With a focus on the two most important cryptocurrencies, Bitcoin and Ethereum, this chapter explains the significance of blockchain in today's environment and analyzes its implementation in both networks as well as investigates how they work, describing their transactions, unique characteristics, benefits, and necessities, noting how Ethereum addressed some of Bitcoin's shortcomings with the introduction of smart contracts. They both depended on the proof of work (PoW) consensus mechanism at first, which Ethereum has moved to proof of stake (PoS) in its new upgrade as Ethereum 2.0. They examine the benefits and differences of these consensus protocols and other ones that deserve consideration and shed light on how they both have dealt with their challenges and drawbacks. Moreover, they analyze the prospects and likely improvements in blockchain technology, as they hope to illustrate the potential of blockchain along with Bitcoin and Ethereum to spark future innovation and address contemporary difficulties through their capabilities and network applications.
TopI. Introduction
Nowadays, blockchain is among the fastest-growing technologies, with its roots tracing back to the groundbreaking work of Satoshi Nakamoto, who introduced the concept of blockchain in 2008 and developed it in 2009 (Nakamoto, 2008). It is essentially a decentralized, distributed public ledger of records in which every network participant can access and examine the same information without obtaining control over it. The records are stored in a linear, chronological manner, with each block having a hash of the previous block, forming a chain of connected blocks. This chain of blocks provides a secure and tamper-proof database, ensuring data integrity and immutability (Andreev et al., 2018). Moreover, it facilitates peer-to-peer transactions by using a consensus validation procedure via a network of computers (Michael et al., 2018). Multiple nodes compete to validate the most recent block entries in order to obtain a reward for maintaining the blockchain. All validated transactions are saved in a chain of blocks that grows as new blocks are added to it. Because the block validation mechanism is immutable, all transactions, old and new, are kept indefinitely and cannot be removed. Further, Anyone on the network can access the ledger via a dedicated website, providing all participants with an up-to-date record of the most recent transactions or changes. Decentralization, persistency, anonymity, and auditability are key characteristics of blockchain technology, which operates in a decentralized environment by combining essential technologies such as cryptographic hash, digital signature (based on asymmetric cryptography), and distributed consensus mechanism, allowing transactions to take place in a decentralized manner. This builds confidence, which, as we'll see, accelerates transactions and provides cost-saving efficiency in a variety of transactional interactions (Bambara & Allen, 2018).
Blockchain technology is primarily intended to decentralize data control and administration, and as opposed to traditional centralized systems, blockchain runs on a peer-to-peer network, eliminating the need for middlemen and building trust through consensus procedures (Aste et al., 2017). This decentralization improves security and gives people direct authority over their digital assets and information (Zheng et al., 2018). Another essential feature of blockchain is its immutability. Once a transaction has been recorded on the blockchain, it is nearly hard to change or erase it. This property is attained by cryptographic procedures, which ensure that historical data remains intact and tamper-proof. This capability is vital in businesses such as supply chain management, where data integrity is crucial (Casino et al., 2018). Furthermore, blockchain's design incorporates anonymity, which gives users a sense of privacy and pseudonymity. While blockchain transactions are public and transparent, they are also pseudonymous, with cryptographic addresses rather than personal information being used to identify them. This delicate balance between transparency and privacy has serious implications for security and confidentiality. Also, the characteristic of auditability is an essential key of blockchain's architecture. Every transaction on the blockchain is accessible to all network participants, increasing accountability and providing transparency that traditional systems cannot match. This ease of access extends to auditors and regulators, who can easily analyze transaction histories, assuring regulatory compliance, and lowering the risk of fraud (Kouhizadeh & Sarkis, 2018).
Blockchain technology can be used in a variety of financial services, including digital assets, remittances, and online payments, due to its capacity to facilitate transactions without the involvement of banks or middlemen (Peters et al., 2015; Foroglou and Tsilidou, 2015). Furthermore, blockchain technology is regarded as one of the most promising for the next generation of Internet interaction systems, such as smart contracts (Kosba et al., 2016), public services (Akins et al., 2013), the Internet of Things (IoT) (Zhang and Wen, 2015), reputation systems (Sharples and Domingue, 2015), and security services (Noyes, 2016a) (Zheng et al., 2018).