Life depends on evolution, natural selection, and change. It gives meaning to our lives and to the world; it helps us stay up to date, adjust and adapt. And this mindset led us to Blockchain-based cryptocurrencies. But what is blockchain? How does it work? Let’s get to know everything about the crypto ledge system.
When you make payments online, you provide your credit card information. And if you don’t have a credit card, you can opt for a bank transfer. With the rise of cryptocurrencies, these methods are aging.
What if I told you that you can do the transactions and many other works without giving out your personal information? And you can do it all without governments, banks, or third parties. Isn’t it amazing? The answer to “how” is a blockchain!
It’s like a database where you save blocks of information connected together. That’s why we call it Blockchain. Things are changing fast and you can even do Android cryptocurrency mining on your phones today.
Keep reading if you want to understand the concept of Blockchain in detail.
Two mathematicians, Stuart Haber and W. Scott Stornetta, first brought Blockchain technology to light in 1991. Initially, the goal was to implement an untamable system with timestamps. Then, in 1990, Nick Szabo proposed using Blockchain to secure a digital payment system called “Bit Gold”. But no one ever did, until Satoshi Nakamoto claimed to have invented the first Blockchain and Bitcoin.
What is Blockchain?
Simply put, a Blockchain is a distributed database shared between nodes in a computer network. It saves information in digital format. Most people have heard of Blockchain after they started researching Bitcoin. “A blockchain is a digitally distributed, decentralized public ledger that exists on a network. It is particularly notable in its use of cryptocurrencies.
Blockchain has played an important role in cryptocurrency systems, ensuring the secure and decentralized recording of transactions.
The unique thing Blockchain brought to the table was that it ensured the fidelity and security of a data record and did all of this without the need for a trusted third party.
The main difference between a Blockchain and a database is in the way they structure data.
Here is a List of basic steps to follow by a blockchain:
It collects information in groups called “Blocks”.
Each block has a specific storage capacity, and it is closed and linked to a previously served block once it is filled.
This forms a chain called “Blockchain”.
Any other information will be added to a newly created block until its capacity is full. The process keeps repeating itself.
Each block in the chain has an exact timestamp when added to the chain, which cannot be altered.
Let’s see how Blockchain works in detail.
Transaction Process: How Does Blockchain Work?
Someone or a computer transacts
- The transaction is transmitted over the network
- The computer network solves equations to confirm the transaction
- The transaction is added to blocks if confirmed
- The blocks are chained together creating an entire story
And that’s just it! It sounds like a complicated task, but it is done in minutes with modern technology. And because technology is advancing rapidly, I expect that to happen faster than ever.
A new transaction enters the system. It is then transmitted to a network of peer-to-peer computers scattered in different locations around the world. The computer network then solves equations to confirm the authenticity of the transaction.
It is placed in a block after confirmation. All blocks are chained together, forming a long chain of the permanent history of all transactions.
How are Blockchains Used?
Although Blockchain is a big part of cryptocurrency, it is not the only use. We may use Blockchain to reliably store your transaction data. People confuse it with cryptocurrencies like Bitcoin and Ethereum.
Blockchain has already been adopted by Walmart, AIG, Siemens, Pfizer, and Unilever. For example, IBM’s Food Trust uses it to track the journey of food before it reaches its final destination.
Now, for some of you, that might sound a little overkill. But the reason for food tracing is that the food industry has seen countless outbreaks of E. coli and Salmonella. There have also been cases where hazardous materials have been accidentally introduced into the food.
Tracing and identifying the causes of the epidemic has always been a difficult and time-consuming task. However, thanks to Blockchain, food is now tracked and businesses know exactly where the food truck stopped before it gets to the intended location. This allows them to conclude much more quickly in the event of a health hazard. There are also tons of other uses for Blockchain.
What is Blockchain Decentralization?
Decentralization makes the Blockchain safe even if it is public. You can easily access it by just using an internet connection.
Have you ever been in a situation where all your data was stored in one place and that “secure” place was compromised? Even if you’ve never faced it yourself, I’m sure it doesn’t sound like a scenario you’d want to be in.
Blockchain has a way to avoid this situation. It broadcasts the information to multiple computers located in different locations around the world. This creates redundancy. If someone somehow manages to delete, modify or destroy a transaction history from one place, it will not affect other nodes.
Instead, other nodes will cross-reference and locate the node with the incorrect information. This is called “decentralization”, which means that not all information is stored in one centralized location.
This makes information and history irreversible. So, Blockchain is not only a reliable place for transaction history, but we can also use it to store data. You can also store integral items such as legal contracts, state identifications, or even a company’s product inventory.
Advantages and Disadvantages of Blockchain
Like everything in the world, Blockchain has many advantages and disadvantages. In this section, you will study them in bullet form.
Benefits
- Improved accuracy as it removes human involvement from the verification process
- Information is much harder to falsify due to the decentralization
- Secure, private, and efficient transactions
- Provides a banking alternative as well as a much more secure way to store personal information for citizens.
The Inconvenient
- Bitcoin mining has a high technological cost
- Data storage has limits
- It has a risk of being used for illicit activities
- The regulations still remain uncertain as they vary by jurisdiction.