Blockchain has been a technology buzzword lately. It’s everywhere. Everybody in the field of IT talks about it, wants to know about it, and wants to see how it works. We’ll be discussing it in a simpler way which can be understandable by most people even the non-technical ones. Blockchain, many believe that in the near future, will influence the transactions in the same way as done by the internet with the information. If that’s the case, that’s something really big. Let’s take a look at what blockchain is.
Blockchain – Definition
In its simplest definition, Blockchain is a shared, immutable ledger that records transactions as they happen. What does this mean? As most of us know that ledger is a book of accounts where no entry is deleted. Even if it is incorrect, it is rectified with another entry. The same is the case with blockchain. You can write a transaction to the blockchain, but you can’t delete it once it has become part of a block. This makes the entry immutable. By shared, it means that a blockchain is not located on a single computer but is shared by a network of computers. The blockchain network doesn’t operate in a client-server model, it works as a peer-to-peer network. That means all the computers on the network works as a peer to the other. They are not connected to a server for resources. That is why it is often called a decentralized network.
To make it a little more specific, a blockchain is a decentralized immutable real-time database. A database is a collection of information electronically stored and used by computing devices. A typical database is structured in tabular form that makes it searchable and usable. What makes blockchain different from the conventional database approach is that unlike database it is not stored on a centralized location on a network, all the nodes (peers) on the network carry the separate but identical copy of the whole blockchain record. This is achieved with a set of special mechanisms called blockchain protocols. This unique mechanism makes it almost impossible to make changes to the data stored on the blockchain, that is why it is called an immutable ledger.
A block stores the transactions as they happened with the mutual consensus of the nodes (peers), a transaction once accepted into a block becomes immutable. once a certain volume of transactions is achieved the block is closed with the security hashes and certain information.
Once a block is closed it becomes part of a chain. Every new block is placed next to the last block. Each block will have the information of its previous block. Once a block becomes part of a chain, its location in the change can’t be changed. All this mechanism is governed by a time-stamping server which makes all the events timestamped so that they can be chronologically placed into the block and then the chain.
Data on the blockchain has certain characteristics, It can be Created and Read, but can’t be Updated or Deleted.
Types Of Blockchain
There are two types of blockchain.
As the names suggest a public blockchain is where anyone with a qualifying computer can participate as a node, whereas in a private blockchain the right of admission is reserved. Both types of blockchain have their own use-cases. By far the public blockchain is the most popular type of blockchain.
Features Of Blockchain
A blockchain has many features that contribute to its popularity and adaptability. Let’s take a look;
A blockchain network, as discussed earlier, is a peer-to-peer network with each node having the same status as that of the other node on the network and has all the data of blockchain on its own. This is different from a typical computer networking model where client computers are connected to servers for different services and resources. With this model, many other features of blockchain, like transparency, security, and trust are achieved.
In a decentralized model, every node can independently view and verify the transactions, so a node or a group of nodes can’t tamper with the data without being noticed. The consensus mechanism of blockchain makes it impossible for a false, fake or tempered record to prevail on the blockchain. This transparency makes blockchain a preferred choice for financial transactions and necessary records.
Security is achieved through more than one mechanism in a blockchain. The first and foremost security feature is timestamping of data. The transactions are stored chronologically in a linear method. Data is secured in the blocks through cryptographic hashes. The new block is always added to the end of the chain and it has the information corresponding to its previous block. In this way once data is recorded into a block, it can neither be changed nor deleted. The same is the case with a block, once a block is accepted into the chain, it can neither be tampered with nor can be relocated. As the complete agreed-upon record of the blockchain is stored with each node, so it can’t be altered by any malicious actor. Due to the consensus mechanism in place, individuals or groups can’t take over the blockchain unless they have the 51% of the total computing power of the entire blockchain. Which is virtually impossible in the public blockchain. All these features make blockchain secure for the storage of financial transactions and sensitive records.
A blockchain doesn’t require a third-party entity like a bank or an institution to establish trust between the two transacting parties. The mechanism elaborated above itself works as a trust mechanism for a transaction to take place.
As we’ve seen that the blockchain model builds a strong case for itself to be adopted as a financial mechanism that can be secure, trustable, and cost-effective.
Most people think blockchain and cryptocurrency (Bitcoin for instance) to be the same which is not true. Cryptocurrency is a use case of blockchain. The blockchain itself is a much bigger and broader platform than cryptocurrency. It has hundreds of other applications and uses besides cryptocurrency and financial transactions.
A lot more can be written about blockchain, this quick overview is your basic introduction to this much-sought emerging branch of technology.