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Beginner’s Guide To Understanding Blockchain Technology

Blockchain Technology

Are you new to blockchain technology and want to learn more about it? Or perhaps you have heard the phrase "blockchain" but don't understand its definition or purpose.

Today, blockchain is one of the most in-demand technologies in the technology industry. It has become increasingly important for businesses of all ages to be aware of blockchain and to understand what it is exactly.

Blockchains are immutable digital ledgers that store records or transactions in multiple places on a digital network. Each verified transaction is added to a space called a block, which is linked to other subsequent blocks through cryptography, forming a chain.

The blockchain is a system of recording information in such a way that it becomes difficult to change, hack, or cheat. A blockchain is a digital log of transactions that is duplicated and distributed from the blockchain’s network of computer systems. 

Blockchain technology is one of the boost emerging technologies in today’s age of industrialization.

Blockchain technology is revolutionizing how businesses store and transfer data. It is a secure, decentralized, and immutable ledger system used for digital transactions. Blockchain has become increasingly popular in recent years due to its ability to provide transparency, traceability, and security in various applications like cryptocurrencies.

What is Blockchain?

Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the internet system. A blockchain is essentially a digital ledger of transactions that is duplicated and distributed over the complete network of computer systems on the blockchain.

Each block in the chain contains a number of transactions, and every time a new transaction occurs on the blockchain, a record of that transaction is added to every individual ledger. The decentralised database managed through multiple participants is known as Distributed Ledger Technology (DLT).

Blockchain is a type of DLT in which transaction data is recorded with an immutable cryptographic signature called a hash.

4 Types of Blockchains

Types of Blockchains

1. Public Blockchains

Public blockchains are open, and distribute networks of computers accessible to anyone wanting to request or validate a transaction. Those (miners) who validate transactions get rewards.

2. Private Blockchains

Private blockchains are not open to the public, they have access restrictions. People who want to join need permission from the system administrator. They are typically governed by one entity, meaning they’re centralized. 

3. Hybrid Blockchains or Consortiums

Consortiums combine public and private both blockchains and contain centralized and decentralized features.

4. Sidechains

A sidechain is a blockchain that works in parallel to the main chain. It lets users move digital assets between two different blockchains and improves scalability and efficiency.

History of Blockchain

While blockchain currently commands a lot of demand, its basic characteristics are different from a new concept. The technology started in 1991, when a group of researchers first came up with the idea of cryptographically securing data in a blockchain, time-stamping it so it would be impossible to overwrite or tamper with the data.

This concept became the subject of scholarly study and experimentation throughout the years. Then, in 2008, a developer under the pseudonym Satoshi Nakamoto came up with a model that would become the first functional blockchain that went on to be used as the first public ledger for the Bitcoin trading system. 

Since the technology has grown to surpass its cryptocurrency implications alone, new data-oriented possibilities for countless industries. Today, with innovative entities like Ethereum and Ripple leading the charge, blockchain showcases a full-fledged paradigm shift for data sharing, storage, and fortification.

How Does Blockchain Work?

  1. Step: A transaction is requested and authenticated by the blockchain network to you.

  2. Step: A new block is created to showcase that transaction.

  3. Step: The new block is sent to every node (or individual ) in the blockchain network. 

  4. Step: The individual now has validated the new block and transaction. 

  5. Step: (In most cases) the person receives a reward as a result of a proof-of-work system. 

  6. Step: The new block is added to the blockchain data. 

  7. Step: The blockchain update is distributed over the network. 

  8. Step: This way the transaction is complete.

Why do people use blockchain?

Blockchain builds trust, security, transparency, and the traceability of data shared across a business network and delivers cost savings. Blockchain for business uses a shared and immutable ledger that can only be accessed by members with permission only.

Blockchain helps in the verification and traceability of multistep transactions required in verification and traceability. It can give secure transactions, reduce compliance costs, and speed up data transfer processing.

Advantage Of Blockchain

1) Public ledger

Every transaction is made public because this is an open-public ledger. Miners keep a watch on all transaction data to ensure that the blockchain’s integrity is maintained.

2) No third-party operation

Cryptocurrencies based on blockchain technology is not operated by any government or financial organizations. This means that no government can operate the currency’s value.

3) Secure transactions

The blockchain, which records data of all transactions, cannot be changed or tampered with. Both parties and the general public can view the transaction data at any time. This makes the security of online transactions stronger.

4) Efficient cross-border transactions

Consider a financial transaction by a person residing in different countries. Such a transaction, with traditional ways, might even take a week. Blockchain technology lets such cross-border transactions to be finished in a few minutes.

Disadvantages of Blockchain

1) Difficulties with Updating and Error Elimination

If any component of the P2P network’s nodes refuses to change to accept the program must be upgraded. 

2) Dedicated Purpose Network Robustness

All applications are supported by business logic only. The rationale specifies how new applications must perform in terms of business needs.

3) Development Difficulties

It’s critical to use sophisticated protocols from the beginning to gain consensus and enable scaling.

4) Crime

Because there is no central authority to ensure a user’s identification, the development of certain decentralized apps becomes a major problem. Moreover, blockchain tech gives anonymity to users, which criminals can use to conduct illegal activities.

5) Needs tech knowledge

Most people think that blockchain technology is only for tech-skilled people.

How Secure is Blockchain?

Blockchains manage a large-scale record of transaction data and additional data wrapped in several layers of data security. As a result, these systems are normally regarded as safe and secure.

A blockchain is a digital ledger of transaction data managed and updated by a distributed network of computers. It is easy to read the ledger and add extra data to the chain of transactions, although each new transaction must clear several security hurdles before it is added to the blockchain. 

Nobody can change or delete existing data from the record. Any attempt to tamper with the ledger is easily traced back to the expected hacker, who then typically loses access to the network.

Summary

Companies are giving more focus on how to use blockchains to create new revenue streams. Blockchain is finally creating a trend with several practical applications for the technology being implemented and researched.

It has become a buzzword for every investor. Blockchain aims to make business and government operations more precise, easy, efficient, secure, and cost-effective by eliminating middlemen.

With the demand for blockchain tech rising, and the whole ecosystem’s willingness to adopt it, this is the best time for businesses to ride on the ongoing wave.

FAQ's on Blockchain:

How do you understand blockchain technology?

Blockchain is a system of recording data in a way that makes it difficult or impossible to change, hack, or cheat the system.

What are the basics required to learn blockchain?

A person should have a good knowledge of Information Technologies, Information security, and computer science.

Can I learn blockchain by myself?

Enrolling in a course at a facility or online learning platform can help you better.

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January 9

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