What is Blockchain Technology

Through this blogpost, I am going to talk about the blockchain technology. So first of all, let’s have a look at what is blockchain technology.

In simply, blockchain is a chain of blocks. But it is not in the traditional sense of those words. Sometimes a blockchain is referred as Distributed Ledger Technology (DLT). The purpose of blockchain is to solve the double records problem without the need of a central server.

A blockchain has three main concepts which are block, node and miners. Let’s see what these concepts are.

Blocks — Every chain consists of blocks. Data is cryptographically stored in a block. The type of the data stored in the block is depended on the blockchain type. When a block is generated a 32 bit nonce is randomly generated. This causes for generating the block header hash. This header hash is 256 bit number started with huge number of zeroes. The hash is unique for the block just like a fingerprint. Each hash references to the previous block which maintains the security of the blockchain.

Miners — The process called mining is used for creating new blocks for the chain. This process is complex as it has a reference to the previous block.

Nodes — Node can be any kind of electronic device that keeps copies of the blockchain. Since the every node is having a copy of blockchain newly mined blocks should be algorithmically approved by the network. Then after the chain is updated, trusted and verified.

Decentralization, transparency and immutability are the key features of the blockchain. In blockchain there is no central authority. Every participant in the blockchain is capable of supervising and confirming new blocks. Hence blockchain is decentralized. Also, since blockchains are transparent, every action in the ledger can be easily checked and viewed. Each participant is given a unique alphanumeric identification number that shows their transactions. As the blockchains are immutable, no one can damage or make unauthorized alternations to the data in the block.

Now let’s see how a blockchain transaction works.

process of a blockchain transaction

Step 1 : A transaction is requested.

Step 2 : Requested transaction is broadcasted to the p2p network.

Step 3 : Nodes validates the transaction.

Step 4 : Add new block to the chain with a hash.

Mainly there are four varients of blockchains : public, private,consortium and hybrid. So, we’ll next focus on blockchain types.

A public blockchain can be seen by everyone on the internet and it allows anyone to verify and add a block to the chain. Ex : Bitcoin, Litecoin

A private blockchain is having the authority within a single organization. It allows only a set of people in the organization to verify and add blocks to the chain. Generally, everyone in the internet allows to view the chain. Ex: Corda

A Consortium blockchain is used cross-organizations: only group of organizations are capable of adding and verifying a new block. Ex: Energy Web Foundation, R3

A hybrid blockchain is a combination of public and private blockchains. Ex: Dragonchain

Then let’s have a look on how blockchain keeps the security.

First, a new block is added at the end of the chain. After it adding, the data in the block cannot be changed as it is given a unique hash. Making a change of a block in the chain is not applying only for that particular block. All the blocks that after coming the changing block should be re-minded. So, if a hacker tries to change the data in a block, he needs to change every block after the coming changing block which takes a large amount of time. To address the issue of trust, blockchain networks have implemented tests for computers that want to join and add blocks to the chain. The tests, called “consensus models,” require users to “prove” themselves before they can participate in a blockchain network.

Blockchain becomes popular due to its reliability, security, transparency, time efficiency, decentralization and fraud prevention. Blockchain usecases can be found in the fields of goverment, health, markets, finance and accounting, IoT and science and arts. Bitcoin is one of the real world application which built on the blockchain technology.

So, I think this blogpost help you in improving your knowledge on blockchain technology. Let’s meet in new article.

Cheers..

References

Undergraduate at University of Moratuwa

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