Blockchain

Blockchain :

    Blockchain is a method of recording information that makes it impossible or difficult for the system to be changed, hacked, or manipulated. A blockchain is a distributed ledger that duplicates and distributes transactions across the network of computers participating in the blockchain.

    Blockchain technology is a structure that stores transactional records, also known as the block, of the public in several databases, known as the “chain,” in a network connected through peer-to-peer nodes. Typically, this storage is referred to as a ‘digital ledger.’

    Every transaction in this ledger is authorized by the digital signature of the owner, which authenticates the transaction and safeguards it from tampering. Hence, the information the digital ledger contains is highly secure.

    Over the past few years, you have consistently heard the term ‘blockchain technology,’ probably regarding cryptocurrencies, like Bitcoin. In fact, you may be asking yourself, “what is blockchain technology?” It seems like blockchain is a platitude but in a hypothetical sense, as there is no real meaning that the layman can understand easily. It is imperative to answer “what is blockchain technology, “including the technology that is used, how it works, and how it’s becoming vital in the digital world.

History of Blockchain:

    Satoshi Nakamoto, whose real identity still remains unknown to date, first introduced the concept of blockchains in 2008. The design continued to improve and evolve, with Nakamoto using a Hashcash-like method. It eventually became a primary component of bitcoin, a popular form of cryptocurrency, where it serves as a public ledger for all network transactions. Bitcoin blockchain file sizes, which contained all transactions and records on the network, continued to grow substantially. By August 2014, it had reached 20 gigabytes, and eventually exceeded 200 gigabytes by early 2020. 

Why is Blockchain Popular?

    Suppose you are transferring money to your family or friends from your bank account. You would log in to online banking and transfer the amount to the other person using their account number. When the transaction is done, your bank updates the transaction records. It seems simple enough, right? There is a potential issue which most of us neglect.

    These types of transactions can be tampered with very quickly. People who are familiar with this truth are often wary of using these types of transactions, hence the evolution of third-party payment applications in recent years.  But this vulnerability is essentially why Blockchain technology was created.

    Technologically, Blockchain is a digital ledger that is gaining a lot of attention and traction recently. But why has it become so popular? Well, let’s dig into it to fathom the whole concept.

    Record keeping of data and transactions are a crucial part of the business. Often, this information is handled in house or passed through a third party like brokers, bankers, or lawyers increasing time, cost, or both on the business. Fortunately, Blockchain avoids this long process and facilitates the faster movement of the transaction, thereby saving both time and money.

Types of Blockchain:

1.Private Blockchain Networks:

    Private blockchains operate on closed networks, and tend to work well for private businesses and organizations. Companies can use private blockchains to customize their accessibility and authorization preferences, parameters to the network, and other important security options. Only one authority manages a private blockchain network.

2.Public Blockchain Networks:

    Bitcoin and other cryptocurrencies originated from public blockchains, which also played a role in popularizing distributed ledger technology (DLT). Public blockchains also help to eliminate certain challenges and issues, such as security flaws and centralization. With DLT, data is distributed across a peer-to-peer network, rather than being stored in a single location. A consensus algorithm is used for verifying information authenticity; proof of stake (PoS) and proof of work (PoW) are two frequently used consensus methods. 

3.Permissioned Blockchain Networks:

    Also sometimes known as hybrid blockchains, permissioned blockchain networks are private blockchains that allow special access for authorized individuals. Organizations typically set up these types of blockchains to get the best of both worlds, and it enables better structure when assigning who can participate in the network and in what transactions.

4.Consortium Blockchains:

    Similar to permissioned blockchains,  consortium blockchains have both public and private components, except multiple organizations will manage a single consortium blockchain network. Although these types of blockchains can initially be more complex to set up, once they are running, they can offer better security. Additionally, consortium blockchains are optimal for collaboration with multiple organizations.

The Process of Transaction:

    One of Blockchain technology’s cardinal features is the way it confirms and authorizes transactions. For example, if two individuals wish to perform a transaction with a private and public key, respectively, the first person party would attach the transaction information to the public key of the second party. This total information is gathered together into a block.

    The block contains a digital signature, a timestamp, and other important, relevant information. It should be noted that the block doesn’t include the identities of the individuals involved in the transaction. This block is then transmitted across all of the network's nodes, and when the right individual uses his private key and matches it with the block, the transaction gets completed successfully.

In addition to conducting financial transactions, the Blockchain can also hold transactional details of properties, vehicles, etc.

Proof of Work:

• Previous Hash: This hash address locates the previous block.
• Transaction Details: Details of all the transactions that need to occur.
• Nonce: An arbitrary number given in cryptography to differentiate the block’s hash address.
• Hash Address of the Block: All of the above (i.e., preceding hash, transaction details, and nonce) are transmitted through a hashing algorithm. This gives an output containing a 256-bit, 64 character length value, which is called the unique ‘hash address.’ Consequently, it is referred to as the hash of the block.
• Numerous people around the world try to figure out the right hash value to meet a pre-determined condition using computational algorithms. The transaction completes when the predetermined condition is met. To put it more plainly, Blockchain miners attempt to solve a mathematical puzzle, which is referred to as a proof of work problem. Whoever solves it first gets a reward.

Advantages:

    One major advantage of blockchains is the level of security it can provide, and this also means that blockchains can protect and secure sensitive data from online transactions. For anyone looking for speedy and convenient transactions, blockchain technology offers this as well. In fact, it only takes a few minutes, whereas other transaction methods can take several days to complete. There is also no third-party interference from financial institutions or government organizations, which many users look at as an advantage. 

Disadvantages:

    Blockchain and cryptography involves the use of public and private keys, and reportedly, there have been problems with private keys. If a user loses their private key, they face numerous challenges, making this one disadvantage of blockchains. Another disadvantage is the scalability restrictions, as the number of transactions per node is limited. Because of this, it can take several hours to finish multiple transactions and other tasks. It can also be difficult to change or add information after it is recorded, which is another significant disadvantage of blockchain.