Are you confused about what Blockchain is, and how it works?. well, then you have came to the right place. In this article, you will be going to learn about Blockchain in detail.
Ever wondered if there is an easier way to complete transactions without having to deal with online wallets, Banks, and third-party applications. well, it’s possible thanks to BLOCKCHAIN.
Many people think of Blockchain as the technology that powers bitcoin and Cryptocurrencies. While this was its original purpose, Blockchain is capable of so much more.
What is Blockchain ?
To understand Blockchain, firstly, I want you to picture a ledger like your bank statements. Your bank keeps track of every transaction and how much money is coming and going out of your account.
It is also the central authority that keeps track of everything and they store data in a single server, it can be hacked or user identity can be stolen.
DLT ( Distributed Ledger Technology ) :
Here comes DLT ( DISTRIBUTED LEDGER TECHNOLOGY ), rather than having just one Authority Keeping Track On Transaction Like Banks.
DLT is managed by an entire network of participants ( participants are the miners, we can call them nodes or computers also, who are located in different geographical areas across the world ), who all share the ledger of transactions.
Every node will have the ledger of entire transactions, that’s why this is called Decentralization.
In the case of the banking system, banks are the only authority to store data of every transaction. That’s why it is called centralization.
Blockchain technology :
Blockchains are distributed, which means the nodes that are running in that network have a record of every transaction that has ever taken place.
In every Block, we have three major pieces:
Firstly, the block in a blockchain will have the data of all transactions that happened at that time. for every 10 minutes, a new block is created, the new transactions are stored in that block and added to the blockchain. So, it will have the data of all transactions from the time when the blockchain was created.
The second one is HASH, a Hash is essentially a digital fingerprint. It represents the transactions that are in the block and It is unique for every block
The third one Is, HASH of the previous block. Every block is linked together to form a chain, which is a blockchain.
If anyone tries to change the transactions in one block, the HASH of the block will be Changed automatically. As a result, the previous HASH in the next block is incorrect, to fix that you need to change the Hash of every single block, which is impossible.
How Blockchain works in Bitcoin
Let’s assume that you have made a transaction. The transaction will join the list of other transactions that have been made on the network at that time.
Then the next thing that will happen is, the nodes around the world are going to start picking up those transactions.
Then validate by looking through all of the transactions that Happened in the blockchain so far( means it will check every block from the beginning, so that, it will check does we have enough balance to make the transaction).
Before a block can be added to the blockchain, few things have to happen.
Proof Of Work
Firstly, a cryptographic puzzle must be solved. Thus creating the block and then the block is added to the blockchain.
The computer or node that solves the puzzle will get some bitcoins as the reward. Because, to solve the puzzle lot of computational power is required, it consumes a lot of energy.
Then the node shares the solution to all the other nodes on the network. This is called PROOF OF WORK.
The network verifies the proof of work and if correct, the block is added to the blockchain.
The combination of these complex math puzzles and verification by many other computers ensures that we can trust every block on the blockchain.
After the node shares the solution, every node will update the blockchain by adding the newly created block.
Like this, in every new block so many transactions are stored, Along with the Hash of that block and previous block.
For example, if we have done another transaction, our details will be updated in a new block again, along with many other transactions that happened at that time.
Every transaction that happened till now from when the bitcoin came into the market is stored in blockchain.
There are about 6 to 7 lakh blocks in Bitcoin Blockchain.
This type of peer-to-peer interaction with our data can revolutionize the way we access, verify, and transact with one another and because it is a type of technology, not a single network. It can be implemented in many different ways.
A public Blockchain is non-restrictive and has no access restrictions, anyone with an internet connection can send transactions.
Limited to a selected group of authorities, such as private companies, banks, and government agencies.
Hybrid Public-Private Blockchains:
Some of those with private access can only see all the data.
But the public can see only selections. In other words, everyone can see all the data, but only some people have access to add new data.
Uses of Blockchain:
To track shipments. some ports and shipping companies are testing out DLT. So that, everyone can securely track and monitor containers.
There are potential uses for Blockchain in healthcare, Like managing data in medical trials.
We can use it to keep track of land properties, like who owns which, and the data can’t be changed once It is stored in a block.
We can use blockchain in many other ways and the data can’t be altered, which means no corruption.