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Everything you need to know about Blockchain
There are a lot of inventions that disrupted the flow of traditional methods, and undoubtedly, blockchain is the best invention of the century that has revolutionized almost all the sectors in the market. Blockchain - the brainchild of Satoshi Nakomoto, has evolved into something great in the course of time. Still, there is a common question among people "what exactly is blockchain?"
Blockchain - The new Internet
Blockchain technology forms the backbone of a new type of internet by allowing the data to be distributed but not copied. Initially, the blockchain was devised for the virtual currency Bitcoin, but later the tech community has found other potential use cases for the blockchain. Now, Blockchain has revolutionized the leading industries including healthcare, finance, and investment.
This article will guide you to know the basic definition of blockchain and also let you know the properties of blockchain that make it unique.
In layman's terms, blockchain is a time-stamped series of records. The data aren't managed by a centralized entity, instead, by a cluster of nodes (computers) that are widely spread across the world. These blocks of data (blocks) are connected to each other by cryptographic functions, forming a chain. Hence, named Blockchain.
Why is blockchain so special and how does it disrupts the current industrial technologies?
The blockchain is a democratized system which means it has no central authority governing it. Blockchain being a distributed ledger, allows everyone to see the information in it. Hence anything that is deployed on top of blockchain is transparent in nature and every member is accountable for their actions.
Blockchain and its Zero transaction cost
Though there is an infrastructure cost associated with blockchain, it has now transaction costs. With blockchain, the passage of information from one person to another is automated and is completely safe. This makes blockchain, the ingenious way of sending information. To initiate a transaction, a block is created and this block is verified by millions rather than thousands of computers in the network. Only verified blocks will be added to the chain, making a unique record with a unique history. Falsifying the data even in a single block is practically impossible as there are numerous blocks carrying the same data. This model is used by Bitcoin for implementing its monetary transactions.
An example use case
Consider a railway company. The tickets are booked on the web or app. The part of the transaction amount is taken by the credit card company for its processing function. Now, by integrating its platform with blockchains, the railway company can not only eliminate the credit card processing fee but also can shift the entire ticket booking operation to the blockchain. While booking a ticket, the involved parties are the railway company and a passenger. When the passenger completes a transaction, a ticket block is added to the ticket blockchain. When blockchain is used for ticket booking, every ticket will be individually verifiable and the record cannot be falsified.
But the ultimate thing to note here is - this is completely free. In addition to transferring and storing money, blockchain can replace all the traditional business models involved in the process and can completely eliminate filthy fees involved.
The basic working of a blockchain
Here is an excellent analogy for the working of blockchain. A spreadsheet is duplicated a number of times in a network. The function of this network is to regularly update the spreadsheet. Guess what?. You now have a basic understanding of the working of blockchain.
The spreadsheet is the block and the blockchain is similar to the networks that update the blocks with data. Information on the blockchain is available in a more distributed manner and is continually reconciled. The database not being stored in a single location is easy to verify and is truly public. Since the data is hosted by millions of nodes simultaneously, the data can be easily accessed by anyone and it is highly impossible for the hackers to corrupt the data as there is no existence of a centralized version of the information.
Reasons behind the admiration of blockchain technology
1. It is decentralized and not governed by a single entity.
2. Data is secured by cryptography
3. The data is immutable i.e. it is impossible for anyone to tamper with the data.
4. The transparency of blockchain enhances the easy tracking of data
Pillars of the blockchain technology
Blockchain technology has gained widespread acclaim due to its three main properties and are:
Before the advent of torrent and Bitcoin, we were used to centralized services. The idea was so simple. All the data were stored in a centralized entity and you would have to solely interact with that entity to get the required information. Banks are the best examples of a centralized system. They have your money stored and you cannot transact your money without going through the bank.
In a centralized system, the data are stored in one spot and it becomes so easy for the hackers to tamper with the data. In case if the system shuts down, accessing the data becomes impossible. In worst cases, if the centralized entity gets malicious, every data it contains will be compromised. To overcome these drawbacks, the concept of centralization was taken away and the blockchain is decentralized. In a blockchain, the data is not stored in a single spot, and in fact, everyone in the network owns the information. Here, you can make transactions or send data without having to go through a third party.
Another fruitful feature of blockchain is transparency. Some people wonder how blockchain can be transparent and anonymous at the same time. They just need to know what happens behind the scenes to get a clear idea. A person's identity in the blockchain is hidden via cryptography. If you are looking at transaction history, you will not see " Alex sent 1 BTC ". Instead, you could see " 1ME2hbsFLkBzzx7vpFYEmvwT2TbyCt7NZJ sent 1BTC ".
So, the real identity of a person is secure, but the transactions made by him are transparent. This is why blockchain offers both transparency and anonymity. This level of transparency had never existed in the traditional centralized financial systems. The best use case is, if you know the public address of any big company, you can easily get to know tye transactions made by them. This forces the institutions to be honest when they have to deal with something.
Once the data enters the blockchain, it cannot be tampered with. This property is of huge value to the financial institutes. People cannot work the company's financial records and play around with the company's accounts. This cuts down embezzlement in the bud. The main reason for the existence of this property is the cryptographic hashing function.
What is hashing?
The input string of variable length will be converted to the output of a fixed length. In the case of cryptocurrencies, the transactions are input and they run through a hashing algorithm. Specifically, Bitcoin uses SHA (Secure Hashing Algorithm) 256 algorithm for hashing.
Blockchain technology has revolutionized the way, the market functions. Firms have started integrating blockchains with their platforms to head on compete with their fellow competitors. It offers a whole new standard for its services and products.