Learn all about Blockchain Technology and how it can be instrumental financial transactions and record keeping in future.
What is Blockchain Technology?
Block Chain Technology is a new type of database where data are stored in a growing list of blocks that are encrypted with cryptographic hash. Data or records are distributed to multiple users at a same time without copying it.
Basic Structure of Blockchain Technology
A blockchain is a scattered database that takes a number of inputs and places them into a block. Each block is then ‘chained’ to the subsequent block by a cryptographic signature. With this, the blockchains is allowed to be used as a ledger, which is accessed by anybody with authorization to do so.
Blockchain facilitates two bodies that do not identify each other but are digitally verified.
What are Blocks?
“Blocks” stores of digital pieces of information in the blockchain network.
- Blocks store information like transaction date, time, and amount.
- Blocks store information about the participants unique digital signature.
- Each block stores a unique code called a hash that makes each block of unique identity.
Properties of Blockchain
- Blockchain is Decentralized or Distributed i.e the database is not stored in a server but in the blocks distributed around the internet accessed through a P2P (Peer-to-Peer) network. No official copy of data exists here. This concept eliminates many risks like data falsification, attacks from hackers etc.
- Blockchain is Immutable The concept of block chain cannot be tampered. The term Cryptographic Hash stands for a long encrypted input and a fixed length of output that makes the data and the data-flow secure. Block chain defies ‘Avalanche Effect’ i.e. a small change with any data of any block can change the hash of the whole chain, which is impossible. That’s why it is immutable.
- Timestamp: At a time, only one user can access to a piece of data. It records the track of time of creation or modification
Types of Blockchain Network
- Public Blockchain Network: It has no access restrictions. E.g., Train ticketing
- Private Blockchain Network: It is restricted until the network admin requests to access.
- Hybrid Blockchain Network: It’s a combination of centralized and decentralized networks.
- Sidechain Network: It is a chain of network that runs simultaneously with the primary network being linked with it. It can play its role either being dependent on primary network or independently.
What’s the Relation between Blockchain and Bitcoin?
Blockchain network operates through the cryptocurrency Bitcoin, but Bitcoin is not the only version of a blockchain distributed ledger system in the market. Bitcoin, the cryptocurrency is a peer-to-peer electronic cash system. It was designed by a pseudonymous person called Satoshi Nakamoto.
There are several other cryptocurrencies which are operated under their own distributed ledger architectures. Some most used bitcoins are listed here
- Etherium (ETH): Ether was launched in 2015. Ether is currently the second-largest digital currency just after bitcoin.(as of July 2020)
- Ripple (XRP): It was launched in 2012. Ripple is currently the third-largest cryptocurrency by overall market cap.
- Litecoin (LTC): It was launched in 2011
- Tether (USDT): Tether belongs to stablecoins cryptocurrency group. It was launched in 2014.
- Libra (LIBRA): It is a Facebook owned cryptocurrency.
- EOS (EOS): Dan Larimer founded this digital currency in 2018.
- It uses peer-to-peer network to avoid the data-theft and slow data-flow parameters of client-server model. This concept of peer-to-peer network and proof-of-work consensus mechanism has given birth to cryptocurrency like bitcoin, namecoin, ethereum, etc.
- Transactions are secure, private and efficient.
- Financial industries can use it as distributed, safe ledger having potential to speed up back office job.
- Blockchain domain names have a resistant power to censorship and can be controlled only by the private key owner.
- Many companies use this Technology to distribute music and create contents to musicians.
- The technology bypasses third party verification.
- It allows technology transparent decentralization.
- The technology involves significant technology cost specially for mining bitcoins.
- Susceptibility to being hacked is not entirely proved.
- This technology can be used for illegal trading and is widely used in an dark web marketplace.
After the inventions of first WAN in 1960s, development of e-mail in 1970 and Ethernet in 1990s, Blockchain Technology is a great success to the way to future. Stuart Haber and W. Scott Stornetta first described this concept in 1991.
In 2008, this concept was practiced successfully through the making of Bitcoin by Satoshi Nakamoto (unidentified). That is the initialization of cryptocurrency.
Blockchain could be the key in building a more honest government. A Blockchain network handles all information and transactions on decentralized database permanently, publicly and most important of them securely. Blockchain can hold state and local actors answerable for any embezzlement by permitting governments for tracking the government funds movement. Blockchain not only dissuade corruption with the help of accountability, but it can also undertake so by entirely evading the middleman.