What is Blockchain? How does it work?
Blockchain technology has become another emerging power in the post-2016 and 2017, especially in the world of IT and finance. A public electronic ledger built on a P2P(Peer-to-peer) system, Blockchain provides the unparalleled capability for data to be stored on thousands of different servers around the world letting anyone see everyone’s inputs and entries in real-time. Here, we will share the basics of blockchain, as well as cover some of the most frequently asked questions behind the technology that has made bitcoin a part of everyday financial discussions.
Blockchain has gained distinct notability as the record-keeping system behind the bitcoin network and has seen its meteoric rise with the rise of cryptocurrency. This is largely due to each computer in the blockchain network having its copy of the blockchain, meaning there are thousands or even millions (in the case of bitcoin) of the same blockchain copies. While each copy of the blockchain is identical, the fact that this information is spread across the entire network of computers makes the information more difficult to manipulate. Since there is no centralized account or “feed” of events that can be tampered with, a hacker would need to tamper with every copy of the blockchain on the network.
The technology and processes behind blockchain are quite simplistic, and as this new method for processing and tracking continues to spread, it is likely to be an area of continued development and widespread use in the coming years.
Why is it called a blockchain?
The words “block” and “chain” refer to storing digital information (“blocks”) in a public database (“chain”). The “blocks” actually store basic information about the transaction, such as the date or time of the transaction and when it was processed. This is no different from the way transactions are done in an e-commerce site’s database such as eBay, Amazon, and Alibaba.
A key difference from normal transactions is that a block on a bitcoin blockchain can(suppose) store about 1MB of data — meaning that any given block can contain tens of hundreds or thousands of transactions.
Then how does Blockchain work?
The name blockchain comes from the practice that each new block filled with transaction data is added to a chain of other existing blocks. However, some specific steps are required to add a block to the blockchain.
Firstly, it starts with a transaction. Once you’ve made a purchase, your information (with thousands of others passing or being created at the same time) will be grouped in a block containing all the data listed in the previous section. Think of it roughly like a huge packet of transactions that are grouped and stored together.
Once your transaction is checked out and approved by the computer network, it is allowed to be stored in a block. Important information like transaction details and digital signature is collected and the transaction is stored in this new block with thousands of similar transactions.
Finally, once the entire set of transactions is verified and approved, the block will have to provide its unique digital signature to differentiate it from other blocks in the blockchain. This digital signature known as a hash, allows it to be added to the blockchain.
Is Blockchain only limited to financial transactions?
While blockchain is largely thought of concerning finance, there are many uses for which computer programmers apply blockchain technology. Some of them are listed below :
- Medical HealthCare: Medical records are particularly sensitive documents, so blockchains have the potential to store records that are impervious to hacking from being encoded with the same technology mentioned above.
- Manufacturing & SupplyChain: Being able to track the transaction, source, and destination of goods and resources would allow retail or consumer-facing operators to verify or authenticate products.
- Property & Legal Contracts: Everything from real estate transactions to the transfer of deeds and ownership requires utmost secrecy. Blockchain technology can offer secure storage space for these documents.
- Voting Security: With the controversy of secure surrounding and valid voting methods, blockchain offers a possible way to allow people to cast votes with verification that cannot be edited or tampered with after the fact.
And Many More!