So, whenever you hear the term Blockchain, What pops up in your mind? It may just sound like fancy geeky terms or maybe some cool new technology that is constricted among the techno-nerds. Isn’t it?
Well, if you feel the same, no worry! We are here to deliver you detailed information on Blockchain so that you can get error-proof knowledge and update your learning curve along with the growing trends.
Now, before starting this topic let me warn you if you are here while watching a Netflix Series, or in a hurry, or if you are an impatient reader then I am extremely sorry, this blog is not for you. This blog is dedicated to all those passionate readers and knowledge-hungry men and women who want to up-skill their genre of knowledge.
So, which category are you in?
If you are in the second category, I would like to congratulate you that you chose to learn, over other fancy things. So, without any further ado let’s get started. Shall we?
Oh, yeah!
Let’s understand blockchain with real-life scenarios
To begin with, imagine a world where you can directly send money to anyone without a bank or any third parties within a few seconds, and the coolest part is that you don’t have to pay the hefty bank charges or other charges associated with your transaction.
Or, maybe you can consider an online wallet where you can store money that is not associated with any banks, meaning you are your own bank. For that, you do not need to take the permission of the bank to access it, and you don’t have to worry about third parties like the government or other institution taking away your money in case of any economic policy or other similar instances like inflation and various government policies.
Yes, this is not a mere fantasy of the future. In fact, these are few instances of blockchain technology. We will see the rest in the later part of this blog.
Before getting into further discussion let’s understand what blockchain is!
What is Blockchain Technology?
Blockchain is often referred to as Distributed Ledger Technology (DLT) that makes the transaction history of any digital assets transparent and unalterable through the extensive use of decentralization and cryptographic hashing.
Without getting into technical definition let’s understand blockchain technology in layman’s terms. In a simpler understanding, blockchain technology can be visualized as Google Docs. When we create a document and spread it to other groups of people, the document is then distributed but not copied and everyone can access the document at the same time. This in terms creates a decentralized distribution chain that allows everyone to access the document at the same time. Any modification in the document is being recorded at the same time, thereby making the changes transparent.
One thing to be noted in this regard, in real-life blockchain and Google Docs is an entirely different technology. Only, a glimpse of the similar functionalities has been showcased in this blog.
How Does Blockchain Work?
Blockchain lies around three main concepts: blocks, nodes, and miners.
Blocks
Blockchain is a chain of multiple Blocks. A Block is consist of three basic elements:
Blocks.
Every chain consists of multiple blocks and each block has three basic elements:
The data in the block.
And a 32-bit whole number called a nonce. When a block is created, a nonce gets generated randomly along with it which then generates a block header hash.
The hash is a 256-bit number mated with the nonce. It generally starts with a huge number of zeroes.
When the first block of a chain is created, the nonce brings about a cryptographic hash. The data in the block is then signed and forever tied to the nonce and the hash, unless it is being mined.
Miners
Miners are responsible for creating the new blocks in a chain and this process is called mining.
Mining a block isn’t an easy task. In a blockchain, every block has its unique nonce and a cryptographic hash, and also the reference of the previous block, thus making it a chain. It is the job of the miners to find out the unique nonce through a complex mathematics problem that accepts the hash.
A nonce is a 32-bit number whereas the hash is a 256-bit number thus there are more than 4 billion possibilities to find the unique nonce-hash combination. For this, miners use special software to find the “golden nonce” or the desired combination, once it is found a block is then added to a chain and the miners enjoy a small commission for the same.
Now, in order to manipulate or make changes in a block, one has to re-mines not only the block with the change but also all the blocks in the chain. Hence, it is utterly impossible to manipulate blockchain technology.
Once a block is successfully mined, the change is then accepted by all of the nodes on the network.
Nodes
In a blockchain, no one computer or organization can own the chain, rather the chain is connected via the nodes. Now, what are Nodes? Nodes can be any electronic device that maintains the copy of the blockchain thereby, keeping the network functioning.
Each Node has its own copy of the blockchain. And since the blockchains are transparent, every action can be viewed and checked at any given time. Moreover, each node is provided with a unique alphanumeric identification number that showcases their transactions.
Types of Blockchains
As of now, there are four types of blockchain
1. Public Blockchains
These are open, decentralized networks of computers accessible to anyone who wants to validate and check transactions at any point of time. Basically, no restriction is present in the number of participants. Anyone can view the ledger and fall in with the consensus process.
Some common examples of public blockchain are Bitcoin and Ethereum
2. Private Blockchains
Private blockchain as the name suggests is not open to everyone, they do possess access restrictions and this is governed by a single entity. One who wants to join may require permission from the system administrator.
Few examples of private blockchains are Ripple (XRP), and Hyper ledger.
3. Hybrid Blockchains/Consortiums
These are a combination of public and private blockchains thus giving it hybrid characteristics. Moreover, the Consortiums possess both centralized as well as decentralized features.
4. Sidechains
A sidechain is a new mechanism of blockchain that runs parallel to the main chain. This allows the user to move the digital assets between the blockchains which in terms improves the scalability and efficiency.
Liquid Network can be cited as a perfect example for the Sidechains.
History of Blockchain
Who Invented Blockchain?
In 1982 it was David Chaum, a cryptographer who first initiated the blockchain-like protocol. Later, W. Scott Stornetta and Stuart Haber composed their work on Consortiums in 1991.
But, the ultimate blow came from Satoshi Nakamoto who first invented and implemented blockchain network and bring into the limelight, the world’s first digital currency, Bitcoin.
Who found Bitcoin?
Bitcoin was introduced by a mysterious and pseudonymous Satoshi Nakamoto. The identity of the person is still a mystery for many.
Who Owns Blockchain Technology?
Blockchain Technology is not associated with any individual or organization, nor can it be owned. Anyone and everyone can make use of this technology to run their own sets of blockchain.
Who Sent and Received the First Bitcoin Transaction?
Nakamoto was the first ever to send bitcoins. He sent 10 bitcoins to the computer scientist, Hal Finney, who built the first reusable proof of work back in 2004.
Why is there so much hype around blockchain technology?
It can be seen that a ton of attempts were made in the past to create a digital currency, yet they have failed.
The reason behind this is "Trust". If a new currency called the 'X' dollars is created by an entity, the question arises what is the proof that they won't give themselves a million 'X' dollars, or steal your 'X' dollars for themselves?
Therefore came Bitcoin, designed to solve the said problem with a new genre of technology called Blockchain. Most other normal databases, like in a SQL database, someone is in charge of editing and changing the entries (i.e. giving themselves a hundred thousand X dollars), whereas a blockchain database plays a completely different role from the traditional one.
In a blockchain, nobody is in charge of the entries, it is run by the people who use it. Moreover, the transactions of bitcoins are completely transparent and decentralized meaning no one is present to manipulate, and also bitcoins can not be faked or duplicated thereby adding trust to the people who were earlier being sceptical of the digital currencies.
Advantages and Disadvantages of Blockchain
Pros
Enhancing the accuracy due to least human intervention.
Reduction in cost due to the elimination of third parties.
A decentralized platform makes it harder to manipulate.
Transactions are safe, secure, and most importantly transparent.
It can be used as an alternative to banking that is more secure in beholding personal information especially for the citizens of countries with unstable and underdeveloped governments.
Cons
- The primary challenges lie with the significant cost of the technology.
- Most importantly, there is no regulatory body to regulate the technology. Now, this can be used as an advantage and also a disadvantage, this solely depends on how the technology is being used.
- Lower transaction per second. Now this may be subjective, with the evolution of blockchain technology, soon this problem may get dispensed.
How is Blockchain Used?
So, briefly explaining these are the few areas where blockchain can mark a significant impact
- Banking and finance
- Voting
- Currency
- Supply chains
- Healthcare
- Smart Contracts
Stay tuned to get more info on 'the uses of blockchain' which will be coming in a few days. A detailed explanation will then be provided. Subscribe to the newsletter! To get informed.
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