Suddenly, blockchain is everywhere. The technology is actually invented to power the Bitcoin in 2008. Now technology is using everywhere. Once the technology was a brainchild of a person or group of an anonymous person called Satoshi Nakamoto. The identity of Satoshi Nakamoto is one of the biggest mystery of the 20th century. the blockchain is a buzzword now. you may be wondering what the hell blockchain actually. Do you know what is blockchain? How does blockchain work? Like a ton. Let’s discuss this.
Blockchain was invented by Satoshi Nakamoto in 2008. It is actually invent-ted for use in the first cryptocurrency i.e. bitcoin. The purpose of this technology is to prevent the double spending problem without the need of any central authority.
In this article, I am going to discuss each and everything about blockchain. From what is blockchain to future of blockchain. Let’s start.
What is blockchain
Before going further discussions let us put a definition. To understand its basic functioning and functionality, it is very necessary to start first with the definition.
The blockchain is a continuously growing list of records called “blocks” and it is maintained by encrypted networks.
All the transactions data are saved inside cryptographic blocks. The blocks are connected in a hierarchical manner to each other. A block may contain any type of data, such as unique digital identifiers of physical products.
This creates an infinite chain of data blocks. Hence the name blockchain. For this region, you to trace and verify all the transactions you have ever made.
To get more clarity about blockchain you need to understand cryptography.
You have heard the word cryptocurrency. But do you heard cryptography?
The term cryptography is a Greek word which means “secret writing”. It means to protect information by transforming it into an unreadable format. You need a specific key in order to read it.
The idea behind cryptography is far old than internet and computer. The military used more complex cryptography before computers.
Nowadays encryptions are more complex and digital. So it is quite impossible to decode them by simple math calculation by human beings.
But digital encryption technology is not immutable. Smart hackers can break the algorithm. But the encryption level like 128-bit now standard on the Android and iPhones can is enough to keep your data safe from the hackers.
How does blockchain work
You may think about how the magic happens. How does blockchain works?
We have come across cryptography and see the encryption. Encryption is used to protect files so that only specific people can access. But if a situation arises when you have to show the information to everyone.
Let us take an example,
The Government have to show financial information to the public and still needs to be secure. Here come the problems. The more people can see and edit the data, the less secure it is.
So what is the solution to this particular situation?
The concert solution is the blockchain. In blockchain whenever the information is accessed and updated the change is verified and stored and then tightly sealed off by encryption. It is unable to edit it again. Then the record is added to the blockchain network.
When someone edits the information and make some changes the record it starts again. It preserves the new information in a new “block” that is also encrypted and attached to the old block.
This process is repeated over and over. Whenever a block is edited it creates a new block and attached to the old one. So everyone in this network can see all the changes ever made. But If anyone wants to edit the record he/she can edit only the latest version.
It is mostly used in digital currencies like Bitcoin. Actually, the idea of blockchain is started from Bitcoin itself.
The best example of this is Google Docs or Office 365. If you have access to the document you can edit it. But whenever you make some changes the change is saved as a new spreadsheet. Then it is locked in the document history.
So you can check the old copies but can edit only the latest version. You can’t edit the old versions of the spreadsheet that have already been blocked.
Actually, blockchain is a combination of cryptography and per-toper networking. Each individual computers constantly checking and updating each other. They make sure that no one can modify the previous records. This is called decentralization because there is no central servers or authority to do this.
That’s the main idea behind the blockchain. It is continuously accessed and secure the data at the same time without the help of any centralized servers.
Each user in this network contributes their computer power to solve some complex solution known as a “hash”. The denser the data the more complex more processing power is needed to solve it.
The blockchain is more complicated but this is the basic idea.
Why is blockchain secure data ledger
There is a so-called word for blockchain i.e. secure.
As there is no duplicity of data in the blockchain network there is no chance of data corruption. It is very difficult for hackers to hack the blockchain because it is a distributed ledger system.
Advantages and disadvantages
The blockchain is a revolutionary technology but it has some advantages as well as disadvantages. Let us discuss it.
This is the biggest advantage of the blockchain.
The core value of a blockchain is that it enables a database to be directly shared without a central administrator. But you may think why disintermediation is good for us?
Because a database is still a tangible thing even though is just bits and bytes. Think about this, If the contents of a database are stored in the memory and disk of a particular computer system or any server run by a third party even if it is a trusted organization like governments, banks or any organization, anyone who somehow got access to that system can easily corrupt the data within.
Thanks to blockchain because we can now replace these third-party organizations or governments with a distributed database, locked down by intelligent cryptography.
Durability and reliability
Because of the decentralized nature of blockchain, it does not have a central point of failure and is a better option to withstand malicious attacks.
Blockchain data is super accurate, consistent, complete, timely, and widely available throughout the network.
Transparency and immutability
Any changes to blockchain are publicly viewable to people in this network. All parties creating transparency and all transaction are immutable, meaning they cannot be edited or deleted.
Blockchain has some disadvantages also.
This is the biggest disadvantage of the blockchain
As blockchain is decentralized in nature it is always slower than centralized databases. When a transaction is being processed, a blockchain has to do all the same things just like a regular database does, but it carries three additional burdens along with normal operations as well.
- Signature verification: Whenever a blockchain transaction occurs it must be digitally signed using a public-private cryptography scheme such as ECDSA. This is necessary because transactions propagate between nodes in a peer-to-peer, so their source cannot otherwise be authenticated.
- Redundancy: This isn’t about the performance of an individual node, but the total amount of computation that a blockchain requires. In a blockchain network, they must be processed independently by every node in the network. So lots more computing power is needed for the same end result.
The uncertainty of regulatory status
Modern currencies have always been created and regulated by national governments. But blockchain and Bitcoin face a hurdle in widespread adoption by pre-existing financial institutions of its governing rules and regulations status remains unsettled.
The hardware components used in the blockchain network is very costly. You need a very high initial capital.
Large energy consumption
The most used blockchain network areas like cryptocurrency mining. It uses a very large amount of power to run the powerful hardware.
How are blockchain using cryptocurrencies like Bitcoin
To understand the use of blockchain in Bitcoin let us assume an example.
You want to buy a car from a person. Instead of money, you want to spend a Bitcoin. You connect to the bitcoin blockchain with your software and transfer the Bitcoin to the seller of the car.
Now your transaction is visible to everyone in this network. But your identity and the seller identity is signature. Miners have to solve a complex math problem in order to verify the transaction.
One the transaction is verified, one Bitcoin is moved from your account to seller. Then the record is added to the latest block in the chain. Then the book is sealed and protected with cryptography. The blockchain grows longer, containing a complete list record of all transactions each time it’s updated.
Is blockchain secure
After reading this you may think how much the blockchain is secure?
Each Individual transactions are secure, and the total record of the block is secure, so long as the methods used to secure the cryptography remain “uncracked”. This is really hard to break the stuff.
The only weakest part of the blockchain is the user like us. If you share your personal key to someone else or your computer may hack, then they can make an addition to the blockchain. There is no way to stop them. They stole your Bitcoin and transferred to anonymous users. There is no way to find the attacker.
So as long as you keep private your personal key, the blockchain is very secure.
Other major uses
With a huge success in Bitcoin, many industries have turned their focus to Blockchain technology. After knowing the importance of this technology, people are giving more importance to the blockchain. Let us discuss some major uses of blockchain technology.
In banking and payments
In the Blockchain technology, as all of the data is being encrypted and secured. There is no change in duplicity. This feature of the Blockchain technology is using excellently for money transfers and international payments.
In the insurance sector
Blockchain technology is using In the Insurance sector. This is working with a concept, smart contracts. Smart contracts are run through blockchain. If the contracts and claims validated by the network could be recorded on the blockchain. It will eliminate any invalid claim made or multiple claims made for the same accident.
Blockchain playing a vital role in healthcare. Health data is a sensitive data of the patient it must have to keep secure without any privacy concerns. With the help of blockchain, without the private key, anyone cannot edit the data.
Healthcare is now digital. Now-a-day health records are frequently linked with the medical devices i.e. IOT devices. The blockchain technology can be used to connect those healthcare IOT devices with the health records of the patient. It reduces the risks of the siloing of the data related to the medical devices.
In Audit and Regulatory Compliance
As all the data in the Blockchain technology is secure, encrypted and authenticated, it keeps the integrity of the records and reduces the possibility of errors.
The main benefit of using this technology in the accounting field is that once the account records are created and are sealed with blockchain technology, no one can change the records. The owner of this record also cannot do this. This could eliminate any need for the auditors to audit it manually.
Blockchain technology partially using in the Voting area. In the feature, it will implement a lot. The most important and interesting thing about the blockchain technology is that the past stored data is sealed and cannot be changed.
Voter fraud is a major and critical imposition on the productive and accountable formation of democracy across the globe. So once a voter makes a vote he/she can’t vote again. It also provides an unhackable electronic vote-counting system.
In real estate
The blockchain is using in real estate also. As this technology is highly encrypted it reduces the chances of any fraud. The real Estate data is connected with it and recorded, it will offer transparency in the selling and purchasing process.
Future of blockchain
The blockchain is a new technology and most people have no idea about it. The future of the world could be dominated by blockchain. Nowadays many sectors have already implemented this technology. Here are some predictions about blockchain.
- Blockchain has the potential to reduce cybercrime by offering identity authentication.
- Small businesses could use blockchain to create trusted and secure trading platforms among themselves.
- Blockchain will be adopted by central banks because it is cryptographically secured. It will become widely used.
- Blockchain technology could replace today’s centralized financial infrastructure entirely.
- It has great potential to create new industry opportunities and destroy traditional technologies and processes.
- Blockchain technology will make the world smaller as its superfast speed and efficiency of transactional activity.
- Elections are currently expensive and corrupted. Blockchain will replace the traditional procedure.
We have started our discussion from what is blockchain. Now we are in the conclusion stage. The blockchain is a revolutionary technology and it allows people to secure digital relationships that were impossible before.
Major open source tools like Hyperledger are trying to make blockchain techniques available to a wider range of people. It will help the large organization as well as small business start-ups.
It can make a huge impact on the financial sectors. It’s too late but it is an impressive technology. You can find the impact of blockchain technology in each major sector. As technology is rapidly increasing and changing it is predicted that the blockchain technology is the future.