Blockchain 101: An Introduction to Blockchain Technology
The first time I heard about blockchain technology, I found it a very confusing concept. words like “Token”, “Bitcoin” and “Miners” were being thrown around which even made it harder for me to comprehend. It took me a while of listening to a good number of tutors to understand the concept and will be explaining my learnings in this series.
To understand blockchain, one has to understand the terms “centralization” and “decentralization".
CENTRALIZATION is the traditional system of organization whereby services and decision makings are dependent on a central authority whereas, in DECENTRALIZATION, services are deployed in a way that no central authority has absolute control over data and decision makings.
A good example of Centralization is the banking system. This system is one you might be conversant with and below are some of its shortcomings:
During Payment from one’s bank/money wallet to another account in the same bank, different bank or, across the border, One would notice that transactions are often dependent on third-party intermediaries such as the bank or apps like PayPal, etc. These intermediaries have secure ledgers where databases of each transaction performed are stored. These ledgers can be tampered with and this can easily lead to financial fraud/crises.
Payment for services offered by these intermediaries especially when international transactions are mostly expensive.
Also, Intermediaries are often owned/ controlled by an individual or a group of individuals so decision makings are usually not unanimous.
The hunger for autonomy and removal of third-party intermediaries gave birth to the blockchain technology
What is a Blockchain?
A blockchain is simply a secure decentralized and distributed database.
Blockchain is decentralized because services or applications on the blockchain are deployed on a network in a way that servers are independent i.e. Applications or services continue to be available and usable even if a server or a group of servers on a network are not available.
Blockchain is trusted and secure because its database is made up of a string of blocks that have been encrypted and given an identifier called a hash. information on these block are immutable i.e. Information can’t be changed.
Blockchain is distributed because servers or nodes in a network are interconnected i.e. no one server is the chief server. it is also called a public ledger because it contains a history of transactions, it also mimics a normal ledger by not allowing past transactions to be changed but modified.
What Does Blockchain Offer?
The enablement of trust is blockchain’s most cited benefit. Information on the blockchain is immutable i.e. can’t be changed so chances of manipulation by parties are low.
Improved Privacy and Security
The elimination of third-party intermediaries creates an avenue where data is more secure, unauthorized activities such as inappropriate distribution of data are shut out. Fraud is also reduced because of blockchain’s end- to- end encryption.
How Does Blockchain Work?
To understand the dynamics of blockchain at more than just a superficial level you will have to understand a few concepts from a branch called cryptography.
Cryptography is the practice and study of techniques for secure communication in the presence of adversarial behavior
Cryptography covers encryption and decryption (the encoding and decoding), hashing (turning data into fingerprint digests), digital signatures (proofs to validate messages) and, other concepts which I will be explaining extensively in the next series.
Blockchain Technology is a broad technology that I find fascinating and I hope this brief introduction helped simplify the complexity of the technology.