Blockchain is a technology that is rapidly expanding with the development of new platforms and applications. Blockchain is an open and distributed ledger that can record transactions efficiently, permanently, and verifiably. It was first described as a part of the Bitcoin protocol by ‘Satoshi Nakamoto’ in 2008. Bitcoin needed a way to record and validate transactions and the blockchain was the answer. The blockchain serves as a linear register of all past transactions within the bitcoin system.
It is constantly evolving and one of the most popular and talked about subjects built in the blockchain is Smart Contracts-These contracts are the simple programs that are stored on the blockchain and can be used to automatically exchange coins based on certain conditions.
The creation of blockchain technology got attention from many. It didn’t take much time for others to realize that this technology could be used for other things like storing medical records, creating a digital notary, or even collecting taxes, etc.
What is Blockchain Technology?
Blockchain is a structure that stores transactional records, in simpler words, it is a type of diary or spreadsheet containing information about transactions. Blockchain is referred to as a ‘digital ledger’.
A simple analogy for understanding blockchain technology is a Google Sheet. When we create a Google Sheet and are shared among numerous people, the sheet is distributed instead of copied or transferred. This creates a decentralized distribution chain that offers everyone access to the sheet at the same time. Nobody is bolted out awaiting changes from another party, whereas all modifications to the sheets are being recorded in real-time, making changes completely transparent.
Why is Blockchain Popular?
Over the years, blockchain has seen immense interest both from the media and individual investors, many organizations are exploring the potential value of blockchain and some of the large players are even developing their solutions.
The reason why the blockchain got so popular:
- It is decentralized.
- The data is cryptographically stored inside.
- It is immutable.
- It is transparent and one can track the data if they want to.
Core Components of Blockchain
These are the core components of blockchain architecture:
Node- Computer or user within the blockchain architecture.
Transaction- The smallest building block in the blockchain.
Block- A data structured that is used for keeping a set of transactions that are further distributed to all nodes in the network.
Chain- It is a sequence of blocks in a specific order.
Miners- It is the specific node that performs the block verification process.
Consensus- A set of rules and arrangements that carry out blockchain operations.
Advantages of Blockchain Technology
The advantages of blockchain technology are decentralization, immutability, security, and transparency.
Decentralization- It is one of the cores and the most important advantages of blockchain technology. The blockchain technology is decentralized- It is designed in such a way that it is distributed and synchronized across networks. This means that there is no single unit of authority operating or controlling it, and instead, it’s run by a group of users privately connected through LAN or run across with thousands of users over the internet.
Immutability- The blockchain technology is immutable, which means it is unalterable. Once the transaction is completed it is stored in a distributed ledger and protected using cryptography. It cannot be changed or deleted, if any node or a piece of information is added to the ledger, every other node is informed and needs to check if the information is valid, only then any information is added to the ledger.
Security- Blockchain technology’s greatest strength is the security it offers. Every information is hashed cryptographically. Each block has a hash and the hash of the previous block. If someone tries to tamper with the block, it will cause to change the hash of the other blocks as well. So changing a single block will make all the blocks invalid.
Transparency- Blockchain offers privacy to users because it hides their identity using complex cryptography and only shows their public address. The data in a blockchain is stored on a distributed network. Anyone can view the entire record of transactions. But, if anyone tries to change the record, it will nearly be impossible for them to do it since many individuals can view the record, any alteration in the logged data is sure to be seen, which adds to the transparency and security.
Blockchain is an especially promising and revolutionary technology because it helps reduce risk, stamps out fraud, and brings transparency in a scaleable way for myriad uses, the impact of blockchain has been felt across the globe and in all sectors including consumers, governments, private industries, and communities.