You may have surely come across the mention of “Blockchain technology”. Mostly with Bitcoin and other cryptocurrencies it had been a major element involved in their existence.
Well, this content would get through some considerable concepts and details of a blockchain. So, run down the page and grasp.
Blockchain: A Brief Historical Insight
Blockchain had been a humble concept in computer science much before it was actually used in cryptocurrencies. It had been a part of particularly, data structures and cryptography.
Hash tree, also known well as Merkle tree was known to be the most primitive form of Blockchain. In 1979, this use of blockchains was patented and named by Ralph Merkle by handling and verifying data between computer systems.
In order to make sure that nothing is changed or altered while being transferred it was important to validate data in a peer-to-peer computer network. It helped in proving the integrity of shared data and also makes sure that no false data is transferred.
In the year 1991, the same was used for creating a “secured chain of blocks”. This was known to be a series of data records, connected to the one preceding each other.
Each new record consisted of the history of the previous ones and hence a blockchain was formed. Further, in the year 2008, the concept of distributed Blockchain was brought up by Satoshi Nakamoto.
This consisted of a secured history of data exchange and exchanges could be managed and verified without centralization, autonomously.
Working of a Blockchain
Before actually traversing into its way and process of working, let’s reconsider some of the Blockchain features:
- All data exchanges are recorded: Blockchain maintains a record of all the data exchanges that take place. In the cryptocurrency world, this record is referred to as “ledger” and every data exchange is known as a transaction. Also, verified transactions are entered into the ledger as blocks.
- The distributed system is utilized for verification of each transaction; this is generally a peer-to-peer network of nodes.
- Any new blockchain transaction when once signed, verified and added to the blockchain, it cannot be altered.
Now, stepping up towards its working, there are various platforms that have got Blockchain explained in the most perfect manner. To begin with, it is first important to clear and explore the concept of “keys”.
A set of cryptographic keys help in creating a unique identity. Generally, Public and Private Key combine to avail you with a digital signature. A public key is the way other would identify you.
And a private key lets you sign digitally and authorize various actions as per this digital identity.
A blockchain ledger consists of two types of records: blocks and individual transactions. The first block is known to hold on to the header and data pertaining to transactions that are set for a considered time period.
Hash, which is an alphanumeric string, is created with the help of the blockchain’s time period. Once the first block is created the succeeding hashes use the previous block’s hash to calculate their own.
Validation or verification of authenticity is important before a new block is actually added to the chain. For this, the majority of nodes in the blockchain should agree that the hash for new block had been calculated correctly.
The consensus makes sure that all the copies of the distributed ledger are sharing the same state. Once a block has been added it can be referenced to other blocks. However, neither of them could be changed.
If any attempts are made in order to swap out the blocks, this will disrupt the shared state of the ledger because of the change in the hashes of previous and subsequent blocks.
When consensus is not possible, other computers in the network get aware of the occurrence of a problem and that no new blocks would be added unless the problem is solved.
Basically, in this case, the block creating an error would be removed and the consensus process would be repeated.
There can be both permission and permission-less Blockchain platforms. In permissionless, public Blockchains like Bitcoin, each node that is a part of the network can participate in the consensus process and conduct a transaction.
In a permissioned, private chain, for instance, Multichain, every node can conduct transactions. However, not all of them can participate in the consensus process; only a limited number of approved nodes can do so.
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Advantages and Disadvantages of Blockchain
There are many cited benefits that arrive with the use of Blockchain. One of those major advantages of this technology is Security. It may be almost impossible to corrupt any blockchain.
Information is shared and reconciled continually by thousand and millions of computers. It is hard to find even a single point of failure in a Blockchain. Even if one node tends to go down, there would be no problem created as the other nodes hold the copy of the ledger.
When the positive face of a coin is considered, there also exists the negative. Therefore, several challenges, risks, and drawbacks exist with Blockchain technology too.
In case of public blockchains, no party can be trusted or be held responsible if a problem arises. Private blockchains hold with them the interrogation with respect to whether or not the organizations would be willing to invest in its infrastructure of IT chargeback.
It is an accounting strategy that applies to the cost of the IT services which include database transactions.
Many Blockchain enthusiasts had been talking about the decentralized aspect it follows. Well, the reason why decentralization is one of the most important elements of it is that it makes a blockchain impervious to tampering corruption or censorship.
Since blockchain uses a peer-to-peer network and different copies of ledger, it is important to ensure that every single transaction is tracked and verified and every node keeps well to the track in the most trustworthy manner.
Moreover, block-chaining enables extensive practices in e-commerce and proper detection of any fraudulent practices that may have taken place.
It would be one of the best ways to maintain decentralized economies. This basic guide for Blockchain technology would surely help you well.