Networked Application Management

This report provides an overview of blockchain technology, discussing its architecture, features, and challenges. It also explores the different applications of blockchain technology, such as bitcoin and smart contracts, and their socio-technical aspects.

Running head: NETWORKED APPLICATION MANAGEMENT
Networked Application Management
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Table of Contents
Introduction.........................................................................................................................2
Part 1: Blockchain................................................................................................................2
1. Blockchain Architecture...............................................................................................2
2. Features of Blockchain.................................................................................................4
3. The challenges associated with Blockchain.................................................................5
Part 2: Applications of Blockchain.......................................................................................5
1. Blockchain application in Currency..............................................................................5
2. Application of Block chain in Smart Contracts............................................................6
Part 3: Socio Technical aspects............................................................................................6
Conclusion............................................................................................................................6
References...........................................................................................................................8

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Introduction
Blockchain can be described as a type of data structure that enables the identification
and tracking of the transactions digitally for sharing the information across a distributed
network of computers thus creating a distributed trust network. Blockchain makes use of
cryptography for creation of a distributed trust network where each participant in a network is
capable of manipulating the digital ledger and transactions in a secure manner without the
need for a central authority. Therefore, blockchain acts as a global ledger that can be viewed by
anyone on the network. The transactions in a blockchain are recorded in encrypted form and
therefore it ensures proper security of the data. The report discusses the different aspects of
blockchain such as blockchain architecture, features and challenges associated with the
blockchain technology. The report further discusses the different applications of blockchain
technology along with the socio technical aspects of blockchain.
Part 1: Blockchain
1. Blockchain Architecture
A mesh network of computer or blockchain is a technology that is not connected with
any central server. It is a digital ledger of all the cryptocurrency transaction and was originally
developed for the virtual currency like Bitcoin. Blockchain has a shared and decentralized
architecture and forms the foundation of bitcoin. There is a considerable increase in blockchain
based application. Blockchain is generally defined as a sequence of blocks that holds the
transactional records that constitutes the “block” in the blockchain. The block chain technology
is one of the most advanced technologies. The blocks that store the details of the transactions
are linked together, thus constituting a chain. The blockchain architecture therefore consists of
a sequence of blocks, each block having different subcomponents. Other component of
blockchain architecture includes a simple database that is needed for storing the transactional
details associated with a block chain technology. The following figure represents the
architecture of the blockchain followed by the different components of each block of a
blockchain [2].

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Figure 1: The blockchain architecture showing the sequence of blocks
(Source: Zheng et al. 2017)
Figure 2: Representing the structure of block of each blockchain
(Source: Zheng et al. 2017)
The architecture of blockchain mainly consists of sequence of blocks as represented in
figure 1 above. Every block of a blockchain always posses one parent block that is generally the
previous block. Therefore, the very first lock of the blockchain does not have a parent block and
therefore it is known as genesis block [5]. A block of a blockchain can further be divided into a
number of sub components, which are the block header and block body. The block header is

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particularly divided into a number of sub components such as block version, time stamp, merkle
tree, nBits, Nonce and parent block hash. The body of the block on other hand is composed of
transactions and transaction counter. All these components make up the architecture of
blockchain. The size of the block and size of each transaction specifies the maximum number of
transaction that a block can contain. In order maintain the security feature of each transactions,
the blockchain technology makes use of the asymmetric cryptography mechanism for validating
the associated transactions. Digital signature is used in case of an untrustworthy environment.
2. Features of Blockchain
The key characteristic features associated with the technology of blockchain are as
follows [2]-
1. Decentralization is one of the most important feature or characteristics of blockchain
technology and is one of the major reasons this technology has gained so much popularity in
such a less time. Since in centralized transaction system, each transaction is needed to be
validated by a central trusted agency it inevitably results in the cost and performance bottle
necks in the central severs. In contrast to the centralized mode of transaction, this
decentralized mode of data transfer in blockchain eliminates the need of any third party [3].
Furthermore, consensus algorithms in blockchain are used to maintain the consistency of data
in the distributed network.
2. Persistency is another key feature of blockchain technology, where the transactions
are validated quickly and the invalid transactions are automatically cancelled out after admitted
by the honest miners. However, it becomes nearly impossible to delete or roll back a
transaction if they are recorded in blockchain [13].
3. Anonymity is key feature of blockchain technology as well. Each user can interact with
the blockchain with a generated address without revealing the real identity of the user [6].
However, block technology cannot guarantee a proper privacy protection due to the presence
of intrinsic constraints.

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The above discussed points represent some major features of the blockchain technology
[14]. Furthermore, if offers certain features of fault tolerance, lower cost of transactions,
durability and resistance to the attacks and the elimination of the third party risks associated
with a transaction.
3. The challenges associated with Blockchain
Along with the numerous advantages offered by the blockchain technology, there are
certain disadvantages or challenges associated with blockchain. The major challenges
associated with blockchain are as follows [8]-
1. Talking about the challenges, scalability is a major challenge that is associated with
the blockchain technology. With the increasing amount of blockchain transaction, the time
taken by the blockchain technology in processing one transaction becomes comparatively
slower. The rate of processing of 7 transactions per second fails to perform according to the
processing of millions of transaction in real time [7]. Therefore, it is one major challenge of
blockchain technology.
2. Leakage of the privacy is another risk or challenge associated with the technology of
blockchain. Blockchain although provides certain amount of privacy, it does not guarantee the
transactional privacy.
3. Selfish mining is another challenge that is faced by the blockchain technology where
the selfish miners can attack the database for collecting confidential information.
Part 2: Applications of Blockchain
1. Blockchain application in Currency
Bitcoin or the digital currency makes use of the blockchain technology. Bitcoin can be
described as the digital currency that is not backed up by central bank of any country or
government. This digital currency is mainly traded for goods or services only with the vendors
who accept bitcoin as their payment [2]. This is a new form of money and can be traded
throughout the world. The only difference between online wallet and the bitcoin is that bitcoin

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is decentralized digital currency that is not needed to be managed in a central bank. Bitcoin is
therefore the key player for the cryptocurrency marketplace [11]. The balances in the bitcoin
are generally kept using the public and the private keys. Bitcoin is one the first digital currencies
that make use of peer to peer technology for facilitating instant payments.
2. Application of Block chain in Smart Contracts
Ethereum is an application of smart contracts. It allows the developers or the coders to
program their smart contracts according to the rule [4]. One of the main features of smart
contracts and ethereum is that it can feature as multi signature account, which ensures that the
funds can be spent only when the required percentage of the people associated with the
contract agrees for the same. Smart contracts are used to effectively manage the agreements
between the different users for example, if one user wishes to buy insurance from another
user. Smart contracts are increasingly used by a number of organizations as it is capable of
bypassing the need of lawyers for any particular legal work.
Part 3: Socio Technical aspects
Bitcoin is capable of revolutionizing the process of online transaction. The main aim or
purpose of cryptocurrency is to create an altogether new form of economic power that is
capable of becoming the harbinger of a new society [12]. Bitcoin is expected to be accepted by
a number of people and it is undoubtedly a better form of money and definitely creates a
personal economic power [9]. It makes use of a decentralized architecture of blockchain and is
therefore acceptable and applicable worldwide.
Similarly smart contracts and ethereum are increasingly adopted by a number of people
and business organization as it considerably lowers the cost to company by bypassing the need
of a lawyer [10]. Blockchain is a digital ledger across a distributed network. It is a self enforced
contract that makes use of blockchain technology in its implementation.
Conclusion

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The technology of block chain can be described as a digital ledger where the
transactions are recorded in a chronological order tin certain “blocks” that are linked together
to develop a chain like structure. Each block of a blockchain is linked with a previous block,
which is known as the parent of the current block. A block of blockchain architecture contains a
block header and body of the block. The report gives an overview of the blockchain architecture
and discusses the challenges and the different features of the technology. The report further
provides an overview of the different applications blockchain such as bitcoin and smart contract
ethereum. Bitcoin is a decentralized payment option or virtual currency that can only be
exchanged electronically. Smart contracts are self executable contracts that bypass the need of
a lawyer. The socio technical aspects of smart contract and bitcoin are further discussed in this
report.

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References
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"Blockchain technology: Beyond bitcoin." Applied Innovation 2,2016: 6-10.
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[5]. Mattila, Juri. The Blockchain Phenomenon–The Disruptive Potential of Distributed Consensus
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[8]. Heires, Katherine. "The risks and rewards of blockchain technology." Risk Management 63,
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[10]. Watanabe, Hiroki, Shigeru Fujimura, Atsushi Nakadaira, Yasuhiko Miyazaki, Akihito Akutsu,
and Jay Kishigami. "Blockchain contract: Securing a blockchain applied to smart contracts."
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[11]. Malinova, Katya, and Andreas Park. "Market Design with Blockchain Technology.", 2017.

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[12]. Scott, Brett. How can cryptocurrency and blockchain technology play a role in building
social and solidarity finance?. No. 2016-1. UNRISD Working Paper, 2016.
[13]. Ouaddah, Aafaf, Anas Abou Elkalam, and Abdellah Ait Ouahman. "Towards a novel
privacy-preserving access control model based on blockchain technology in IoT." In Europe and
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[14]. Lemieux, Victoria Louise. "Trusting records: is Blockchain technology the
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