The term Blockchain is revolving around the tech world more than the speed of light now. Everyone is wondering, what is blockchain and how exactly does it work? Well, even if you feel the same then we are here to help. Blockchain Technology combines the freedom of internet and security of cryptographic algorithms to let different parties easily establish trust between each other and most importantly transfer money, stocks, and other digital assets quickly and in a secure environment.
Bitcoins – a digital cryptocurrency, first used Blockchain technology to keep track of transactions. Blockchain allowed Bitcoins to easily keep track of money flow among its network users. Not just money flow, blockchain can be used in a wide range of applications. Interestingly, it is already being used in supply chain tracking and peer to peer pay. However, blockchain right now is far from perfect to be used in applications like online credit payments where usually thousands of transactions take place in a second, unlike in case of Bitcoins where just 4-8 transactions occur per second.
You can think of blockchain as a digital transaction ledger where it stores all your transactional data in an encrypted form and interlinked with other transactions to maintain data integrity.
Structure of blockchain database:
Blockchain database basically contains two type of records – Transactional data and Blocks. A single block contains all transactional-related data which is encoded using a hashing function to generate a hash code which is a unique set of characters. Likewise, there are multiple blocks in a chain and each block is related to the next block as each block includes the hash of the previous block. This ensures data integrity.
How does blockchain work?
Let’s understand the concept of blockchain by a very simple transaction and how a blockchain network will handle it:
1. Person A sells a product to B.
2. The transaction information such as product details, seller details, price, etc. is recorded and share with other computers in the blockchain network.
3. On the blockchain network, the transaction information is bundled with other transaction into a block. Every transaction in a block is time-stamped which makes them unique as well.
4. Once a block is complete, it is also time-stamped by the network so that all information stays sequential in nature which obviously avoids duplicate entries in the database.
5. The completed block is then sent to all computers in the blockchain, where it is appended to the chain. The timestamps of blocks play a vital role in placing them at the right order and ensure that every user has the latest version of the data.
Blockchain data security:
6. The Blockchain Technology uses a Hash function to create hashes of a block using all its transactional data – a unique string of characters – these unique hashes makes unbreakable links between blocks.
7. Hash from the previous block is added to the data of the next block. So when the next block goes through the hashing method, the generated hash still contains the imprints of the previous block which continues to the very end of the chain.
So if there is any attempt to change data of the previous block then the hash that cipher in the next block won’t match. This mismatch will continue through the complete blockchain denoting data discrepancy.
Application of blockchain technology:
Blockchain Technology is still at its early-stage, but its potential is enormous. It establishes trust, paperless ownership of assets like money, property, stocks, products, etc. However, its success will depend on how companies adapt to this new technology. Blockchain is secure, but as it mainly focuses on the handling of digital assets and transactions, hackers might not be very far behind to find a loophole in the system and exploit it to earn some quick money. As you might have heard, some Bitcoin users lost their bitcoins and they were not able to retrieve them in any case. Also, blockchain cuts the role of various intermediaries in most transactions which means those people will oppose the technology in their respective industries.
That’s all readers about what is blockchain and how it really works. If you like our informative post, then don’t forget to share it with your friends on social media. Also, if you have any query related to the blockchain, you can write us at [email protected]. Just like you we also new to this technology but we will do our best to help.
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