If you are an enthusiast of banking and investing networks and also been following the rise and fall of the cryptocurrency trends during the past ten years, you may have surely come across the word “blockchain,” a behind curtains mechanism for one of the most popular cryptocurrencies bitcoin. The whole bitcoin circuit runs on the idea of blockchain that was proposed two decades ago before bitcoin arrived. You might have heard that blockchain is trending nowadays, it’s really cool, it has made currency handling problem scared away and also have saved us from the hassle of carrying money all the time in our pockets.
But here we will tell you the total truth in these above descriptions. How much really blockchain has changed today’s world, and how this thing really works?
What does it mean?
First of all, blockchain is a decentralized, distributed, public ledger method. It means that there is no third party or a mediator between the receiver and the sender, no government body associated with it. Read further to get more insight on the topic.
Now, whenever you hear the block-chain word, your brain visualizes a picture of blocks along with chains. Yes, the visualization powers of yours are good, but it’s not that easy as it seems.
Blockchain is a combination of two words – where a block is a digitally stored information about the person’s transactions like the date, time, and the INR spent on the purchase from let’s say Alibaba. You see all the transactions from Alibaba(as an example) will get reflected and stored in this block digitally
Each transaction with Alibaba will be saved with a digital signature that is like a username to distinguish you among other transactions uniquely.
A single block could range up to 1 MB of data, and hence, few thousands of transactions could be given a roof under a single block.
Now obviously, Blockchain has several blocks associated with it, and hence, each block in the blockchain is given a unique code associated with it called a “hash,” which helps us to tell us apart from every other block.
How does blockchain operate?
Now blocks are added to the blockchain every time a new transaction occurs, in order to do that there are some conditions that the block should pass before getting attached and accepted as a block in the blockchain.
A transaction needs to be done in order to qualify as a block. So you have to buy something from Alibaba(here in our case).
As we had told earlier that there is no third party sitting in order to enter every transaction made. In place of that, we have a set of connected networks of computers. Each time a transaction is made, these computers verify the transactions, including the amount spent, transaction’s time and the transaction relevant to.
After that, the transaction of yours is ready to get stored in the block containing your digital signature, transaction amount, and also Alibaba’s digital signature.
Now in order to send this block to its final destination, i.e. blockchain, it is given a unique value called “hash,” which is a string literal basically. If this block added is the recent block, a most recently created block hash is assigned to it too.
Now after getting attached to the blockchain, this block added recently will be available publicly and can be viewed by others too. It’s the very reason why the blockchain is termed as a public ledger. To get a glance at what we are referring to, visit the site Bitcoin’s blockchain.
Advantages of blockchain?
Getting hacked and data tampering is an almost impossible task in blockchain, as each block has a hash key, and if any data tampering will result in hash code change. In the blockchain, not only the blocks have its hash value, but the block they are behind to also have a copy of its hash value. So if somehow the block hash gets changed, the next block will be still carrying the old hash code, thus making hackers impossible to cover their tracks.
As there is no third party involved, the cost for managing the accounts is zero.
As a whole record system is done publicly and can be accessed easily from anywhere, a good level of transparency is maintained.
Disadvantages of blockchain?
Stetospherically high cost: As the cost of the transaction between the user and the receiver is almost zero, it doesn’t make it low cost. The whole “bitcoin circuit” and blockchain follow an idea of “proof of work.” This idea consumes an enormous amount of computational power. Hence mining a single bitcoin can be so much of a difficult task that consumes a lot of time and energy too.
Blockchain is mostly praised for its unhackable and privacy providing networks. But many criminals and gangsters are using it for bad deeds like illegal trading and other illicit activities.
Summing it all up, blockchain is now 27 years old and has affected a large part of business areas and government sectors too. It has much practical application running nowadays, and it seems like it will continue to make the business and government operations more secure, clear and stable. Almost three decades are about to pass, but the blockchain is still standing tall, ahead of many other emerging technologies.