The blockchain is a public ledger that records bitcoin transaction. A novel solution accomplishes this without any trusted central authority: maintenance of the blockchain is performed by a network of communicating nodes running bitcoin software.[14] Transactions of the form payer X sends Y bitcoins to payee Z are broadcast to this network using readily available software applications.[44] Network nodes can validate transactions, add them to their copy of the ledger, and then broadcast these ledger additions to other nodes. The blockchain is a distributed database – to achieve independent verification of the chain of ownership of any and every bitcoin (amount), each network node stores its own copy of the blockchain.[20] Approximately six times per hour, a new group of accepted transactions, a block, is created, added to the blockchain, and quickly published to all nodes. This allows bitcoin software to determine when a particular bitcoin amount has been spent, which is necessary in order to prevent double-spending in an environment without central oversight. Whereas a conventional ledger records the transfers of actual bills or promissory notes that exist apart from it, the blockchain is the only place that bitcoins can be said to exist in the form of unspent outputs of transactions.

History of Blockchain

The first work on a cryptographically secured chain of blocks was described in 1991 by Stuart Haber and W. Scott Stornetta, followed by publications in 1996 by Ross J. Anderson and 1998 by Bruce Schneier and John Kelsey.[14] In parallel, Nick Szabo was working in 1998 on a mechanism for a decentralized digital currency that he called bit gold.[15] In 2000 Stefan Konst published a general theory for cryptographic secured chains and suggested a set of solutions for implementation.[14]

The first blockchain was then conceptualised by Satoshi Nakamoto in 2008 and implemented the following year as a core component of the digital currency bitcoin, where it serves as the public ledger for all transactions.[1] Through the use of a peer-to-peer network and a distributed timestamping server, a blockchain database is managed autonomously. The invention of the blockchain for bitcoin made it the first digital currency to solve the double spending problem. The bitcoin design has been the inspiration for other applications.[1][3]

The blockchain format was first used for bitcoin, as a solution to the problem of making a database both secure and not requiring a trusted administrator.[4] The words block and chain were used separately in Satoshi Nakamoto’s original paper in October 2008,[16] and when the term moved into wider use it was originally block chain,[4][5] before becoming a single word, blockchain, by 2016. In August 2014, the bitcoin blockchain file size reached 20 gigabytes.[17] In January 2015, the size had grown to almost 30 gigabytes, and from January 2016 to January 2017, the bitcoin blockchain grew from 50 gigabytes to 100 gigabytes in size.[18]

By 2014, “Blockchain 2.0” was a term referring to new applications of the distributed blockchain database.[19] The Economist described one implementation of this second-generation programmable blockchain as coming with “a programming language that allows users to write more sophisticated smart contracts, thus creating invoices that pay themselves when a shipment arrives or share certificates which automatically send their owners dividends if profits reach a certain level.”[1] Blockchain 2.0 technologies go beyond transactions and “exchange of value without powerful intermediaries acting as arbiters of money and information”. They are expected to enable excluded people to enter the global economy, enable the protection of privacy and people to “monetize their own information”, and provide the capability to ensure creators are compensated for their intellectual property. Second-generation blockchain technology makes it possible to store an individual’s “persistent digital ID and persona” and are providing an avenue to help solve the problem of social inequality by “[potentially changing] the way wealth is distributed.”[20]:14–15 As of 2016, Blockchain 2.0 implementations continue to require an off-chain oracle to access any “external data or events based on time or market conditions [that need] to interact with the blockchain.”[21]

In 2016, the central securities depository of the Russian Federation (NSD) announced a pilot project based on the Nxt Blockchain 2.0 platform in order to explore the use of blockchain-based automated voting systems.[22] Various regulatory bodies in the music industry have started testing models that use blockchain technology for royalty collection and management of copyrights around the world.[23][better source needed] IBM opened a blockchain innovation research centre in Singapore in July 2016.[24] A working group for the World Economic Forum met in November 2016 to discuss the development of governance models related to blockchain.[25] According to Accenture, an application of the diffusion of innovations theory suggests that in 2016 blockchains attained a 13.5% adoption rate within financial services, therefore reaching the early adopters phase.[26] In 2016, industry trade groups joined to create the Global Blockchain Forum, an initiative of the Chamber of Digital Commerce.[27]

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