We had enough of manual databases and ledger providing the complete record of transactions and thus, Satoshi Nakamoto came up with a digital, decentralized and public ledger that can be used for recording cryptocurrency transactions!
In 2009, the launch of cryptocurrency Bitcoin created immense curiosity and inquisitiveness among people. Everyone from technology enthusiasts to common investors were interested in getting into the roots of this digital currency. What they ended up with is known as the blockchain technology.
If you are still struggling to understand this inspiring invention, here’s an understandable guide you can follow:
What is a blockchain technology?
Blockchain can be considered as the backbone of digital transactions. It is a decentralized ledger in which, all the transactions done using the cryptocurrencies are recorded. As soon as the transactions are performed and completed, they are recorded in this blockchain, which helps the participants track the transactions in a hassle-free way.
Blockchain was launched as a digital ledger for bitcoin in 2009 by Satoshi Nakamoto, the inventor of Bitcoin. The purpose behind developing blockchain was to record the bitcoin transactions in a secure, reliable and semi-public way.
The technology of blockchain
So how does the blockchain technology actually work? In blockchains, a block is the updated and current state of the blockchain where the most recently completed transactions are recorded. In technical terms, block acts as a cache of blockchain. As soon as one block is completed, it is sent to the master ledger that is in the permanent database/ blockchain. There are such uncountable blocks connected or linked with each other in a chronological order to form a blockchain.
The interlinking of these blocks allow the participants and transaction makers to view the transaction details. Also, the blockchain consists of all the details of users like the transaction amount and addresses. Bitcoin is a decentralized and independent cryptocurrency, as blockchain allows verification of transaction through different users and not any third party.
All the nodes or systems participating in system easily get access to the blockchain database. Different systems have the copy and proof of all the transactions executed till to-date.
What is in a Blockchain?
A blockchain consists of a chain of multiple blocks. The blocks are formed with important information about the transaction. The blocks are topped with a block header, which consists of the transaction data, timestamp and a ‘hash’ (a reference) to the previous block for creating a chain. This information makes the blocks verified, secure and distributed as this header is public.
What is mining?
Mining plays a pivotal role in preparing the blocks and making transactions. This is a process used for validating and authenticating all the transactions made in a network. Through mining, new nodes are created, verified and added to the chain. On the blockchain, a new block is mined every 10 minutes.
Cracking the finest and distinctive features of blockchain technology
Blockchain is defined as a distributed, decentralized, secure, incorruptible public ledger. Let’s get some insights about these defining terms of blockchain.
- Distributed ledger
Blockchain is often referred to as a distributed ledger or distributed platform as every user making transactions with blockchain gets a copy of the database. Thus, each blockchain transaction is shared between a large number of users or systems. The blockchain network allows quick and secure sharing of this database. Due to this distributed framework, the blockchain database is not stored on any centralized platform. The records are public and verified by a lot of users. Thus, due to rigorous and multiplied sharing, it is known as a distributed ledger!
The transactions happening on the blockchain are initialized through public key cryptography. This is an efficient and robust cryptography offering robust authentication of the transactions. Also, the chain of block makes it difficult for the hackers to alter the block information, as the blocks are interlinked over a network and changing the information can disturb the entire system.
All the blocks are shared by different systems or nodes in a network. The transaction data is thus, visible to all the users. The transactions are majorly broadcasted over the network and thus, it is surely a public and transparent ledger. As this is a distributed ledger, the data is shared in the form of distributed copies on a huge network, which makes it purely public.
The blockchain network updates or redefines itself every 10 minutes. Blockchain is a framework, which gets refreshed while collecting all the transactions happening at the interval of 10 minutes. All the transaction blocks are verified by multiple users and alternating any transaction on the network is next to impossible. Thus, the distributed nature of blocks makes it incorruptible and highly transparent.
Modern Applications of blockchain technology
Blockchain is considered as the next big thing in the world of technology and digitization. Here are some applications of blockchain technology:
- As a distributed ledger technology and for verified, secure and robust transactions.
- Blockchain is also used as a master distributed cloud storage, which can handle bulk data and flexible retrieval.
- It is a trusted platform for creating digital identity. As the world is heading towards digitization, digital identity will become a compulsion.
- Blockchain technology is also used in developing smart contracts for high profile, tractable and independent transactions.
- One of its real time application is to facilitate decentralized, and secure database for making cryptocurrency transactions.
Blockchain has emerged as a well encrypted and efficient public ledger for bitcoin transactions, which stores the information regarding transactions and shares the transaction info over a network for developing a transparent and distributed blockchain technology. Blockchain has a huge scope in banking, healthcare industry, finance, retail and other sectors. It is a reliable and secure technology designed perfectly using excellent cryptography. The features of blockchain are unmatchable and the future awaits the widespread use of blockchain in different areas. This technology is surely here to stay.
Cheers to blockchain technology! Thanks for reading this simple guide aimed to help you understand the blockchain technology.
Author bio –
Amir is a cryptocurrency expert who started investing in crypto in 2012. He is a software engineer and the author of https://abitgreedy.com, a cryptocurrency trading guide.