What is Blockchain?
What is Blockchain – A Comprehensive Guide to this Technology
Blockchain gained recognition as being the record-keeping technology behind the world’s first cryptocurrency, Bitcoin. However, people have had difficulty in figuring out exactly what it is because it is often referred to as a decentralized, distributed public ledger, which doesn’t really explain much. The good thing is that blockchain is a lot easier to comprehend than what people make it seem.
Put simply, blockchain literally refers to a chain of blocks, but not in the traditional way. It refers to digital information i.e. the block being stored in a public database, which is referred to as chain. This means that the blockchain is made up of blocks that comprise of digital pieces of information. There are three parts of this information, which are:
- Firstly, the blocks store details about a transaction, such as the time, date and the dollar amount.
- The blocks also store information about who is conducting the transactions. It doesn’t record your actual name, but uses a unique digital signature, not very different from a username, to keep a record of your purchase.
- The blocks also store information that helps them in distinguishing from other blocks. Just like people have names, these blocks have a unique code called ‘hash’, which can be used to tell them apart from each other. Even if the details of two transactions are same, it is possible to distinguish between blocks through their unique codes.
The beauty of blockchain is that a single block has the capacity of storing about 1 MB of data. Depending on the size of the transactions being conducted, it is possible to use one block for storing a few thousand transactions.
How does it work?
When new data is stored by a block, this information is added to the blockchain. As the name indicates, the blockchain comprises of several blocks strung together. But, there are four things that must happen before a block can become part of the blockchain. What are they? Let’s take a look:
- A transaction has to happen. If there is no transaction, no information is added, which means no block is formed.
- The transaction needs to be verified. When it comes to public records of information, there is always someone who is responsible for vetting any new data entries, such as in the case of Wikipedia or the Securities Exchange Commission. In the case of blockchain, this is the responsibility of a network of computers. These networks comprise of about thousands of computers that are spread all over the world. These computers confirm the transaction details, including the participants, time and dollar amount.
- The transaction has to be stored in a block. When your transaction has been verified, it sort of gets the green light. Thus, the dollar amount, your digital signature as well as that of the other party are all stored in a block. It will join other hundreds or thousands of transactions that are already part of the block.
- The block has to be given a hash. After all transactions on a block are verified, it is given a unique identifying code referred to as the hash. The hash of the most recently added block is also given and it is added to the blockchain. After it has been hashed, the block can finally be part of the blockchain.
When a block becomes part of the blockchain, it means it can now be publically available to anyone who wants to view it.
Is it Private?
The contents of the blockchain can be viewed by anyone and users have the option of connecting their computers to the blockchain network. In this way, a copy of the blockchain is received by your computer and it is automatically updated when a new block is added. Every computer that’s part of the blockchain network has its own copy of the blockchain. This means there are thousands of copies of the same blockchain.
Every copy of the blockchain is completely identical and since the same information is spread over a network of computers, it makes it immensely difficult for anyone to even think about manipulating the information. In the case of blockchain, there is not a single set of events that can be easily manipulated. Instead, if a hacker does wish to manipulate the information, they would have to manipulate every copy of the blockchain that’s part of the network.
Is it Secure?
The issues of trust and security are addressed by blockchain technology in a number of ways. First and foremost, any new blocks that are added to the blockchain are stored chronologically and linearly. This means that they will be added to the ‘end’ of the blockchain. Once the block has been added to the blockchain, it is immensely difficult to go back and make changes to its content. This is due to the fact that every block has its own hash, along with the hash of the previous block.
A math function creates these hash codes by turning the digital information into a string of letters and numbers. If any of the information on the block is edited, the hash code will also be changed. Thus, if a hacker wishes to change the information of a single block, they would need to alter every block after it in the blockchain. All hashes would have to be recalculated, which would take a huge and mostly improbable amount of computer power. In simple terms, once a block has become part of a blockchain, it can be difficult to edit it and impossible to eliminate it.
Blockchain has managed to gain worldwide acclaim because of its decentralization i.e. it is not owned by a single entity, transparency and immutability. Therefore, it doesn’t come as a surprise to see that this technology has been adopted by numerous industries. While the most prominent impact has been seen in the financial sector, it is not the only one as other industries are also using it for storing their data in the best possible way.
