Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system. A blockchain is essentially a digital ledger of transactions that are duplicated and distributed across the entire network of computer systems on the blockchain.
Each block of the chain contains multiple transactions, and each time a new transaction occurs on the blockchain, a record of that transaction is added to each participant’s ledger. The decentralized database managed by many participants is known as distributed ledger technology (DLT).
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What is Blockchain Technology?
The blockchain seems complex, and it certainly can be, but its basic concept is actually quite simple. Blockchain is a type of database. To be able to understand the blockchain, it is helpful to first understand what the database actually is.
A database is a collection of information that is stored electronically on a computer system. Information, or data, in a database is usually structured in a table format to allow easy searching and filtering for specific information.
What is the difference between someone using a spreadsheet to store information instead of a database? Spreadsheets are designed to store and access a limited amount of information for an individual or a small group of people.
In contrast, a database is designed to hold a fairly large amount of information that can be quickly, easily accessed, filtered, and manipulated by any number of users at once. Large databases achieve this by housing data on a server made of powerful computers.
These servers can sometimes be built using hundreds or thousands of computers to have the computational power and storage capacity necessary for multiple users to access the database simultaneously.
While a spreadsheet or database may be accessible to any number of people, it is often owned by a business and managed by an appointed person who has complete control over how it works and the data within it.
How Blockchain Works?
Public blockchain ledgers are primarily managed autonomously and are used in peer-to-peer networks to exchange data between connected groups of parties. As is the nature of the blockchain, there is no need for an administrator.
Users work together as collective administrators. Another form of blockchain, commonly known as a permitting or “private” blockchain, allows an organization to create and administer transaction networks that are used internally with partners or from one company to another. Can be done in the company.
Whether it is used for financial transactions or product tracking, each blockchain transaction goes through similar steps. The basic principle of operating any blockchain can be broken down into four distinct, contiguous steps:
A record is made of each transaction. This record, which contains some details of the people who carried out the transaction, is authenticated using the digital signature of each. Each transaction is verified to ensure its validity.
This verification process is completed by computers connected to the network, each of which independently checks to ensure that the business is legitimate. Because it is a decentralized process, it means that every node in the network needs to agree before the process is completed.
Once verified, each transaction is added to a block that gets hashed. “Blocks” are basically groups of transaction records, and each is unique. Each block also contains a code known as a hash value (or hash digest), which both uniquely identifies it and states its position within the blockchain.
The hash also ensures the integrity of the data to show that it has not been modified since it was entered into the block. Once completed, the block is added to the end of the blockchain. This brings us to the end of the blockchain creation and verification process. Once a block is completed, another block will soon follow – usually in a few minutes.
Who are the miners in the Blockchain?
Miners create new blocks on the chain through a process called mining. Each block in a blockchain has its own unique non and hash, but it also references the hash of the previous block in the chain, so mining the block is not easy, especially on larger chains.
Miners use specialized software to solve the incredibly complex math problem of finding non-generating an accepted hash. Because non is only 32 bits and hash is 256, there are approximately four billion possible non-hash combinations that must be mined before they can be found correct.
When this happens the miners are said to have found the “golden non” and their blocks have been added to the chain. Making changes to any block earlier in the series requires re-mining not only the blocks with the changes but also all subsequent blocks.
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This is the reason that Blockchain technology is extremely difficult to manipulate. Think of it as “security in mathematics”, because finding the golden non requires a lot of time.
Advantages & Disadvantages of Blockchain:
Pros of Blockchain:
Durability and safety
The blockchain provides durability at its best. You can think of it as the Internet where there is inherent robustness. In fact, the overall structure of the technology makes it so durable. Furthermore, since it stores blocks of information around the network, it ensures that there is no single point of failure or a single unit controlling it.
This property makes the system inherently durable. Also, since no one can replace the block, it remains a solid safe platform. Apart from this, it is also quite efficient in preventing hacking attempts.
Since blockchain data is often stored in thousands of devices on a distributed network of nodes, systems and data are highly resistant to technical failures and malicious attacks. Each network node is capable of replicating and storing a copy of the database and because of this,
There is no single point of failure: a single node going offline does not affect the availability or security of the network. In contrast, many traditional databases rely on one or a few servers and are more vulnerable to technical failures and cyber-attacks.
In most traditional payment systems, transactions are dependent not only on the two parties involved, but also on an intermediary – such as a bank, credit card company, or payment provider.
When using blockchain technology, this is no longer necessary because a distributed network of nodes verifies transactions through a process known as mining. For this reason, blockchain is often referred to as a ‘trusted’ system.
Cons of Blockchain:
The blockchain revolution hinges on public-key cryptography, also known as asymmetric cryptography. It provides ownership over blockchain data when combined with private keys.
While the public address can be shared, the private keys have to be kept secret, they need to access and decrypt the data on the blockchain ledger. A private key converts the rumble of characters into usable data. Its parallel in the world of cryptocurrency is like the pin number on a debit card.
Despite the many benefits of this technique, users using evidence of work are usually inefficient. Blockchain mining is highly competitive. Combine this with only one “winner” in a set time frame, the work done by other miners is completely ruined.As a result, miners try to increase computational power. This gives them a strong chance of mining a valid block hash and any related rewards. An increase in computational power requires an increase in the network’s resources.