On the off chance that you have been following banking, investing, or digital currency in the course of the most recent ten years, you might be comfortable with “blockchain,” the record-keeping technology behind bitcoin. What’s more, there’s a decent shot that it just bodes well. In endeavoring to get familiar with blockchain, you’ve most likely experienced a definition like this: “blockchain is a distributed, decentralized, open record.” The uplifting news is, blockchain is really more obvious than that definition sounds.
Blockchain technology was originally developed to support the digital currency Bitcoin. Since then, many other potential uses have been identified. It disassembles and distributes data, without letting it be altered by anyone.
This blog will aim to explain how blockchain technology works and what it can offer.
What is Blockchain?
A blockchain is a growing set of data referred to as Blocks. These blocks are connected with each other using cryptography Each block contains a cryptographic hash. Hashing is a method of cryptography that converts any data into a unique string of text. Each of the blocks in a blockchain includes a cryptographic hash to link it to the previous block. Each block also contains another set of transaction data as well as a timestamp.
What’s So Special About Blockchain Technology?
Blockchain is a ledger that cannot be controlled by any centralized authority. The ledger is shared by all systems in the network and is accessible to everyone. Blockchain technology promotes transparency and accountability of actions. Using blockchain technology to carry out transactions is free. There are some costs to becoming part of the infrastructure, but the transaction itself is free of cost.
How Does It Work?
Blockchain uses the combined network of all users to process every transaction. If person A initiates a transaction, a block is created. This block is then verified by thousands, or more, computer systems connected to the network. Once verified, the block is added to a chain of similar blocks. The blocks are stored by spreading them out across the network. Each block is stamped with unique identifiers to help maintain a detailed record.
Let’s try and explain how a blockchain works by using a simple example. Imagine a spreadsheet. Let’s say it’s a ledger of your company’s weekly expenses. Currently, you maintain the ledger by consolidating all your weekly expenses from all departments into one. The accounts department then updates the information on the spreadsheet. What blockchain does is allows every department access to the ledger in real-time. Each department can then update its own expenses and have them validated by sharing the same changes across all departments. Everyone will be able to access and record the data at the same time. Google Docs works in a similar way. Two parties can access the same document in real-time and make alterations to it together.
Main Qualities of a Blockchain Network
The blockchain network was designed to support the trade of Bitcoins. Since then many other potential uses for it have been identified. People are learning to trust this system for the benefits and security it offers.
Here are the main qualities of Blockchain Networks:
1. Data Security
Cybercrime is advancing quickly. There are hundreds of thousands of cyber-attacks taking place each year. Businesses are losing Millions because of it. Individuals are losing hundreds of thousands. Blockchain technology works in a way that makes it virtually impossible for cyber-criminalists to make any changes in data. Blockchain technology does not use any centralized storage system. All the data is encrypted using Hash Cryptography. That makes it considerably difficult to decrypt, without the right tools. If a hacker were to gain access to the data stored in a block, they still wouldn’t be able to successfully change it. Any slight change in the data, even the addition of a single figure would greatly alter the cryptographic hash. And since each block contains the cryptographic hash of the previous block in the chain, it would result in inconsequential changes in the hashes of the entire blockchain. This ripple effect is what makes blockchains so secure.
Traditionally all networks have centralized storage. They grant each user access to their database. Once access is granted, users can check their emails, accounts, etc.
Blockchain for decentralized finance works differently. It allows users to get direct access to each other, without having to use a centralized server. So if you wanted to send a document to someone, you would be able to do so without having to use email or Dropbox services.
Blockchain technology allows users to keep their identities secret but has their data transfers open. Let’s take the example of bitcoins. If you were to transfer a bitcoin to someone, your transaction will be public. Everyone will be able to see that you have transferred 1 bitcoin, but no one will be able to see your identity. Just your public profile.
The first thing you need to be part of a blockchain network is an internet connection. Since blockchain technology relies on the continuous transfer of data between systems, the stronger the connection, the better.
Right now the internet works based on servers and centralized systems. If your internet fails, you have to call Spectrum Customer Service. Blockchain has the potential to be a new kind of internet that is not dependent on centralized systems. It can theoretically allow for truly free data sharing using peer-to-peer networking.