Blockchain Technology is a chain of records or blocks which are linked using cryptography. This is the building block of cryptocurrency and consists of transaction data. Blockchain distribution of data and transaction records between two parties efficiently in a permanent way. The blockchain technology is the new ingenious invention, which is the brainchild of the inventor Satoshi Nakamoto, since then it has evolved every day and what is blockchain is one of the most asked questions in Google.
Blockchain technology is the backbone for cryptocurrency and any other digital currency, and it has also been known for use age in other Technologies. Digital information can also be passed using blockchain Technology. Let us know about the properties and the working of blockchain Technology.
What is blockchain in cryptocurrency?
- When someone asks for a transaction, the blockchain starts
- Then the requested transaction is broadcast to a peer to peer which has computers called nodes
- This peer to peer to peer network validates the purchase using an algorithm
- Once the transaction is initiated, then it is verified finally it gets completed
- The new block is added to the existing blockchain which becomes on alterable and permanent
- This transaction is now completed
What is blockchain technology?
Originally blockchain is a collection of data which is clustered by computers and not owned by any centralized system. The blocks of data are secure and bound together using cryptographic principles. The unique ability of cryptocurrency is it has no central authority and is a democratic system, and open to use for anyone and everyone. Hence cryptocurrency is very transparent. Blockchain is considered to be a leader in the field of digital currency, and it can record not an only financial transaction but also everything other than it.
Explanation of blockchain Technology
In cryptocurrency, there are no transaction costs that occur, but their infrastructure cost. Blockchain is very efficient and Indigenous way of passing information in a safe and fully automated manner. The transfer of knowledge takes place by the creation of the block. In this, one party initiated by creating a blog and this blog is a sign of verification of the transaction, this block is verified by a few thousand and millions of computers around the network. And this verified block of the transaction gets added to the chain, which is stored on the internet. The best thing is it is not only a single record but 800 Accord with a unique history. And any alteration in the entire chain is not possible. This model of monetary transaction is beneficial.
- Let us give you a simple example, in which the blockchain technology works. Think of Railways, we all buy tickets from the Railways. We pay with the credit card, and the company cuts a charge for processing fees. With blockchain technology, one can save on processing fees. The transaction between two parties hence becomes easy and depends on a small fee for the transaction. It can replace all the current Business models.
- Another example is of gig economy hub, most of the freelancing websites charge 0.5 dollars on five transactions, but if you use blockchain Technology the transaction can be made from any part of the globe and will be free of cost.
- Recently Uber and airbnb started using blockchain technology for the transaction. The transaction becomes easier without disrupting the business model and challenging the traditional economy; with this, there is no need for processing fee for a middle man. Transaction fees are almost they charge you in terms of article read or video views. If you need a considerable amount of transaction, you do not have to worry about the transaction cost. Without companies like Apple and Spotify music artist can make a lot of money from there recorded music.
- Ebooks can also be circulated in the form of blockchain code instead of Amazon and the credit card company through which you to pay, and you could directly buy from the author with blockchain transaction and unlock the book. You do not have to spend unnecessarily to marketplaces like Amazon and Flipkart. With blockchain technology, there would be a revolution in the financial world and changes would be more profitable to people.
- Stock exchanges would also be changed with blockchain technology. With blockchain technology, financial Institutions could go bankrupt, and once everyone understands the advantages of blockchain Technology, it can be implemented quickly. The bankers will not have any right to your money, and stock brokers will not be able to earn a commission.
The working of blockchain Technology
In a network of thousands of computers, a spreadsheet is duplicated thousand times, and regular updates of the spreadsheet have designed this network. This is how blockchain technology works. The spreadsheet is the database which is continuously updated with every transaction taking place. Also, the blockchain database is not stored in a single location; instead, it is public so that it can be easily verified. The blockchain technology has gained popularity because
- A single entity does not own it, and it is not centralized
- It is transparent, so tracking of data becomes easy
- No one can compare with the data which is stored once inside the blockchain
- The information is cryptographically stored, and no one can alter it
What are the pillars of blockchain Technology?
Blockchain technology works on three fundamental pillars like decentralization, immutability and transparency.
Before the advent of BitTorrent and Bitcoin, centralized system of money transfer was available. In this, the centralized authority had the power stored the data. If you wanted to conduct a transaction, you had to pay the centralized entity. This is what our banks are, they save the money, and whenever we have to pay for someone, we can pay through the bank. This is a structure of client-server model all the transaction takes place through a server with charges some amount of fees on every transaction. One more example of a client-server network is when you google something, you send the question to the server, and it gets that see you with the relevant information this is what a centralized system does.
In a decentralized system, as a single entity does not own the data, and everyone knows about the network and holds the information, it cannot be altered. You can easily interact with the friend without using a third party application for a transaction. With this you can easily send money to anyone without going to a bank, as it is decentralized there is no ko authority to dictate the truth to other participants in the network, every participant in the system can access the history and confirm a new transition.
Now it might make you confused to that the concepts of blockchain work on privacy and transparency how is that possible. This is possible as the Identity of the person is hidden in a complex cryptographic number and represented only by their public address if you make a transaction you will not be able to see your name and instead you will see a combination of number and alphabets. The Identity of the person will be secure, but the transaction will be available in all the public addresses, this kind of transparency was never present in any financial system it adds to the level of accountability and is a much-needed change.
In blockchain technology it means that when something is entered into the blockchain, it cannot be disturbed or tampered with, this is a costly process for financial institutes, as no one can tamper with the data. There will be no one responsible for keeping the account of all the people. This property is present in blockchain due to cryptographic Hash Function. No one can fit around with the account of the company as it cannot be changed. Hashing means putting a string of any length which gives out a fixed range of the output. SHA- 256 is the secure hashing algorithm which is used in blockchain Technology, and no matter how small or big input you are giving the production will be fixed to 256 bits length. This is the thing which makes blockchain amazingly reliable.
How can the blockchain be maintained?
The blockchain is maintained using appear to be a network which is a collection of nodes and interconnected computers. A series of machines support the system, and individual computers take part in the function of receiving the input performing the task and giving the output, the workload is equally distributed between the peers, and there is no central server. Peer to peer network is used, that maintains the blockchain network.
What is peer to peer network, and why do people use it?
Peer to peer network is the best for distributing the workload. Several decentralized and distributed peers maintain the system and the nodes. People use this method for file sharing, which is also called torrenting. If you use a client-server model coding that will be extremely slow and will depend on the health of the server it is also prone to censorship, but on the other hand if you have a peer to peer iGNOU Central authority even if one Peer goes out of network you will have other pairs to download it from. Hence there is no scope of censorship. The central web service system is prolonged, has a single point of failure when the entire network will stop, and means high bandwidth usage for the server. Decentralized peer to peer system has no single point of failure, is hugely all downloaders are also uploaders.
What is the role of network and node in cryptocurrency?
The cryptocurrency network structure is structured according to the consensus mechanism and peer to peer network structure. Cryptocurrencies like Bitcoin and Ethereum uses consensus mechanism, and all the nodes have equal rights and privileges, any single node has no special powers; hence, their function depends on the degree of participation. This follows a flat topology system, and there is an absence of any Hierarchy. Due to this decentralized system of cryptocurrency, they stay true to their policy.
What is the role of a node in Bitcoin and cryptocurrency?
A note is simply a computer which participates in the network and verifies the transaction or helps in the mining, keeps control of the blockchain and acts as a light client keeping the shadow copy of the blockchain. This is not really, which makes it difficult to use cryptocurrency. Although there might be some supernode, who is in charge of overall network health. Cryptos are better because they have both a decentralized system and speed.
Who uses the blockchain technology?
Blockchain technology is the next biggest thing because it stops the interference of any middle man or a centralized bank, today there is a massive demand of blockchain developers because in the future finance will be the most vigorous use of technology.
Now let us take a look into what is blockchain and what are the applications to us.
Blockchain gives internet users to create authentic Digital information, and there are many applications which can be developed using blockchain Technology.
1. Smart contracts
A simple contract can be made using this technology which performs simple functions. In these simple codes are enabled that will get executed when they meet the specified conditions. Ethereum was an open source blockchain project which brought change on a significant scale. Smart contracts can also be programmed using pure functions.
2. Sharing economy
Sharing economy has become a success with companies like Uber and air bnb. Many riders are depending upon services like Uber for transportation. So there are more and more people depending on sharing economy, by enabling direct peer-to-peer interaction between parties can take place decentralizing the economy results. Open Bazar uses blockchain to create a system which is more like eBay, but it is peer-to-peer. Tense it takes no transaction charges.
With peer to peer Technology, crowdfunding initiatives can get advance work and become popular it as they have a direct say in product development. Blockchain Technology has a lot of potential to Usher for economic cooperation and a new economy. There are many crowdfunding initiatives like Gofund me, and Kickstarter is working and creating crowdsourced venture capital funds.
With full transparency and public access the decentralized bitcoin technology works for ordinary people, this blockchain technology brings complete clarity two elections, and while taking polls, there are many apps currently working for bringing polling through blockchain so that it is transparent and verifiable.
5. Supply chain auditing
This works for a lot of consumer-based goods; this is an easy way to buy the whole thing. With blockchain technology of location and it will become easy so that people can get certified product like a diamond and more valuable things.
6. File storage
With decentralization file storage on the internet have cleared benefits, this prevents the data from being hacked or getting lost. The interplanetary file system is the new thing on the internet, which works on the centralized client-server relationship. The content delivery system receives a lot of improvement with this.
7. Prediction markets
The prediction markets have a high degree of accuracy as blockchains are the wisdom of the crowd, and no one will be able to doubt it. The real world events are predicted by blockchain.
8. Protection of intellectual property
Digital information can be reproduced worldwide. Hence nothing is safe, but copyright holders have also not been fortunate because they lose their control, when the thing is available on the internet. With smart contracts, you can protect the copyright and automate the sale of your products directly to the customers without the interference of any medium. In such cases, blockchain Technology can be used so that the risk of copying and redistribution is reduced.
9. Internet of things
Internet of things is a network which is managed by electronic devices like monitoring of air temperature in cold storages. This work on remote systems and combination sensors, software and technology, operating the data object and mechanism. With system efficiency, the cost of monitoring improves. The current age is the time of the internet of things, and from today a lot of applications will be managed by iot.
The blockchain technology e helps in the selling and buying of renewable energy which is generated by using the microgrids; there is the leading solar panel that reduces the excess of power, with blockchain Technology it can be Redistributed and can be used for automation of applications. There are many companies which are currently working on neighbourhood microgrids they are also called intelligent grid which allows monitoring and redistribution of energy within a network, that is is also an example of the function of iot.
11. Management of Identity
There are a lot of transactions which happen online, and there are also many risks on these e-commerce platforms. With a secure identity, the transaction gets more comfortable like in a shared economy or a blockchain technology. Having a digital identity initially can be a complicated process that meets technical challenges, but in a long-term, that will be beneficial.
What are the vulnerabilities of the centralized system?
One single entity stores the data which can be easily targeted by potential hackers
If there is a software upgrade in the centralized system, the entire system will come to a halt
If the centralized system shuts down for a reason, no one will be able to access the information
Suppose the centralized system gets corrupted and hacked the data will be compromised