As more people come to learn about cryptocurrencies and their usage, the desire to know them further, increases. Are you interested in digital currencies like Bitcoin? Probably, you’ve heard of its hype and increasing popularity. Likely, many people have come to know about crypto coins, especially the most popular one, Bitcoin. What of the technology behind cryptocurrency, Blockchain? Ever heard of it? Whether or not you understand what it is, the technology is here with us to stay and its growing significance to various sectors is a marvel. This guide will explain more about Blockchain is. Read on to find out more.
So, what’s Blockchain. Simply put, it’s a distributed and decentralized network of nodes. It’s the record-keeping technology or ledger behind cryptocurrencies like Bitcoin. It’s basically a chain of blocks, though that’s not to be taken literally in the traditional sense. “Blocks” are used in this context to mean digital information that’s stored in a public database, the “chain.” Understanding “blocks” is vital in getting to learn about Blockchain.
Blocks consist of three pieces of digital information (parts). First, they store information about transactions like the date, time, and amount. Next, they also keep information about those participating in transactions, but without using any identifying information like a real name. Only a unique signature something like a username is used. Lastly, blocks store info that differentiates them from other blocks. Each block stores a unique code called a hash (a cryptographic code created by special algorithms) that makes it distinguishable from other blocks. A single block can store about 1 MB of transaction data, meaning that a block can house numerous transactions depending on their sizes.
How Does Blockchain Work?
The technology seems complex and may be hard to understand for us who haven’t heard about it. Even so, how Blockchain works isn’t a hard-nut to crack. The blocks within a Blockchain get added to it whenever they store new data. For that to happen, however, four things must happen. First, a transaction must occur. Blocks store transaction-related info, thus there must be a transaction to initiate the storage within the block.
Second, the transaction must be verified. No individual does the work of verification like in public records of information, but the work is left for a network of computers that confirm the transaction details, including time, amount, and participants. Third, the transaction must be stored in a block. After being verified as accurate, it gets approved and stored in a block where it will possibly join other hundreds or thousands like it. Finally, the block has to be given a hash (a unique, identifying code) and also the hash of the most recent block that was added to the Blockchain. Once it’s hashed, it’s added to the Blockchain and becomes publicly available for anyone to see.
The Security of Blockchain
Interestingly, this technology is among the most secure that the world has ever had. It accounts for security issues and trusts in numerous ways. First, new blocks are always added to the Blockchain linearly and chronologically at its end and they occupy positions called “heights.” Once, a block is added to the Blockchain’s end, it can’t be undone or its contents altered. Every block contains its own hash and that of the block before it. Tampering with a hash code is an impossible thing to accomplish.
The codes are created by mathematical functions that convert digital information into a string of letters and numbers. Changing the digital information in any way will also mean altering the hash codes. To change a single block’s details, a person will have to change every block after it in the Blockchain. Editing all those hashes will take a huge and impracticable amount of computing power. Thus, once a block is added to the Blockchain, it becomes impossible to edit or delete its information. In other words, Blockchain is immutable.
The Publicity of Blockchain
As mentioned above, once a block is successfully added to the Blockchain, it becomes accessible to the public and anyone, including you, can see it. Isn’t that lack of privacy and can it not cause trust issues? While anyone can view the contents, users can also connect their computers to the Blockchain network as nodes to automatically receive an updated copy whenever a new block is added.
Every computer in the Blockchain network has its own identical copy of the Blockchain. Having information spread in such a way across a computer network makes it more complicated to manipulate. A hacker would have to manipulate every available copy. Further, even if anyone can have access to information in the Blockchain, no one can see identification info about the users making transactions. Users’ personal information is limited to a username or digital signature. So, even if transactions are publicly recorded, user data isn’t in full.
The Practical Use of Blockchain
The Blockchain technology hype comes about because of how people have realized how it’s important in practical application. Most sectors are using it as a reliable way of storing data about monetary transactions and other types. Some of Blockchain use cases in the real world include the following:
- Banking. Integrating Blockchain into banks allows consumers to see their transactions processed within the shortest time possible. It also enables banks to exchange funds with other institutions faster and more securely.
- Healthcare. Healthcare providers can make good use of Blockchain to securely store their patients’ medical records. It will provide patients with proof and confidence that their information, once recorded will not be changed.
- Smart Contracts. These are computer codes that can be integrated into Blockchain to assist in verifying and negotiating contract agreements. They operate under certain conditions agreed upon by users which when met, the agreement is carried out automatically.
- Supply Chain. Logistics and other supply chain processes can employ Blockchain usage to record orders of products. That way, it would be easy to assess the authenticity of such products.
- Digital Identity Protection. Using Blockchain’s immutable ledgers can help store personal data securely. Verifiable IDs will be created through various identity checks and will help users perform online transactions efficiently and securely.
Blockchain is here to stay with us and it has a very bright future. The more enterprises continue to realize its benefits in real life, the more hyped it becomes. We look forward to more applications of these technologies in various economic sectors.