The technology behind Trillions of Digitial Currency,
In this Blog
What is blockchain
If you don’t know blockchain technically, probably, you will find it is a complicated technology. By the way, you are right. But, at its core, it is simple. It is just a database. So, if you know about the database, then it becomes easy for you to understand blockchain.
The database is the collective information that is stored in storage devices from where stored information can be retrieved. For this purpose, table format is used in typical databases to store and read data. Table format helps the database to search, fitter, store, and fetch data efficiently and effectively. Databases are designed to handle large amounts of data with appropriate rights, who can access which part of the specific database.
Advanced databases can store data on remote places(servers) to make data available with the internet. These servers are powerful computers in real. They can handle databases even more efficiently. These servers are owned by an organization or a person and they have full control over these servers, working, and storage.
But the question remains, what is blockchain?
Blockchain is the decentralized & distributed form of a database. The difference between blockchain and databases is that data stored in the blockchain can not be altered easily. Thus, blockchain makes the transaction history of digital assets secure and transparent. For this purpose, blockchain uses cryptographic techniques and asymmetric encryption algorithms. In the blockchain, information is stored in form of a block other than conventional table formats. Those blocks are linked together and form chains of the block (stored data). We hope now you can get a little picture of what is blockchain. Now blockchain becomes one of the top technologies and some of the tech giants like Microsoft, and Amazon is investing in this field. Blockchain is getting the attention of technology rulers because it can help to reduce fraud and database breaches. The rise of blockchain begins with the rise of cryptocurrencies. The main properties of cryptocurrencies like decentralization, and anonymous and secure transactions are not possible without blockchain. In 2021, digital currencies using blockchain for example Bitcoin, Ethereum, collectively cross the $1 trillion market cap. This shows the scale of usage and importance of blockchain.
How does blockchain work
As we talked about before, a blockchain is the chain of the block. The blocks have information. Blockchain is a distributed ledger. It is completely accessible by anyone. But, once data is successfully stored in blockchain, it becomes almost impossible to alter it. Now, it is the question that, what is the block?
What is the block?
Let’s take a look at a block. Each block in the blockchain is consists of data, the hash of itself, and the hash of the previously stored block.
The data in a block can be any information we need to store, depends upon the type of blockchain. For instance, the blocks in the blockchain of Bitcoin contain the data of sender, receiver, and amount sent.
Block also contains a hash. It is just like a key. It is used to identify the block. This hash is always unique. For easy understanding, we can say that it is the unique name assigned to every block to be identified later. Just like fingerprints are used to identify the human. The hash is created exactly when the block is created. Every change in a block causes the hash to change. Thus, hashes are used to detect if the block is altered.
We took a birds-eye view of Hash, and data, 2 of the 3 elements of a block. Now the 3rd element is the Hash of the previous block. It is the identification of a previously-stored block so that the next block is always linked with the previous block. This is how the chain of a block is formed and the whole thing is known as the blockchain.
But, question is that 1st block does not contain the link of the previous block because there is no previous blog. What is the name of 1st block? The genesis block.
Due to the development of compomers and their computing power, just hashes are not enough to validate and secure the whole blockchain. To tackle this problem blockchains start using something called Proof of work.
Proof of work
Proof of work is the mechanism used in blockchain to slows down the production of new blocks. For instance, it takes almost 10 minutes to add a new block into the bitcoin blockchain in the Bitcoin blockchain. This mechanism enhances the security and integrity of blocks. When a block is altered, its hash is changed too, then all the other blocks need to add a new hash of that block. If someone does this with the powerful computer then he can alter the block and can re-calculate the hash into remaining blocks. So. proof of work mechanism prevents blockchain from this alteration. After proof of work mechanism implementation, if someone wants to change something it will take an enormous amount of time even on supercomputers.
Another working property of blockchain is distribution. Blockchains are not managed by a central authority. Blockchains are running on P2P (peer-to-peer) networks. Everyone can join this network. When anyone joins, he can access a full copy of the blockchain. The entities connected with the blockchain knows as Nodes.
Who creates the blocks?
Miners is the term used to refer to the person who can create a new block. The process of creation of a new block is known as Mining. Mining is not an easy task especially in a big blockchain like Bitcoin.
Miners use specific software and solve complex mathematic problems. As a result, they got a hash that is eligible to be added to the blockchain. For each new hash, there are roughly 4 billion calculations are made, the result is a new hash that is to be added to the blockchain. That one has is knows as Golden nonce. That hash is assigned to a block and then that block is added into the blockchain.
All other nodes check that block and accept that change at their end. As a result, a block is successfully mined and the miner got rewarded currency usually cryptocurrency.
If a node wants to change a block, that node needs to mine all the other blocks in the blockchain, redo the proof of work for all blocks, and you can imagine how much time it takes if 4 billion calculations per block. That’s why blockchain is so much secure and has integrity.
Applications of Blockchain
I can say that many of you know that the application of blockchain is Cryptocurrency. Due to its ability to make extraordinary secure and irreversible encrypted encryptions, it is finding its applications in various aspects of life.
Some popular applications of blockchain are:
- Security and integrity of health care data
- Multi-media royalty tracking
- Money-laundering security
- Rigging free voting systems
- Supply chain management
- Social media insights
- Content creating ownership security
- Cryptocurrency transactions
- Banking transaction security
- IoT operating systems
- Govt. records e.g. Tsx collections
Security of blockchain
At this time. blockchain is considered as one the most secure to maintain data security and integrity, because:
- Linear and chronological sorting methods are used to store new blocks. It means every new block is must be stored at the end of the chain. If someone wants to alter that he needs to alter the previous chain and accepted it by all the nodes. It is almost impossible till yet.
- If someone wants to change data he needs to change 51% copies across nodes so that changed data become legitimate.
Usually, blockchains are large and they are adding new blocks rapidly, they automatically become more secure. The time and cost to alter blocks are increasing as the new block are adding. All the nodes can know the altered data and reject it.
We hope after reading this you got an idea of what is blockchain? and how it is working. This article is for beginners who want to know about blockchain.