In this ever-changing world, we are in, new advancements and developments keep on happening in the blockchain technology world. Every next day one might see another change or update with it.
Someone who has been following the news or spends adequate time on the internet must have heard about the terms Cryptocurrency or bitcoin or blockchain by now.
If you are also keen to know what this hype around is about which is keeping everyone at their toes, here’s an in-depth explainer on blockchain technology and everything you need to know to get started in the financial tech world.
WHAT IS BLOCKCHAIN TECHNOLOGY?
A blockchain is a growing list of documents, known as blocks, that are cryptographically linked together. A cryptography copy of the preceding block, a timestamp, and transaction data are all included in each block (generally represented as a Merkle tree).
To get into the hash, the timestamp validates that the transaction data existed when the block was published.
because each block contains information about the one before it, they form a chain, with each new block reinforcing the preceding ones.
As a result, blockchains are resistant to data tampering since the data in any given block, once recorded, cannot be changed retrospectively without affecting all subsequent blocks.
A peer-to-peer network often manages blockchains for use as a publicly distributed ledger, with nodes.
In order to communicate and validate new blocks, everyone must follow a protocol. Though forks are possible, blockchain records can be deemed secure by design, and they demonstrate a distributed computing system with excellent Byzantine high availability.
To sum it up, a quick explainer:
- A database is a set that holds encrypted data blocks and links them together to build a chronological only one for the content.
- Instead of being duplicated or moved, digital assets are distributed, producing an immutable record of the asset.
- The asset is decentralized, giving public access in real-time and transparency.
- The authenticity of the document is safeguarded via a transparent record of changes, which builds trust in the asset.
- The existing security features of blockchain, as well as it being a public ledger, make it an ideal technology for practically every industry.
Why is blockchain important?
Data is the soul of business. The quick and more accurate it is obtained, the greater. Because it delivers immediate, shareable, and entirely transparent information kept on an immutable ledger that can only be viewed by permissioned network users, blockchain is excellent for delivering that information.
Orders, payments, accounts, production, and much more may all be tracked using a blockchain network. You can see all facts of a transaction end to end since members share a single view of the truth, providing you greater confidence as well as additional efficiencies and opportunities.
Benefits of blockchain:
Blockchain technology came in handy and much in demand since the duplicate record keeping and third-party verifications had been wasting a lot of time in operations throughout the way business had been conducted all this while.
There were plenty of dangers associated with record-keeping, making them susceptible to cyber crimes and risks such as fraud and cyberattacks.
The process of data verification also hit a snag making it slow due to its open structure. With the onset of new technology, internet 2.0, and with the advent of the Internet of Things, transaction volumes started reaching the sky, knowing no bounds.
There was a demand for better processing since the above factors made things difficult. Blockchain technology came as a boon, becoming the perfect solution for this issue.
How does Blockchain work?
In order to understand how this technology works in-depth, first, we need to know the three main concepts blockchain is based on.
- Blocks
- Nodes
- Miners
Blocks:
Each and every chain is made up of several blocks, each of these comprises three key elements:
- -The information that is contained in the block.
- -A nonce is a 32-bit whole number. When a block is constructed, a nonce is generated at random, which then produces a block header hash.
- -The hash is a 256-bit number that is associated with the nonce. It has to begin with a large number of zeros (i.e., be extremely small).
A nonce provides the cryptographic hash when the first block of a chain is formed. Unless it is mined, the data in the block is regarded as signed and irrevocably linked to the nonce and hash.
Miners:
Mining is the process by which miners add new blocks to the chain.
Every block in a blockchain has its own unique nonce and hash. but it also refers to the hash of the previous block in the chain, which then makes mining a block difficult, particularly on the big chains.
However, the miners are able to utilize this using specialized software to solve the exceedingly difficult math issue of generating an acceptable hash using a nonce.
Since the nonce is only 32 bits long and the hash is 256 bits long, there are around four billion nonce-hash combinations to mine before finding the proper one.
Miners are considered to have discovered the “golden nonce” when this happens, and their block is added to the chain.
Changing things to almost any block earlier in the chain necessitates re-mining not only the affected block but all subsequent blocks as well.
This is why manipulating blockchain technology is so tough. Consider it “safety in math,” because identifying golden nonces takes a long time and a lot of computational resources.
When a block is successfully mined, all nodes in the network acknowledge the change, and the miner is compensated handsomely.
Nodes:
Decentralization is one of the most key aspects of blockchain technology. The chain cannot be run by a single computer or entity. Instead, the nodes connecting to the chain form a distributed ledger.
Any type of electronic equipment that saves copies of the blockchain. and keeps the network running is referred to as a node.
Every node has its own copy of the blockchain. In order for the chain to be updated, trusted, and confirmed, the network must algorithmically approve any newly mined block.
Every action in the ledger can be easily reviewed and examined since blockchains are transparent.
A unique alphanumeric identification number is assigned to each participant, which is used to track their transactions.
The blockchain’s authenticity is maintained and users’ trust is built by combining public data with a system of checks and balances. In a nutshell, blockchains are the universality of trust through innovation.
Cryptocurrency: a product of the blockchain technology
The most renowned and perhaps most contentious application of blockchain is in cryptocurrency. Cryptocurrencies, such as Bitcoin, Ethereum, and Litecoin, are digital currencies (or tokens) that may be used to purchase products.
Crypto, is like a digital version of cash, which may be used to purchase anything including meals to properties or luxury items.
However, unlike with cash, crypto relies on blockchain to serve as both a public ledger and a stronger cryptographic security mechanism.
Hence, ensuring that online transactions are always recorded and protected as well.
Cryptocurrencies are digital currencies that record and safeguard all transactions using blockchain technology. A cryptocurrency (for example, Dogecoin, Bitcoin) can be used to pay for everything.
Ranging from ordinary things to major purchases such as cars and houses.
Additionally, it can be purchased with one of several digital wallets or trading sites, then digitally transferred announced the signing of an item.
Along with the transaction and new owner being recorded on the blockchain.
The allure of cryptocurrencies is that everything is recorded in a public ledger and encrypted using cryptography.
Thus, resulting in an irrefutable, timestamped, and secure record of every transaction.