2. Blockchain Theory
You must have heard about Cryptocurrency, NFT, Bitcoin, Ethereum, Blockchain, Dogecoin, etc. Why are these terms trendy and essential for you to understand?
Before understanding all these terms, you need to understand what Blockchain is? Why is it useful? And why do we need it? As Blockchain is the technology lying behind all these concepts/products.
First, let’s understand the meaning of Centralized Systems. A centralized system is a network of computers connected(dependent) to one central computer, also known as a Server. All the data is stored and controlled by this server.
But there are some problems with centralized systems, which are:
- The nodes (or computers) connected in the network depend on just one machine(server), which makes the whole network vulnerable to attack from hackers.
- A server is maintained by a few people in an organization who could always exploit the server; thus, a server doesn’t guarantee the safety of data.
- A central server should always be connected to its nodes. If there is any network connection issue, all nodes stop working. As it frequently happens with the current banking system.
While Blockchain is a decentralized network. Hence, It doesn’t have a server storing all data and controlling all nodes, but the data is distributed (duplicated) among all the nodes (computers) of the network.
Here nodes are the ones that manage the blockchain network. For instance, if one node tries to alter some data, other nodes need to validate that modification, and if the other nodes find out that the data is incorrect, they will reject the modification.
Blockchain can also handle network issues as it has multiple nodes working simultaneously, and the network doesn’t depend on a single machine; so even if several nodes go down, it will not affect the whole network, ensuring the overall consistency of the network.
Now, it’s time to understand what Blockchain means! Blockchain is a public database for storing real-world data, shared and updated with many nodes (computers) across the globe. It’s kind of a Public Ledger.
As we break the word; It consists of two parts: Block and Chain.
“Block” is an entity that stores the data, you can visualize it as an Empty Box or Paper on which data would be written(stored). “Chain” can be defined as a cryptographic link of a block with the previous block.
In other words, the link between blocks forms a chain of blocks. Basically, Blockchain is a collection of blocks chained together using cryptography. You can read more about its application in my recent article here.
Features of Blockchain:
Blockchain is an immutable public data storage that is:
- Decentralized: Blockchain is a distributed technology that is not controlled by any individual or organization. i.e. It doesn’t have any central authority.
- Trustless: People have always been dependent on some organization or central authority such as Banks or some intermediaries for reliability or trust on any network. But with blockchain technology, people don’t have to rely on any third party for their transactions and holdings. It’s the fundamental part of Blockchain Technology.
- Permission-less: You don’t need anyone’s permission or authorization to join the network or become a node.
- Secure: Blockchain uses decentralization, cryptography and consensus at its core, making it secure.
In my next blog, we will know more about how blockchain works and what is consensus mechanism! Follow me so that you will get notified when the next blog publishes.
