What is Blockchain?

blockchain technology

If you haven’t heard the word "Blockchain" yet, you sure must be living under the rock. As soon as the cryptocurrency became mainstream, Blockchain technology was the first one to gain recognition. It has been a revolutionary technology, which supports Bitcoin, for its error-free recordkeeping feature. While we all have heard this word once or more, many of us do not know what technology is all about. Many of us even think that it is a complex phenomenon that is hard to decode. However, all these notions are wrong as understanding this decentralizes, distributed, and public ledger technology is elementary. 

Here is an ultimate guide to Bitcoin technology that you need to read today, to understand what the buzz is all about:

What is Blockchain?

As the name suggests, a blockchain is nothing but a chain of blocks, however not literal by in the form of its functioning. It is basically an intricately woven set of data that is encrypted and stored in a database (block), and several such databases are interconnected (chain).
A typical block (set of a database) has three parts;

1. The block stores a variety of data which include the date, time, and dollar amount about any transaction that you make online using Bitcoin. 

2. The block also stores information about the parties involved in the transactions, including the buyer and the seller. However, blockchain technology operates on an anonymous basis and hence every entity on a blockchain is given a unique “digital signature,” to keep it personally unidentifiable. Take it like a username you have to generate while using any app or website.

3. Each block stores a unique set of information that makes it different from any other block in the chain. The code stored in the block, known as “hash,” makes identification of the block easier. Every transaction you make is stored in a separate block to make it unique. 

Each block is large and capable of storing as much as 1MB of data. This means that each block stores several transactions that may involve different transaction parties.

How does blockchain work?

Block records the data related to a transaction, and a series of blocks strung together is known as a blockchain. For any transaction to be recorded in a blockchain, it must fulfill the following sequence of events:

1- Transaction:
The primary requirement for the data recording and formation of blockchain is the occurrence of a transaction. 

2- Verification:
The second step is verification and every transaction added to the blockchain must be verified. Unlike other transactions of the physical world, in Blockchain, a transaction is verified by a series of computers. The network may comprise several computers spread in a vast geographical area, often across the globe. The role of these computers is to check the transaction details and give a confirmation that they are correct. 

3- Addition:
As soon as the transaction is verified, the data must be recorded in a block. The data include the transaction amount, as well as the details of the involved parties, i.e., seller and buyer. Hundreds and thousands of similar natured transaction are recorded in one block.

4- Every block is assigned a unique hash, a unique identification code. As soon as the hash is provided, the block can be added to the chain.

Pros and cons of Blockchain:

Just like any other technology, Blockchain has its own set of advantages and disadvantage. Let us have a closer look:

Pros of Blockchain:

Blockchain is distributed:
Blockchain operates in a network of over thousands of computers. This makes it safe for any technical failure or malicious attacks. Each computer in the network, also known as a node, make their own copy of the data, which cannot be breached.

Higher stability:
Once a block gets verified, it is impossible to reverse them. This is the reason that the data stored in a blockchain is 100% safe and cannot be breached.

Decentralized system:
Because there is no one intermediary party involved, but several nodes, operating on the chain, Blockchain is a decentralized system. Mining, the process of several nodes, working vigorously on approving a transaction, makes it a trustless system.

Cons of Blockchain:

Yes, blockchain has certain downsides as well, which includes:

Data modification:
The blockchain technology does not have any scope for modification of the data. Once the data is recorded in a block, it cannot be modified. There are certain times when a modification is mandatory, and in such cases, one blockchain is abandoned, and another one is taken. The process is called Hard Fork.

Private Keys:
Every blockchain user gets a private key to own cryptocurrency on the blockchain. A unique key is associated with a blockchain address. This private key allows access to the funds and must be kept secret. If a user forgets the private key, the transaction is lost.

Blockchain is a revolutionary technology with exceptional uses. Hope this article helps you understand the basics of this technology to take advantages of its excellence.


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