What is blockchain?
A blockchain facilitates secure online transactions. It is a continuously growing list of records which are linked and secured using cryptography. The records are termed as blocks and each block is linked to a previous block, hence the name blockchain.
A blockchain is a decentralized and distributed digital ledger that is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network. This allows the participants to verify and audit transactions inexpensively.
The working process involves 3 components:
2) a distributed network with a shared ledger
3) record-keeping and security.
The main purpose of this component of blockchain technology is to create a secure digital identity reference. Identity is based on possession of a combination of private and public cryptographic keys.
The combination of these keys can be seen as a dexterous form of consent, creating an extremely useful digital signature which was technically known as the hash function.
2) a distributed network with a shared ledger
In its simplest form, a distributed ledger is a database held and updated independently by each participant (or node) in a large network.The distribution is unique: records are not communicated to various nodes by a central authority but are instead independently constructed and held by every node.
Once there is any change in records, the distributed ledger has been updated, and all nodes maintain their own identical copy of the ledger.
3) Record-keeping and security
When cryptographic keys are combined with this network, a super useful form of digital interactions emerges. The process begins with the sender taking their private key, making an announcement of some sort of the transaction that you are sending a sum of the cryptocurrency — and attach it to Receiver’s public key.A block – containing a digital signature, timestamp and relevant information – is then broadcast to all nodes in the network.
The type, amount and verification can be different for each blockchain. It is a matter of the blockchain’s protocol – or rules for what is and is not a valid transaction or a valid creation of a new block. The process of verification can be tailored for each blockchain. Any needed rules and incentives can be created when enough nodes arrive at a consensus on how transactions ought to be verified.
A common conflict is when multiple miners create blocks at roughly the same time. Because blocks take time to be shared across the network, which one should count as the legit block? In bitcoin, the conflict is resolved by a rule called the “longest chain rule”.The ‘longest chain’ rule broadly says that as a participant, if you see multiple competing valid chains, believe the one with more blocks.
Data structure build using blockchain allows users to make and verify transactions without a third-party involvement. This strongly reduces the risk of a backdoor transaction and unauthorized intervention.
The distributed ledger structure gives the control of all their information and transactions to the users. Changes to the public blockchain are accessible to all the members, thus creating a transparent system.
- Faster transactions:
Blockchain transactions can reduce transaction times to minutes and are processed 24/7.
- Reduced transaction costs:
A transaction system builds using blockchain eliminates third-party intermediaries and overhead costs for exchanging assets.
The greatest characteristic of a blockchain is basically its decentralized network. Decentralized technology allows us to store assets in a distributed network that can be accessed over the Internet.The owner has direct control over their asset through their private key.
Once the data has been written into the blockchain, it is extremely difficult to change it back. It is not truly immutable but, due to the fact that changing data is extremely difficult and almost impossible, this is seen as a benefit to maintaining an immutable ledger of transactions.
Smart contracts :
Distributed ledgers enable the coding of simple contracts that will execute when specified conditions are met. Ethereum is an open source blockchain project that was built specifically to realize this possibility.
Digital identity :
Blockchain technology empowers consumers to control their own identity and share between trusted entities with their consent. Also, no single institution can compromise a consumer’s identity.
By making the results fully transparent and publicly accessible, distributed database technology could bring full transparency to elections or any other kind of poll taking.
Protection of intellectual property :
Smart contracts can protect copyright and automate the sale of creative works online, eliminating the risk of file copying and redistribution.
Blockchain – loyalty and rewards :
Blockchain offers many benefits, including transparency and traceability of transactions. This will help banks and insurers to create a more captivating loyalty and rewards program that fits 24/7 performance management and enhances engagement.
The Blockchain technology implemented to provide public ledgers for transparency and security, in order to resolve the issue of double billing on Bitcoin, is aggressively being developed for applications such as Bitcoin 2.0 and Ethereum to expand into other diverse fields beyond virtual currency.
Efforts are continuously be made to construct independent networks outside of the Bitcoin network. Recently, aside from the R3 CEV Consortium Private·Permissioned Blockchain, techniques such as Side-chain are being implemented to offer virtual currency and various autonomous asset issuing services.
In addition to competition from Ethereum and others, Bitcoin may soon be challenged by digital currencies issued by central banks. But whether or not Bitcoin itself survives these storms, one thing is clear. Blockchain technology is set to revolutionize international payments.