The blockchain is distributed ledger of digital events that have occurred between different nodes on the network. Each transaction or event on the blockchain is verified by consensus of most nodes on the network. Once the information is stored on the block it can never be modified or deleted. Blockchain contains the information of each event on the network and the information is shared with all the nodes of the blockchain.
Bitcoin was the first major innovation of blockchain. It was created in 2008 by Satoshi Nakamoto as an experimental digital currency which is now worth more than $100 billion. Bitcoin is the most controversial technology because of anonymous transactions nature. However, the technology behind bitcoin i.e. blockchain is not controversial and lots of innovative applications have been developed on the blockchain. Marc Andreessen, the doyen of Silicon Valley’s capitalists, listed the blockchain distributed consensus model as the most important invention since the Internet itself. There is an assumption that by 2022, more than a billion people will have some data about them stored on a blockchain but may not be aware of it.
The blockchain is moving to mainstream world and many business and organization have started doing research on about implementing blockchain for their operation. US universities have already started teaching blockchain and cryptocurrency on their courses. Many companies are interested in blockchain technology because of the security feature that it offers.
The current digital economy is facing having the lack of trust issue and this is one of the problems that blockchain solves and has the possibility to revolutionize the digital world with a distributed network of blocks where all the current and past events can be verified anytime in the future. All of these are done without compromising the privacy of nodes or parties involved. The blockchain provides a solution for a variety of security issues that we are currently facing and blockchain has become one of the most trending topics because of the solution that it offers. One of the rapidly emerging use cases of blockchain is smart contracts which have made possible to run to different automated functions on the blockchain. Identity management can be run efficiently on blockchain because of the smart contract feature.
Structure of the Blockchain
Generally, a block will contain three major information, data, and a hash of the previous block. The first block of the blockchain doesn't have the hash of the previous block and all the next blocks will have has of their previous block. The first block on the blockchain which does not have the information of the previous block is called genesis block. A block has a record of all the recent transactions and a reference that came before it. Data inside the blockchain differs from blockchain to blockchain, the blockchain of bitcoin will have the information of the sender, receiver, and timestamp on the data field.
Hash on the block is unique and they are created by solving complex mathematical formula. If anything inside the block is changed, then the hash inside the block will also be changed and it will no longer be the same block. This will also make all other following blocks invalid because they will no longer contain the current hash of the previous block.
How Does Blockchain Works?
The blockchain is a decentralized database whose nodes are distributed around the globe and stores the digital information of any value inside its block. A block stores the transaction entries, timestamp, the hash value and hash value of the previous block. A block of the transaction must be validated and recorded by all the nodes on the network before it is added on the chain. This complete process is based on cryptography and who solves this cryptographic puzzle are called miners.
The sender wants to create some transactions or events on the blockchain, once the transaction is executed it is represented online as a block. Now, the block is broadcasted to every node in the network. All the nodes on the blockchain network will approve the transaction is valid. Once the transaction is validated the block will be then added to the chain and this information is a non-editable and transparent record of the transaction. Finally, the information will reach the receiver and the information will be permanently stored on the blockchain.
Why is blockchain considered secure than traditional technology?
Each block on the blockchain are connected to each other they do have a hash of the previous block. Since all the blocks are connected it is difficult to tamper with the information stored on the blockchain. If anything inside the block changes the hash recorded will be changed and the block will be no longer the same block, and this will not be accepted as a valid block by the nodes. This is one of the features that makes blockchain secure. All the information stored on the blockchain is secured with cryptography. All the nodes or participant will have their own private keys and public keys. Private keys are assigned to their transaction and it will act as a digital signature. If the record is modified, then the signature will automatically be invalid.
Blocks are continuously updated and synced between the distributed peer-to-peer networks which make it DDoS proof and hack-proof. Since the data of blockchain are not stored in a central location it doesn't have a single point of failure. It requires to control more than 50% of the blockchain network at the same time to make any changes accepted in the blockchain network. It needs huge computing power to have 51% of the blockchain network in control. Therefore, it is practically impossible to tamper the information in the blockchain. Because of this feature blockchain is considered more secure.