The Blockchain is an indisputably ingenious invention. Blockchain technology allows distributed digital information but not copied and known as the backbone of a new type of internet.
Almost everyone has heard of blockchain but not everybody understands what is it and how it works.
Here, this guide is designed for newbies and experienced crypto enthusiast to gain knowledge about blockchain technology.
What is Blockchain Technology?
Definition: Blockchain technology is a distributed and decentralized public ledger which records transactions across the worldwide network of computers where the information is highly secure. It eliminates the mediators and works independently.
Don & Alex Tapscott, authors of Blockchain Revolution (2016) defines the blockchain technology as – It is an incorruptible digital ledger of economic transaction that can be programmed to record not just financial transactions but virtually everything of value.
However, blockchain technology is an essential element of cryptocurrencies-without it, digital currencies like Bitcoin, Etherum would not exist.
Let’s take the example of Wikipedia to understand more clearly. We know that Wikipedia entries are not the product of a single publisher and no one person controls it. Wikipedia is operated world wide web using a client-server network model.
A client is able to change entries stored on a centralized server with associated permissions. but access and permissions are maintained by a central authority.
However blockchain technology is unique, have a different digital backbone. The distributed database is created by blockchain technology. With Wikipedia, the master copy is edited on a server and all users see the new version while in the blockchain, every node in the network is updating the record independently. This makes blockchain technology so useful.
Blockchain technology is an orchestration of three technologies – the internet, private key cryptography and a protocol governing incentivization, that made Satoshi Nakamoto’s idea so useful for Bitcoin creation.
How Does Blockchain Work?
Information recorded on a blockchain exists as a shared and continually reconciled database. The database of blockchain isn’t stored in any particular location instead the records it keeps are transparent to the public and easily verifiable.
Each data exchange is a transaction and a record is referred to as a ledger in the cryptocurrency world. After verification, the transaction is added to the ledger as a block. For verification of each transaction, it utilizes a distributed system- a peer-to-peer network of nodes.
Once it verified, now new transaction is added to the blockchain and can’t be altered. In cryptocurrency world, you’ll get a unique identity with a set of cryptographic keys. These keys are known as a digital signature (Private key and public key). The public key is how others are able to find you while the private key gives you the digital sign and authorization.
Blockchain as Google Docs
The conventional way of sharing documents with collaboration is to send a Microsoft Word document to another recipient and ask them to make updates to it. The problem with that situation is that you need to wait until receiving an acknowledgment before you can see or make other changes.
That’s how databases work today. Two users can’t be disarray with the same record at a time. That’s how banks maintain money balances and transfers; they temporarily lock access (or decrease the balance) while they make a transfer, then update the other side, then re-open access (or update again).
With Google Docs both people have access to the same document at the same time, and the single version of that document is always visible to both of them as a shared ledger. But it is a shared google doc and distributed part comes into action when sharing includes a number of people. A blockchain is not necessary to share documents, but the shared documents analogy is a powerful one.
Blockchain Durability and robustness
Blockchain technology has robustness like the internet. The blockchain can’t be controlled by any single entity and has no single point of failure by storing identical blocks of information across the network.
In 2008, Bitcoin was invented and since that time it has operated without significant disruption. (To date, any of difficulties associated with Bitcoin have been due to hacking or mismanagement. In other words, these problems come from malevolence and human error, not imperfections in the underlying concepts.)
As the internet is developing continues, it’s a track record that bodes well for blockchain
“As insurgent as it sounds, Blockchain truly is a procedure to bring everyone to the highest degree of accountability. No more failure transactions, human or machine errors, or even an exchange that was not done with the consent of the parties involved. Above anything else, the most significant area where Blockchain helps is to guarantee the validity of a transaction by recording it not only on the main register but a connected shared system of registers, all of which are connected through a secure validation mechanism.” –Ian Khan, TEDx Speaker | Author | Technology Futurist
Transparent and incorruptible:
The blockchain network lives in a state of concord and automatically checks in with itself every ten minutes. You can say a kind of self-auditing ecosystem of a digital value. Each transaction is referred to as a “block”. These two important properties result from this (below):
- According to the definition, it is public and has data transparency within the network.
- It cannot be corrupted altering any unit of record on the blockchain would mean using a huge amount of computing power to revoke the entire network.
“Blockchain solves the difficulty of manipulation. When I talk about it in the West, people say they have trust on Google, Facebook, or their banks. But the rest of the world doesn’t trust corporations and organizations that much — I mean Africa, India, Eastern Europe, or Russia. It’s not about the places where people are very rich. Blockchain’s opportunities are the largest in the countries that haven’t reached that level yet.”
–Vitalik Buterin, inventor of Ethereum
A network of nodes
A network of computing nodes makes up the blockchain.
(Using a client, computer connected to the blockchain network that performs the task of verifying and transferring transactions) gets a copy of the blockchain, which gets downloaded automatically upon joining the blockchain network.
A powerful second-level network is created by them and a completely different vision for how the internet can function.
Every node acts as an “administrator” of the blockchain and joins the network by its own volition (in this scenario, the network is decentralized). However, each one has a chance for participating in the network: the chance of winning Bitcoins.
Nodes are referred to as “mining” Bitcoin, but the term is something of a misstatement. In fact, each one is competing to win Bitcoins by solving encrypted queries.
Bitcoin is now recognized to be only the first of many potential applications of the technology. As well, a scale of other potential adaptations of the original blockchain concept is currently active, or in development.
The idea of decentralization
The blockchain is a decentralized technology by design and whatever happens on it is a function of the network.
Some important connections arise from this and stock market trades become almost synchronous on the blockchain, for example — or it could make types of record keeping, like a home registry, completely public. And decentralization is now a reality.
A worldwide network of computers uses blockchain technology to simultaneously control the database that records Bitcoin transactions. That is, Bitcoin is handled by its network and not any one central authority. Decentralization means the network runs on a user-to-user (or peer-to-peer) basis.
Who will use the blockchain?
As web infrastructure, there is no need to know about the blockchain to use in your life.
Currently, finance allows the effective use cases for the technology. International payments, for example. The World Bank expects that over $613 billion US in money transfers were sent in 2017. And at the same time, there is a high demand for blockchain developers.
The blockchain probably cuts out the third parties for these types of transactions. Personal computing became accessible to the common public with the invention of the Graphical User Interface (GUI), which took the form of a “desktop”.
Similarly, the most common GUI devised for the blockchain is used to mine cryptocurrencies and wallet applications. Transactions online are similarly connected to the processes of identity verification.
The Blockchain & Enhanced security
The blockchain eliminates the risks that come with data being held centrally by storing data across its network. Today’s internet has security issues that are common to everyone. Due to the lack of centralized points of vulnerability, computer hackers can exploit it.
We all rely on the username & password system to shield our identity and assets online. Blockchain security methods use end to end encryption technology. Which offers public and private keys, a public key is a user’s address on the blockchain. And the private key is like a password that gives access only to the owner.
So, storing your data on the blockchain is incorruptible, although protecting your digital assets will also require safeguarding of your private key by printing it out, and creating a paper wallet.
A second-level network
blockchain technology enables the new layer of functionality- the web gains.
Already, users can negotiate directly with one another — Bitcoin transactions in 2017 averaged around $2 billion per day. new internet business is on track to unbundle the traditional institutions of finance with the added security by blockchain.
Goldman Sachs believes that blockchain technology holds huge potential especially to optimize clearing and settlements and could represent global savings of up to $6bn per year.
The Blockchain a New Web 3.0?
Today, we noticed that Indeed.com, one of the biggest job portals in the world, published some interesting statistics regarding the rise of Blockchain jobs. It looks like the number of blockchain jobs increased from December 2016 to December 2018.
But that’s not the end of it. According to the stats, this number has increased by, a barely credible since November 2015. The blockchain technology gives internet users the capability to create value and authenticates digital information.
Fortunately, Blockchain enhance the new business applications results such as-
- Smart contracts
- The sharing economy
- Supply chain and auditing
- File storage
- Prediction markets
- Protection of intellectual property
- Internet of Things(IoT)
- Identity management
- AML and KYC
- Data management
- Stock trading
Hope! This guide helped you to understand the blockchain technology. If you run into any issue related to this guide, please comment below. We’ll try to help you.