Introduction to Blockchain
Hello guys, I’m Senura Vihan Jayadeva. In this blog, I will explain about the blockchain system. Maybe you know about the cryptocurrencies such as Bitcoin, Ethereum, and Tether. All these cryptocurrencies are built on the blockchain.
What is Blockchain?
Blockchain technology is based on a complex branch of mathematics called cryptography.
According to Wikipedia
A blockchain, originally block chain, is a growing list of records, called blocks, that are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data (generally represented as a Merkle tree). By design, a blockchain is resistant to modification of its data. This is because once recorded, the data in any given block cannot be altered retroactively without alteration of all subsequent blocks.
There are two types of Blockchains
- public blockchain
public blockchain ledgers can be managed autonomously to exchange information between parties. There’s no need for an administrator. In effect, the blockchain users are the administrator.
2. private blockchain
private blockchain allows companies to create and centrally administer their own transactional networks that can be used inter- or intra-company with partners.
In the above image, you can see the difference between Distributed, Centralized, and Decentralized systems. Blockchain also likes a public ledger in a Distributed System. Therefore there is no one authority to govern. Not a single computer or organization can own the chain. Therefore the blockchain system is governed together.
A brief history of blockchain:
A cryptographically secured chain of blocks is described for the first time by Stuart Haber and W Scott Stornetta
Computer scientist Nick Szabo works on ‘bit gold’, a decentralized digital currency
Stefan Konst publishes his theory of cryptographically secured chains, plus ideas for implementation
Developer(s) working under the pseudonym Satoshi Nakamoto released a white paper establishing the model for a blockchain
Nakamoto implements the first blockchain as the public ledger for transactions made using bitcoin
Blockchain technology is separated from the currency and its potential for other financial, inter-organizational transactions is explored. Blockchain 2.0 is born, referring to applications beyond currency
The Ethereum blockchain system introduces computer programs into the blocks, representing financial instruments such as bonds. These become known as smart contracts.
Blocks, nodes, and miners are the main three concepts in Blockchain. Let’s get a brief idea about these three concepts.
What is a Block?
Data is stored digitally in a record called a ‘block’. This block contains:
Block header: information about the block, such as a unique block reference number — the hash. The header also includes the hash of the previous block and the time the block was created.
Block content: the record itself, for example, information about a transaction. The block acts as a ledger entry for this transaction.
What is mining?
Blockchain mining is used to secure and verify bitcoin transactions. Mining involves Blockchain miners who add bitcoin transaction data to Bitcoin’s global public ledger of past transactions. In the ledgers, blocks are secured by Blockchain miners and are connected to each other forming a chain.
What is a Node?
One of the most important concepts in blockchain technology is decentralization. As I mentioned earlier no one computer or organization can own the chain. Instead, it is a distributed ledger via the nodes connected to the chain. Nodes can be any kind of electronic device that maintains copies of the blockchain and keeps the network functioning.
Let’s try to understand the blockchain process by example.
Think person A needs to do an online transfer of 1000$ to person B. In the traditional way, they have to do that transaction through a bank. They have to trust a third-party organization. But this is different in a blockchain. You can have a brief idea by looking at the following image.
Therefore there is no need for the involvement of a third party.
This is very secure. Because all the details about the transaction will share among the other blocks in the blockchain. No one can lie because others have proof of all the transactions. If someone wants to change, he or she has to change the transaction details of all the other blocks. It’s not feasible in a large network.
Let’s see what will happen if someone tries to change data in a block.
As I mentioned above block contains Data, the Hash of the current block and, the Hash of the previous block. Hash code built based on the data in the block. Therefore if someone changed the data in a block, then automatically Hash Code will be changed. Then he or she has to change all the blocks. Therefore it’s not technically feasible.
Not only in cryptocurrency there are many industries this blockchain system is used such as Health, Banking, and Transportation.
I hope you learn something about Blockchain today. Thank you!