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What is Blockchain Technology and How Does it Work?

Blockchain: Defined in Most Simple Words

Blockchain is a peer-to-peer decentralized distributed ledger technology that makes the records of any digital asset transparent and constant. It works without involving any third party in-between.

In simple words, the digital ledger is like a Google spreadsheet shared among numerous computers within a network, in which, the transactional records are stored based on actual purchases. Anybody can see the data, but they can’t corrupt/ delete or modify it.

Blockchain is an evolving and an innovative technology that is gaining a lot of public attention due to its capability to reduce risks and frauds in an extensible way.

What do you mean by Blockchain Technology?

Blockchain technology is a structure that stores transactional records, also known as the block, in several databases, known as the “chain,” in a network connected through peer-to-peer nodes. Classically, this storage is referred to as a ‘digital ledger.’

Each transaction is authorized by the digital signature of the owner in this ledger, which provides authentication to the transaction and safeguards it from being tampered. Hence, the information contained in the digital ledger is extremely secured.

Why is Blockchain a distributed, decentralized P2P network?

A decentralized network offers manifold benefits as compared with the traditional centralized network, which entails an increase in system reliability and privacy. Furthermore, such networks are much easier to scale and deal with assurance of no real single point of failure.

The P2P architecture of Blockchains provides several benefits such as greater security compared to traditional client-server-based networks.

A distributed P2P network, paired with a mainstream consensus need, provides Blockchains a high degree of resistance to malevolent / malicious events.

What is Blockchain?

Blockchain appears complicated, but its core concept is quite simple. A blockchain is a type of database. So, to understand blockchain, lets deep dive in and understand what a database actually is.

A database is a collection of information that is electronically stored on a system. Every information, data, is organized in tabular format to ensure easy search and filtration of information.

You must be now thinking, then what’s the difference between a spreadsheet and database as both store information?

Spreadsheets are designed for a single person, or minor group of people, to access the information. Whereas, a database houses a larger amount of information that can be accessed by end number of users.

Large databases are able to do this by storing data on servers that are made up of powerful computers.

These servers are built by using thousands of computers to have computational power and the necessary storage capacity for several users, so that they can access the database.

While a spreadsheet or database may be accessible to end number of people, it is often owned by a business and managed by an appointed individual that has complete control over the data & how it works.

Benefits of using Blockchain Technology

We have learnt a lot about Blockchain technology. Now let’s discover what are it’s benefits.

Stability

  • When we talk about a traditional database, we have to put trust on a system administrator that the data will not be changed. But by using Blockchain, there is zero possibility of change in data or alteration of the data; the data present inside the Blockchain is permanent; one cannot delete or modify it. 

Transparency

  • The traditional databases (centralized systems) lack transparency, whereas Blockchain (a decentralized system) offers complete transparency.
  • By using blockchain technology, organizations and enterprises can go for an entire decentralized network no centralized authority is required, thus improves the transparency of the whole system.

Easy Availability 

  • Unlike centralized systems, Blockchain is a decentralized system of P2P network which is highly available. Everyone in Blockchain is on a P2P network, and everyone has a computer running, so, even one peer goes down, the other peers still work.

Advanced Security 

  • Another key benefit of Blockchain is that the technology is assumed to offer high/ advanced security as all the transactions of Blockchain are cryptographically secure and provide integrity. You need to put your trust in cryptographic algorithms, instead of relying on third-party.

Why to Learn Blockchain Technology?

Blockchain is a peer-to-peer decentralized distributed ledger technology with applications in sectors entailing:

  • Cryptocurrency, healthcare, insurance, government, music
  • Supply chain, data management, and many more.
  • Get an insightful understanding of the fundamentals mechanisms that influence blockchain.

Take-Away Skills:

You’ll learn the structure and properties of the blockchain and the individual blocks that creates it.

Gain exposure in blockchain features that offer security between unlike blockchain members.

You’ll envision different aspects of the blockchain that create and tamper through interactive simulations.


Prerequisites:

Blockchain course requires no prior knowledge. But, if you have prior Python experience, you’ll be able to build a small blockchain library in Python. Add functionality to add blocks, create hashes, and verify the chain.

Importance of Blockchain Technology

In the present context, Blockchain Technology is significant for business. Technology is ceaselessly evolving and the next decade is going to be technological era. Digital currency entailing Bitcoin and Blockchain will take the front seat. It may appear that Blockchain is complex technology; however, it is immensely simple. All transactions are recorded in a digital ledger and is shared among participants.

Worldwide transactions are logged in these ledgers and database is shared among thousands of devices. Blockchain does not only store financial values, but it also can store anything be it music, title, intellectual properties, and much more. All these properties can be secured through Blockchain. People are choosing Blockchain technology because of it’s robust security that it provides to the users. It is massively hard to get information or data loss. Blockchain technology is trusted worldwide by powerful forces such as government or other agencies.

It is considered to be the first digital medium for value just like the internet was the first medium for digital transformation.

It is being proliferated that Blockchain technology will change the face of financial transactions in the coming years. The reason why people are inclined towards Blockchain technology is that it is highly secure. There are infinitesimal chances of theft or financial robs as compared to the traditional ways of the transaction.

How Does Blockchain Technology Work?

Several businesses around the world are integrating Blockchain technology since past few years.

But how exactly does Blockchain technology work? Is this a significant change or a simple addition?

The advancements of Blockchain are still new and have great potential to be revolutionary in the coming years.

Blockchain is a combo of 3 leading technologies:

1. Cryptographic keys

2. A peer-to-peer network containing a shared ledger

3. A means of computing, for storing the transactions and records of the network

Cryptography consists of two keys (Public & Private) which helps in performing successful transactions.

Each individual has these two keys to produce a secure digital identity reference. This secured identity is the most important aspect of Blockchain technology. This identity is referred to as ‘digital signature’ and is used for authorizing and controlling transactions in the world of cryptocurrency.

The digital signature is merged with the peer-to-peer network; a large number of individuals who act as authorities use the digital signature to reach a consensus on transactions.

When they authorize a deal, it is certified by a mathematical verification, which results in a high secured transaction.

To sum it up, Blockchain users use cryptography keys to perform different types of digital interactions.

Conclusion

Blockchains are set up to operate in a number of ways. It can be done using different mechanisms to secure a consensus on transactions, that can be seen by authorized users only.

Blockchain founders are trying out several other applications to expand Blockchain’s influence. Taking into consideration Blockchain’s success and increased use, it seems that it is poised to rule the digital world of the future.

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