchain technology will be used to provide instant transfer of funding to organisations
that practice charity services irrespective of the borders. This will allow the emergency
services to process the money faster and offer more targeted responses. The transaction also
includes lower cost of transfer so more number of people will help the victims during an
emergency situation. The Blockchain technology can be also used to verify volunteers
internationally so that they can work for international charities in an authenticated way.
Traditionally, the authentication process takes time before emergency aids are dispatched and
with increasing number of volunteers this process becomes tedious. This technology can
instantly verify medical records allowing for faster response time during disaster relief
programs [12]. Other socio-technical impacts include new behavioural changes regarding
voting. People may level democracy as a trustless organisation and new type of peer to peer

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voting system may be enabled in the future. Economies can be shared with this technology
like people will be able to control speed limits of electronic cars and holiday homes can be
time limited by the owners. Unemployment can be counteracted with smart contracts just like
universal funds to monitor social impacts and the monitoring efficiency can be increased for
welfare services.
Conclusion
To conclude the report, it can be stated that Blockchain technology has the power to
create new operations and businesses due to the decentralization opportunity it provides. The
peer to peer transactions make the technology truly secure and flexible. It still remains to be
seen whether the companies are willing to use this technology for new services and products
and whether the consumers are willing to trust these companies. The opportunities and vast
range of applications that is possible with Blockchain is the main reason why investors need
to watch this technology carefully.
Despite the challenges mentioned in the report, Blockchain technology is advancing
and maturing rapidly and the demand for the technology is rising every day. Although the
report discusses only two applications of Blockchain, most of its applications are still
unexplored. Most of the applications of this technology are still in bet testing or at their
development stage and th potential applications are limitless. In the future, the socio technical
aspects of this technology need to be watched carefully for making the technology truly
mainstream. Moreover, many consumers are still unaware of this technology and its
implications, so companies which are investing in this complicated technology need to find a
way to explain Blockchain in simple terms. Blockchain is truly the technology of the future.

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References
[1]"Bitcoin - Open source P2P money". [Online]. Available: https://bitcoin.org/en/.
[Accessed: 2018].
[2]"Bitcoin.com | Bitcoin News and Technology Source". [Online]. Available:
https://www.bitcoin.com/. [Accessed: 2018].
[3]"What is Bitcoin? - CNNMoney". [Online]. Available:
http://money.cnn.com/infographic/technology/what-is-bitcoin/. [Accessed: 2018].
[4]"How does Bitcoin work? - Bitcoin". [Online]. Available: https://bitcoin.org/en/how-it-
works. [Accessed: 2018].
[5]"Blockchain". [Online]. Available: https://www.blockchain.com/. [Accessed: 2018].
[6]"What is blockchain? - IBM Blockchain". [Online]. Available:
https://www.ibm.com/blockchain/what-is-blockchain.html. [Accessed: 2018].
[7]"Blockchain explained - CNET". [Online]. Available:
https://www.cnet.com/news/blockchain-explained-builds-trust-when-you-need-it-most/.
[Accessed: 2018].
[8]T. SCOTT, BLOCKCHAIN. [S.l.]: LULU COM, 2017.
[9]"On the Philosophy of Bitcoin/Blockchain Technology: Is it a Chaotic, Complex
System?", Metaphilosophy, vol. 48, no. 5, pp. 620-633, 2017.
[10]O. Leistert, "Bitcoin Und Blockchain", POP, vol. 4, no. 2, 2015.
[11]B. Kewell and P. Michael Ward, "Blockchain futures: With or without
Bitcoin?", Strategic Change, vol. 26, no. 5, pp. 491-498, 2017.

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[12]C. Wright, "Investigation of the Potential for Using the Bitcoin Blockchain as the World's
Primary Infrastructure for Internet Commerce", SSRN Electronic Journal, 2017.
[13]J. BRITO, BITCOIN. [S.l.]: AGENDA PUBLISHING, 2018.
[14]T. Rosembuj, Bitcoin. Barcelona: Editorial el Fisco, 2016.
[15]M. Miller, The ultimate guide to Bitcoin. Indianapolis, IN: Que, 2015.
[16]"Blockchain application and outlook in the banking industry", Financial Innovation, vol.
2, no. 1, 2016.