An Overview of Blockchain Technology for Beginners

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Blockchain is a modern and new generation technology that has revolutionised business environments the world over. It does away with all intermediaries required in conventional systems for record keeping while greatly simplifying the process. The strength of Blockchain lies in its properties – it is reliable, safe from forging, fast and efficient, transparent and does not require any trust to be established between parties. Most crucially, it is immutable, and once any information or data is locked in, it cannot be changed, making Blockchain entirely safe and secure.

The origins of Blockchain

The origins of Blockchain can be traced back to 2008 when Satoshi Nakamoto released a paper Bitcoin: A Peer-to-Peer Electronic Cash System that described “peer-to-peer electronic cash” called the Bitcoin. Blockchain became the foundation for Bitcoin as it promoted digital trust by recording important information in a public space without allowing anybody to tamper with the records or remove it. Starting from a form of establishing an electronic currency, Blockchain has now become one of the ground-breaking technologies that have impacted almost every industry, from manufacturing to retail, from finance to educational institutions.

The evolution of Blockchain

It was around 2014 only that people started to realise that apart from cryptocurrency, there was huge potential in Blockchain in other areas too. Being an open-ended decentralised ledger, it could record transaction between two parties permanently without the need for third-party authentication. This creates a fool-proof process and one that dramatically reduces the costs of operations.

Soon, there was a massive surge in investments in this technology. Blockchain began to be used in supply chain management, insurance, transportation, healthcare, voting and contract management. In the financial sector, almost 15% of institutions base transactions on Blockchain. Even marketers are not left behind. Digital marketing agencies like Blockchain Australia and others from around the world are today offering highly optimised marketing strategies based on this technology.

The working of Blockchain technology

The Blockchain structure has three core segments.

  • Block – This is a record of all transactions over a given period in a ledger. The period, size and date of the transactions in a block are different from all other blocks in a Blockchain. Not all blocks record movement of crypto-currency only. There are many other inputs from various fields too. For a block, a trade denotes assigning a value to it.
  • Chain – A hash links one block to another that is, mathematically “chaining” them together. The hash is created from the data that existed in the previous block and consistently locks blocks in the chain in the specific order that they were created in time.
  • Network – A network is made up of “full nodes” and can be compared to a computer that is running an algorithm. Every node is a complete record of all transactions that are made in that Blockchain.

The Nature of Blockchain

A Blockchain is a distributed, decentralised public digital ledger that is used to record transactions across many computers. This ensures that no single entry can be changed or modified retroactively without altering all subsequent blocks. Since the data is stored across its extensive peer-to-peer network, all risks related to centralisation is eliminated in Blockchain. There is no single point of vulnerability that can be exploited by unscrupulous hackers and computer crackers.

Apart from the robust security of a decentralised public ledger network, Blockchain has additional safety measures like public key cryptography. A public key is a long random string of numbers as an address on the Blockchain. Value tokens sent across the network belong to specific addresses. A private key, on the other hand, is like a password an owner uses to access personal digital assets. Hence, data stored on Blockchain is considered to be incorruptible.

Advantages of decentralised Blockchain

  • Prevention of Fraud – Blockchain is an open-sourced public ledger, and since all transactions are recorded on them, it is very easy to spot frauds taking place.
  • Protection from external interference – Government or central banks does not control Blockchain crypto-currencies.
  • Fast transaction times – Transaction times of Blockchain based crypto-currencies are completed in minutes as distinct from normal banking channels where a wire transfer can take days.
  • Enhanced financial efficiency – In decentralised Blockchain, there are no intermediaries, and all transactions move directly from person to person.

This is an overview of Blockchain technology in a nutshell.