Blockchain explained: What is Blockchain Technology?
People find it hard to understand how this technology works. Although the term blockchain technology appears more times than they can count, the meaning remains foggy to them.
All thanks to cryptocurrencies, the popularity of this technology has increased immensely.
After using blockchain technology to power cryptocurrencies, other sectors have begun to adopt it into their ecosystem.
In this article, we will break down all the complexities and technical jargon into simple and understandable terms. In the end, you will know what this technology has in store for us in the future.
What is Blockchain Technology?
A blockchain is a distributed ledger or database that records transactions or information that cannot be changed, manipulated, or erased.
A blockchain is a type of Distributed Ledger Technology(DLT) that contains lists of records of information that are duplicated and distributed across several networks of computers across the blockchain.
An analogy is that of a Google Doc. When we create a Google Doc, other users can view its content on any computer via a link. Any computer can also view the content without tampering with it.
How does blockchain technology work?
Using its name, a blockchain stores information in blocks, which are then linked together to form a chain.
What makes a Block?
It consists of three things. They are;
- The data in the block.
- Nonce — “Number Used Only Once.” It is a number randomly generated when the blockchain creates a new block.
- Hash. A hash is a number that is specific to a block. You can use a hash to find a block. When you input a hash id in the search box of a blockchain, it can only direct you to one block.
After creating a hash, the new block is linked together with the previous one.
Types of Blockchain
There are four types of blockchain technology. Each one of them has distinctive properties.
Public Blockchain
It is also known as a permissionless or trustless blockchain. A public blockchain allows anyone to participate in the network. Participants become nodes of the network, validating data across the blockchain.
The security of this blockchain is high because it is unlikely for some bad actor to take over the network. The nodes of the public blockchain are many, which means no malicious activity can go unnoticed.
However, there is a disadvantage: a large number of nodes makes the processing of blocks take a long time.
Private Blockchain
It is also known as a permissioned blockchain. A private blockchain restricts the access of the network to certain nodes whose access rights might also be minimal.
The security is less, compared to that of a public blockchain. However, it is more efficient and has a shorter processing time.
They are controlled by a single organization.
Hybrid Blockchain
As you might have guessed, it is the sweet spot between public and private blockchains.
Some parts of the blockchain are restricted, while others are available for the public to see and participate in.
This blockchain is controlled by a single organization.
Consortium Blockchain
This is more like a private blockchain, but it is not controlled by a single organization. It is controlled and governed by groups of organizations.
This blockchain is said to be more decentralized than the private blockchain.
Properties of public blockchain
Since cryptocurrencies use the public blockchain, let us take a look at some of the properties.
Decentralization
Public blockchains are decentralized — they are not owned by a single entity. A public blockchain is owned and governed by every participant in the blockchain.
No single participant can make or alter any decisions without the nodes reaching a consensus — unanimous agreement.
Also, the nodes are anonymous. Their identities are unknown to each other.
Security
Let us imagine that the computer networks powering a blockchain are in a place (which is usually the case). This single point of operation puts the blockchain at risk.
If anything should happen to these computers (malware, fire, an attack, etc.), the blockchain will cease to work.
However, on a public blockchain where anyone can participate, it is harder for these attacks to happen. This is because all the computer networks participating in the blockchain are scattered all over different locations.
That is why the security of a public blockchain is tight.
Anonymous Nature
All the users of a blockchain are anonymous. There is no need to share any information about yourself.
You are also untraceable on the blockchain.
The inventor of the bitcoin blockchain, Satoshi Nakamoto, remains anonymous to this date.
Regulations
Since the public blockchain is not controlled by a single authority or organization, there is no regulation whatsoever.
No one can limit the blockchain or impose any restrictions.
Conclusions
As you can see, blockchain technology is not used only for cryptocurrencies. Other sectors, like legal firms, healthcare, politics, and real estate, use this blockchain technology.
Blockchain has helped many businesses scale up efficiently, cheaper, and more securely. It has also helped the masses to remove restrictions.
Seeing this technology grow, there is no doubt that it is the technology of the future.
If you enjoyed reading this article, kindly follow me for more content like this.
Also, give me a clap if you learned something.
