Blockchain : Explained in Simple Terms.
As the saying goes “Blockchain is the new internet”, so what actually the Blockchain is???
Let us understand it from the roots.
Blockchain is a revolutionary technology taking over every industry starting from Banking sector, Real estate, Legal Sector, Healthcare Sector and the list is never ending. Any sector you name, Blockchain finds it’s use case there.
But there are people to whom Blockchain technology is still confusing. In this article I will try to explain Blockchain in as simple terms as possible. Having an overall knowledge about the latest and emerging technologies helps you to remain competitive with the new players of the industry.
Let’s start with the basic definition of Blockchain.
What is Blockchain?
Let’s divide the term: Block & Chain. A “Block” in Blockchain refers to a record of transactions or any piece of information. That information can be anything like monetary transactions, medical records, legal documents, etc. So in simple terms Blockchain is a chain of the blocks containing record of digital informations.
A Blockchain is a distributed ledger that records every transaction occurring at any point of time. It is open to everyone.
What makes this technology so exciting? The most important property of Blockchain is that once a bit of information is stored in Blockchain, it becomes almost impossible to change or delete them. So, it provides the ultimate transparency and trust in operations.
How does a Blockchain works?
In this segment let’s see what makes it impossible to hack Blockchain stored data?
Each Block in Blockchain have 3 components :
- the information record of that particular block
- The hash of that particular block
- Hash of the previous block which links the blocks, thus forming a chain.
Now you must be wondering, what is this hash? A hash of a block identifies a Block and its contents. In non-technical terms, Hash function turns text into a set of numbers and letters. A hash function is a mathematical function that takes a variable number of characters and converts it into a string with a fixed number of characters.So each block have its own unique hash.
Even a small change in the transaction creates a new hash. Hashes play a very important role in detecting changes in Blocks. If the hash is changed it is no longer the same block.
Each Block also contains hash of the previous block. This is the element that makes Blockchain so secure. If someone tries to change the record of one Block the hash of that particular Block changes. As a result, the hash of the previous block that is stored in its immediate following block changes rendering all the following blocks as invalid.
What makes Blockchain so secure?
In the previous segment we saw how the Hash function helps to prevent tampering with the information. But this alone is not enough to mitigate the risk of tampering. Blockchain also secure themselves with it’s property of being distributed. Instead of having a centralised platform, blockchain is decentralized which means it uses peer- to — peer network and anyone is allowed to join.
Every system connected to the Blockchain is called a node. Whenever anyone joins the blockchain, he gets a full copy of the blockchain.When a new Block is added to the blockchain, it is sent to every node. Each node verifies the transaction and after every condition checks out and the block gets the approval by a significant number of nodes, then the block gets added to the blockchain permanently. Without the approval no block can be added.
So to tamper with a blockchain, you will need to change hashes of each and every block and need to control more than 50% of the nodes which is not possible right!
How is Blockchain Encrypted?
The Blockchain is encrypted using a Public Key and a Private Key.
Public Key is your wallet address or digital address in Blockchain. This is an address that will appear in various blocks within the Blockchain as transactions take place. It does not contain any personal information, only the digital location on the blockchain you have access to.
Private Key is like a digital signature. This key helps to securely access your information stored in blockchain. Like if you want to do any transaction, that message need to be signed with this digital signature or the private key. This key needs to be kept secret.
How does a Blockchain transaction gets validated?
There are 2 major type of algorithm in which Blockchain works: Proof-of-work and Proof-of-stake.
Proof-of-work is the end result when a block gets successfully added in a Blockchain. It is carried out by special nodes or miners having high-power computers. Each miner tries to solve complex mathematical equations that results from the encryption protecting transactions on a blockchain network. The first miner to solve these problems and place a block in the blockchain network receives a reward in terms of cryptocurrency. The type of crypto depends on the type of Blockchain. Like Bitcoin Blockchain will reward miners with Bitcoin, Ethereum Blockchain will reward with Ether.
Proof-of-Stake is a another way to validate transactions in a Block. The miners place a certain amount of virtual coins at stake and miners with highest amount of coins gets the chance to validate a block. And if they successfully validate it, they are awarded with the transaction fees that the users paid to verify their transactions.
Advantages of Blockchain
Let’s make a list of the advantages provided by Blockchain.
- It is distributed or decentralized. No single entity is in control of the data or information. This eliminates the risk of fraud or any chance of data alteration by ay third- party
- It allows full transparency. Every user or node gets a full copy of the blocks present in the blockchain.
- It is highly secure. The Hash function and the encryption makes Blockchain almost impossible to hack. As a result of the encryption your personal information becomes secure and is only accessible to you using the private key.
Disadvantages of Blockchain
Everything comes with both pros and cons. Despite having immense benefits and so many application, Blockchain also comes with a few disadvantages.
- The technology is new and people find it really challenging to integrate Blockchain with their current business model. Some finds it so difficult that they give up on the idea of having Blockchain for their business.
- Blockchain can also, depending on the circumstance, be very energy dependent, and therefore costly. When transactions are being verified, a lot of electricity can be used.
Conclusion
Blockchain have much more benefits compared to it’s drawbacks. It has been around for almost a decade, but recently it is gaining importance as more and more business are testing to adapt this technology. But still now the major problem that stands out is that people are still unclear about the concept of Blockchain and are confused with the thought that Bitcoin and Blockchain are the same. They still do not have any idea that Blockchain can be so much more than just Bitcoin and it has the ability to disrupt any industry.
If you have any doubts about Blockchain or want to integrate this emerging technology into your business and make it more productive, profitable and efficient then contact us at contact@plebiscite.in or visit us at https://plebiscite.in/
