1.5 k
views

Blockchain Technology – Everything you Need to Know

Anyone in the financial technology space must have heard about blockchain technology. However, not many people know how it works and the technology behind it. Blockchain technology is an invention of an anonymous individual or a group of people under the pseudonym Satoshi Nakamoto which powered the first cryptocurrency, Bitcoin, released in 2008. Technology has been in play ever since.

Since blockchain technology release, the IT industry has massively evolved. However, several people are still skeptical due to a lack of understanding of this groundbreaking technology. Let’s break it down for an easier understanding of what it’s all about.

Blockchain Definition 

Blockchain is a chain of encrypted blocks that contain information. Each block has a cryptographic hash that is managed by a cluster of computers. 

Storage Structure

A blockchain collects and stores data in groups called blocks. Blocks have specific storage capacities, and when filled, they are chained onto a previously filled block, forming a chain hence the name blockchain. Any new information freshly added is compiled into a newly created block. The filled block is then added to the chain when filled.

Blockchain has three major concepts: blocks, nodes, and miners.

  • Blocks 

Blocks store data in the chain. The information on blocks depends on the blockchain type. Blocks contain 32-bit whole numbers called nonces that are randomly generated at the block creation. The nonce generates the block identifying header known as a hash. The hash is a 256-bit number wedded to a nonce. It’s uniquely tied to every information it holds, and any change in the information in the block will also update the hash.

It’s easy to know if the block’s information has been tampered with because all you need to check is if the hash has changed. Blocks ensure the network’s safety and any change is immediately noticed and tracked, thus affecting its verification.

  • Network Nodes

Nodes are connection points that create, store, and send data across a network. Nodes are accessible on devices where blockchain software is installable and can access Bitcoin, e-wallet, and other Bitcoin-related services.

Below are the types of nodes:

Full nodes: Full nodes verify the incoming blocks and store all the data in the blockchain. Full nodes need ample storage space for them to hold the blockchain. 

Partial nodes: Partial nodes, also known as light nodes, verify the incoming blocks but lack adequate storage space for the blockchain.

Users perform activities such as making transactions, receiving and transmitting transactions, tracking, and verifying transactions.

  • Miners

Mining is an integral part of cryptocurrency that generates and releases new cryptocurrency tokens for circulation. Additionally, mining helps verify, authenticate, and add the ongoing transaction to a public ledger. 

Miners perform an activity known as proof of work. The first miner to do a proof of work for blockchain generates rewards in Bitcoin. The goal of proof of work is to prevent miners from duplicating coins they didn’t earn.

Mining is a costly process because it requires a vast amount of computing power.

How Proof-of-Work Functions

Proof of work is an algorithm that secures cryptocurrencies such as Bitcoin or Monero. The function helps solve the problem of double-spending, which is difficult to solve without a ledger. If the user can double-spend a coin, the coin becomes unpredictable and worthless. Additionally, double spending inflates the overall supply debasing everyone else’s coin.

Other ways to ensure blockchain secure networks include peer-to-peer networks, hashing, and work proof. Hashing acts like a unique fingerprint to the blocks that help identify it and the information it contains. Proof of work and peer networks decentralize the network from a single entity.

Peer to Peer Network

Peer-to-peer (P2P) is a decentralized platform whereby two individuals interact to buy and sell goods or services to each other. The platform has access for anyone to join. One becomes a node after joining the blockchain and has a full copy of the blockchain. In case of a change in the blocks, all nodes with access to the blockchain notify them that the transaction is legitimate. 

Importance of Blockchain

Sharing information through online platforms has been made decentralized over the years. However, when it comes to transferring valuables like money, ownership rights, and intellectual properties, one is forced to fall back to centralized institutions like banks. There are also online centralized institutions like PayPal that require integration with a bank account.

Blockchain ensures such ‘middlemen’ are never required for any single transaction to happen. Blockchain achieves decentralization through recording transactions, establishing identity, and establishing contracts. The technology ensures a massive increase in inefficiency.

Blockchain can store any digital information, including computer codes. The users could program the codes to become “smart contracts” that create automatically filled contracts when certain conditions are met. Smart contract possibilities for their use are endless. The codes are read from external data feeds, stock prices, weather reports, news headlines, and anything parsed by a computer.

Is Blockchain Secure?

When it comes to security, blockchain has its users covered. The digital world is filled with hackers looking to breach information. The blockchain’s massive security features make it impossible to hack.

Another critical aspect of blockchain is its transparency. Therefore, everything is displayed on the network, minimizing the chances of a discrepancy. Blockchain is also inexpensive compared to other traditional financial models. Furthermore, economic efficiency is increased by this decentralized platform. The non-involvement of third parties aided in saving a lot of money and has reduced security risks when making transactions, unlike the centralized platforms.

Conclusion

Bitcoin live price
Btc
Bitcoin
$30.236
price
3.6754%
price change
BUY NOW

Blockchain technology has taken the digital transaction market by storm, and it seems to be the future of digital transactions. Blockchain creates an immutable and permanent record of every transaction. This impenetrable digital ledger prevents fraud, hacking, and data theft. This technology has positively influenced several industries in the world. The industries affected include transportation, healthcare, and real estate companies such as Google, Microsoft, American Express, Hitachi, and Walmart. These companies are working to become early adopters of blockchain. Users of the traditional ledger system will only evolve as technology evolves.  

Stay up to date with our latest articles

More posts

What Is the Blockchain Scalability Trilemma?

In the context of decentralization, security, and scalability, the Blockchain Trilemma refers to the generally held notion that decentralized networks can only deliver two of the three benefits at any given moment. In this article, we more closely into the matter, assessing all the most relevant aspects of the blockchain scalability trilemma. The Trilemma Vitalik Buterin invented the term "blockchain trilemma," which refers to a conundrum that blockchain engineers face while balancing three competing demands at once: decentralization, security, and…

Do Smart Contracts Represent Legal Contracts?

When industry players use the term "smart contracts," they may mean different things. Words matter, as any contract lawyer will be able to explain. Is the word “contract” a technical overstatement, or does it trigger actual legal bindings? The industry needs to agree on the consistency of its terminology. What exactly is a smart contract? Does it have any legal implications? When attorneys and technologists use this terminology, do they understand each other? Our article will provide a short analysis,…

How Do Crypto Anti-Dumping Policies Work?

Scammers utilize social media platforms to impersonate celebrities or acquaintances to persuade victims to make fake investments. The rise of cryptocurrencies and the lack of regulations gave new tools to these criminals. We'll look at how the market is attempting to safeguard investors today. Crypto commentators frequently emphasize anti-dumping regulations as a deterrent to online fraudsters. What Are Pump and Dump Operations? Before dwelling on the concept of anti-dumping policies, we need to understand what is a “pump and dump”…

Understanding Layer 3 Blockchains

Scalability has become an even more pressing issue as the crypto sector experiences increased customer demand. Many of us have come across terms like “layer one” and “layer two” protocols in the blockchain world. Blockchains must be very secure due to the lack of a centralized authority. They must also be incredibly scalable to cope with growing users and transactions. Today we will learn more about layer three solutions, a technology aiming to provide scalability while maintaining top-notch security. A…

Venezuela – How Does the Petro Crypto Work?

Venezuelan President Nicolas Maduro suggested the creation of a national cryptocurrency in 2017. Officials claim that the country's oil, gas, and mineral riches back its value. However, as of today, Petro seems to fail fulfilling its purpose of rescuing the national economy. Some foreign observers believe the Petro digital currency is a trick to circumvent international restrictions. These sanctions prevent Venezuela from borrowing cash on global markets. This article will provide an analysis of the creation of this national cryptocurrency.…

Understanding Advanced Smart Contracts

The clever use of smart contracts has contributed significantly to the exploding popularity of blockchain technology. Initially proposed by computer scientist Nick Szabo, a smart contract is a collection of instructions executing automatically. This technology aims to make the contract execution as automated as possible. Many know how basic smart contracts work, but it is rare to find a guide on their advanced versions. After a basic overview, we will analyze two typical cases of advanced smart contracts. The article…

Layer 2 Blockchain Projects – A Guide for Beginners

One of the critical difficulties confronting the blockchain community is the matter of scalability. While the technology has proven its high potential over the years, several aspects limit its applicability to a large scale. The scalability problem has been on our minds since humankind came up with the first technological inventions. We'll expand on that in this post, looking at the particular case of Layer 2 blockchains. Layer 2 (L2) blockchain definition The "Layer 2 blockchain technology" concept is gaining…

A Beginners’ Guide to Permissioned Blockchains

It has been a few years since the topic of blockchain technology invaded the market for the first time. Today, people are gradually learning to see a blockchain and a cryptocurrency as two distinct concepts. The technological and financial culture is growing, and, as a result, the industry is attracting more developers and users. Among the many consequences of this trend, we find the appearance of new tools. Today we will talk about one of the many new applications of…

Hyperledger Fabric – What Is It and How Does It Work?

The cryptocurrency world continues to see new developer ideas enter the market. Today, we will simplify a technical aspect: the Hyperledger Fabric technology. Any reader interested in learning about the most complex aspects of the topic can refer to the official documentation. This article will analyze the main elements of this system, also highlighting important criticisms in the sector. Understanding Hyperledger Fabric Let's start, first of all, by understanding the origin of the instrument name: Hyperledger is an open-source distributed…

How does a Replay Cyber Attack Work?

The replay technique is among the many attacks that have made hackers rich over the years. The phenomenon was born before the invention of cryptocurrencies and has grown in recent years. This article will deal with various aspects related to the topic. First of all, it will be helpful to understand how a typical replay cyber attack works. Secondly, we will focus on how a criminal can use this technique in the crypto world. There are several user protection techniques,…