Understanding Blockchain ⛓️
“From a beginner for a beginner ;)”
Blockchain technology is booming these days, with many people discussing either Web3 or Blockchain. Even I decided to delve into this technology and write my first-ever blog on the topic. In this blog, I have explained everything I know about blockchain to date, along with some easily understandable examples ;)
Glimpse in Past 👀
Before the invention of blockchain technology, centralized systems were prevalent. In such systems, a few individuals hold the power to manipulate, your data. Now, power can sometimes be destructive.
For instance, let's consider your bank account. All the data related to your account is available with the bank, which can be sold without your knowledge. Furthermore, the admin of the database has the privilege to modify the database, which poses a significant security threat. There are also concerns that your account could be hacked and all your money could be withdrawn. Another problem with the bank is that they don't keep your money with them. Instead, they use it to grant loans to others. This means that if a fraudulent activity happens, you could end up losing all your money.
This was one of the problems faced by a centralized system. To avoid this we can use Blockchain Technology. How? Let’s learn.
Blockchain: A better and more secure way. 🫡
Blockchain uses decentralized systems wherein the authority is divided equally among all of the participants. No one owns the data and the records are kept by everyone. Nobody has the right to modify the information without the permission of the other members.
Considering the above example, if we eliminate the bank from the system. Now the transaction will happen in a peer-to-peer network. So if you send $10 to your friend then this record will be kept in a block which is shared with every person who is part of the network. In this context, transactions are transparent, secure, and traceable, eliminating the need for intermediaries like banks and providing a more reliable system for financial transactions.
Tech POV for Blockchain 👩💻
Blockchain is a formation of interconnected blocks. In which a single block consists of relevant information, the address of the previous block, and the current block. You can imagine this as a linked list that you studied in DSA. The first block of the chain is called Genesis and its previous block address is set to 0000.
The thing that makes Blockchain more secure is changing a single block in the chain will make all of its later blocks invalid. Because if you change the data inside the block it’ll automatically change its address. Hence modifying a block becomes difficult.
There are four things required to support Blockchain:
- Peer-to-Peer Network: In a fully connected network, each system is linked to all others, allowing shared resources without a server.
- Cryptography: The data in the block is encrypted and can only be understood by the intended recipient.
- Consensus Algorithm/Rule: To add a new block to the blockchain, a participant needs to solve a specific rule or algorithm. For instance, in Bitcoin, the "Proof of Work" algorithm is used, which requires the participant to solve a complex mathematical problem that demands high computational power and time. Only after successfully solving the problem, the participant can add a new block to the blockchain.
- Punishment and Rewards: If a participant contributes legally to the chain, they are rewarded with coins. If they try to hinder the chain, coins will be taken away as a punishment.
Still, Confuse?? 😵
Imagine that you and your friend are detectives working on a case, and you have booked a room for discussion. Once both of you enter the room, you can discuss everything related to the case, and both of you have a record of everything that happens in the room. However, in order to add evidence related to the case, you need to solve a riddle. Once the evidence is added, it cannot be modified by anyone.
Think of the room as a network and you and your friend as participants in that network. The evidence that you discuss is like a single block in a chain. All the evidence and discussions that take place are recorded to create a blockchain.
Conclusion ✨
That's it for today. Blockchain is a rapidly growing technology with numerous benefits. It is secure, efficient, and decentralized. Due to its advantages, many organizations are expected to switch to this technology soon. This switch will also improve transparency between the parties involved.
And Thanks to Hrushi for helping me with this blog. I will write more content around Blockchain and Web3 in the upcoming days, so stay tuned. 😄
