Long back I came across Blockchain technology in an article in 2011, I thought this is the technology we should all know. This new technology made me eager to learn more and more about this topic, as it is going to give transactions a new face. Now, after so many years of research, I have gathered a lot of information about this technology.
Since blockchain is such a new technology, there’s a chance it may not have consciously crossed your radar. If you are a newbie in the world of cryptocurrencies, and blockchain technology, this guide is for you. Let’s start with the basics. If you are a pro trader, you may learn a few new things that you didn’t know. This article shows that Blockchain certainly isn’t magic.
Let’s take a basic route:
What is Blockchain?
A Blockchain can be defined as a list of encrypted digital records or transactions, called a block on the platform ‘.Blockchain technology is a distributed ledger technology which is managed by a peer-to-peer network.
The databases on the blockchain technology are shared among all the Nodes which are connected to the network. A blockchain Node is nothing but the collection of computers on the network.
Blockchain stores the information or the data in the form of blocks in a chronological pattern and are interlinked or connected in the form of a chain. The information in the block cannot be altered or changed hence making it irreplaceable because every block is interlinked to the previous block.
Blockchain can be simplified as is a distributed, decentralized, public ledger’. Due to its very distinct features, it is widely accepted mainly in the finance world. And one of its best use case applications is the invention of cryptocurrencies.
Let us study blockchain technology and its uses in detail below.
let’s understand a bit of history under before we jump into the actual working.
History of Blockchain
The idea behind Blockchain was initiated in the year 1991 when computer scientists like Stuart Haber and W Scott Stornetta introduced a practical solution for timestamping digital documents so that they could not tamper. The technology or the system uses the secured chain of Blocks backed by the cryptography method to store the timestamp documents.
MERKLE TREE in 1992 came up with the Blockchain’s Design to make it more efficient by allowing several documents to be collected and stored in one block. But unfortunately, the patent lapsed in the year 2004.
After this, Stefan Konst published his theory of cryptographically secured chains, plus ideas for implementation. Computer scientist Nick Szabo works on ‘bit gold’, a decentralized digital currency. Hal Finney, a computer scientist, and Cryptographic analyst introduced the Reusable proof of work (R PoW). It can be considered as the earliest prototype for Blockchain technology.
In late 2008, Satoshi Nakamoto founded a platform supporting Bitcoin Hence the Technology came into existence.
When was the technology implemented?
Nakamoto In 2009, the first ever block was processed, confirmed and added to the chain and Bitcoin was given as a reward. In 2014, Blockchain technology distinguished from the currency and also its additional potential for the different financial products were explored.
Owing to applications beyond currency, Blockchain 2.0 was born, The Ethereum blockchain, that assigned the computer programs into the blocks, which represented the financial instruments such as bonds. These came to be known as smart contracts.
Satoshi Nakamoto, a pseudo-identity released a “Whitepaper” that introduced a decentralized peer to peer protocol that supported the world’s first Cryptocurrency “Bitcoin“. Blockchain Technology was designed to provide solutions to problems such as Centralization, Counterfeit money, and double-spending.
It maintains the records privately without any need for a central authority to look after it or manage it. It opts for the decentralized way that maintains a ledger that is practically impossible to penetrate within the network or possibility of getting hacked.
Types of Blockchain
A public blockchain has no restrictions for access, anyone on the internet can access it and become a validator and make transactions by following the consensus algorithm. Certain rewards can also be claimed by maintaining the records on the blockchain.
A private blockchain is restricted and needs permission by the administrator. One can view the details on the ledger but cannot make changes on the ledger. It can be accessed only when invited by the administrator on the chain. Validators and participants are restricted unless invited.
It is the combination of a private and public blockchain. Authentication of the network is set according to its architectural features and suitability.
How Blockchain Works?
So, now when you know what is blockchain, you might be excited to know how actually this technology works. You must be wondering what is inside a Block?
Let us now have a look and understand how does Blockchain work.
Basically, A Block includes 4 main components
- Block Number or Index
Hash: It is the unique identity of a Block. Each Block is linked with the previous Block and the next Block. Thus, the linking of all the Blocks in a chain like structure makes the complete Blockchain. Each Block linked to the previous Block
Index: It is a Block number.
Data: Data is the implementation of a transaction on the Blockchain network. It includes ‘From’ and ‘To’ addresses, and additional inputs like adding a fee to the transaction and many more.
Timeframe: It is the time at which the transaction is complete on the Blockchain.
- A node begins a transaction by initially creating and then digitally signing it with its private key. A transaction represents various actions in a blockchain. In particular, it is a data structure that displays a transfer of value among the users. However, the transaction data structure includes source and destination addresses, relevant rules, and other valid data.
- A transaction is propagated by protocol, called Gossip protocol, to peers that analyze the transaction. Normally, you need more than one node to verify the transaction.
- Once your transaction is confirmed, it is then added in the block which is later propagated on the network. Thus, the transaction is confirmed.
- This latest block is part of the ledger, and the next block links cryptographically back to the previous block. This link is a hash pointer. Now, the transaction receives its second confirmation and the block receive its first confirmation.
- Further, when each time a new block is created transactions is reconfirmed. Basically, 6 confirmations in the network are needed to consider the final transaction.
How did blockchain emerge in cryptocurrency as full-fledged technology?
Before it was introduced in cryptocurrency, it marked its footprints as a concept in computer science. From being just a topic of discussion to Investment for Blockchain entrepreneurs have become the center of attraction across the globe.
The emergence of the blockchain in crypto space lead to a second-generation blockchain system. It was created on the concept of taking contracts and making them smart contracts. These smart contracts can be implemented in multiple ways across many industries. For instance, many healthcare industries are opting these smart contracts, to enhance security for patient information.
Evolution of the blockchain technology
As all the inventions need timely upgrades intending to solve the issues related to the previous version and for the better performance, blockchain technology also has been modernized as per the time.
Cryptocurrency, mainly Bitcoin, is the first use case of blockchain technology. It allows financial transactions based on DLT.
Blockchain 2.0-Smart Contracts
After the blockchain technology was separated from bitcoin to discover more use cases, Ethereum blockchain came into existence which aimed to execute smart contracts. It intended to reduce the cost of verification, execution and fraud prevention.
Smart contracts are the predefined computer programs that contain the terms and conditions of the agreements between the two parties. They cannot be altered or changed.
DApps or decentralized applications work similar to other normal applications but the only difference is that Dapps work on peer-to-peer networks such as blockchain.
Blockchain 4.0- Blockchain for Business
Blockchain 4.0 aims at implementing blockchain 3.0in in real-life commercial usage. Some of the real-life use cases are supply chain management, financial sectors and healthcare.
Benefits Of Blockchain in Cryptocurrency
This technology was made in such a way that any block or even a transaction that adds to the chain cannot be edited which in turn provides very high security.
It is designed in such a way that it can easily locate any problem and correct if there is any. It also creates an irreversible audit trail.
The Blockchain network provides a unique identity which is linked to account. It means that only the owner is operating the transactions. The block encryption in the chain makes it difficult for any hacker to break the setup of the chain
The blockchain technology is designed for quick process initiating the transaction. The transaction increased to a high extent and thus the time reduced to nearly minutes or even seconds.
Future of Blockchain Technology
Blockchain technology has a very promising future. It might take a considerable amount of time to hold on and become useful in routine. To be specific, blockchain technology is still in its infancy stage. Thus, much potential has yet to be realized. But in the coming years, we can see more advances in blockchain technology across multiple industries.
Different industries using Blockchain technology
We have probably heard that blockchain technology is going to revolutionize different industries. But what actually is it and how is it going to influence these industries? Let’s have a look.
Banking: blockchain technology is replacing fiat currency. The reason behind it is cryptocurrency doesn’t require any central authority to verify and process the transactions as in case of bank deposit or withdrawal.
Health: Implementing blockchain technology can help healthcare sectors to avoid common issues like fraud, lost records. Meantime, it helps them perform effective treatment and increase the ability of healthcare systems within a cost-effective mechanism.
Gaming: The emergence of blockchain technology across the gaming platform provides new ways for gamers to earn extra income. Through this, gamers will have ownership of coins in the form of points they’re winning while playing. However, you can even bid the points or coins in cryptocurrency. This method transforms the games that run on just internet into the games that run directly onto the blockchain.
These were the few industries using blockchain technology. You can find many more such firms.
Considering all the things, the technology is likely to bring digital currencies to the mainstream. Many well-known companies like Microsoft accept Bitcoin payments. Moreover, experts have predicted that, with blockchain technology, the world is likely to have a universal currency. It means many people still need to continue exploring the technology to enjoy the best version of it.
- What is Blockchain Technology?
A Blockchain is a list of encrypted digital records or transactions, called a block. Blockchain is a decentralized cryptographically produced technology. It is the underlying technology behind Cryptocurrency.
- How does Blockchain Technology work?
Blockchain is supported by a peer-to-peer network of computers or nodes. The network is open to everyone and helps people to communicate with each other even remotely.
- Are there any limitations of Blockchain Technology?
Blockchain Technology has initial costs and the use is not free of cost which is the drawback of decentralization. The time factor is also an important factor in the Blockchain implementation. Due to the complex verification processes, it is not appropriate for massive transactions.
- What are the applications of Blockchain Technology?
The Blockchain technology finds its extensive uses in the various industries such as Health Care, Insurances, Entertainment and Contract Management.