Blockchain: An elementary prelude

Image source: kryptomoney

Blockchain is here!! Everyone is talking about the blockchain technology, which is anticipated to transform the socio-economic scene of the world. What is this Blockchain technology? Are you wondering too? This technology is largely recognized for its connotation with the Bitcoin technology, but that’s not entirely true. This technology is way beyond cryptocurrency; from preventing monetary frauds till healthcare till retail.

In this blog, I am explaining this technology in the most elementary way, its structure, and its uses.

What is the Blockchain technology?

Blockchain, originally called as block chain, is an endlessly expanding list of records, referred as blocks, which are connected and protected by cryptography. You can consider blockchain as a huge distributed ledger, storing records of all (digital) transaction which can’t be modified or changed.

With every new transaction, a block gets added and contains ‘encrypted’ information of the transaction like source, destination, timestamp etc. The data of blockchain is accessible to everyone who wants the information, but the transactions are recorded and processed without any third-party involvement like a bank.

This process continues forever, adding new blocks, expanding the blockchain and providing trustworthy public records. Besides being updated, the chain and its blocks are spread crosswise a network to the vast number of machines.

Why did the Blockchain technology come into existence?

The most important reason behind this technology coming into existence was the drawback in the traditional banking system. Like, if you are transferring money to your family or friends abroad, then the transfer is delayed by a few days because the bank must do the necessary verifications. On a similar note, in currency transaction, bank take their cut because they are the mediators.

Hence, we had no choice but to depend on the mediators to validate the transactions and make sure that everything went smooth, for a nominal fee. But with Blockchain and Bitcoin technology, we can transfer our digital assets with the luxury of an unfailing check and the balance is in place. It even removes the problem of double-spending by confirming that each unit was transferred only once.

What is the structure of Blockchain technology?

Image source: blockgeeks

The blockchain technology is controlled independently, applying a peer-to-peer network and a distributed timestamping server. It has 3 important parts:

Blocks:

Blocks (also referred as nodes) hold information of valid transactions which are hashed and encoded into a Merkle Tree. Each block contains the information of the cryptographic hash of the previous block in the blockchain; these linked blocks further form the complete blockchain. Peers can have different versions of the history of the blocks sometimes. New blocks of data get added in place of over-writing the old ones.

Decentralization:

In centralized data controlling and manipulating data is quite common but with de-centralized data, everyone involved has a transparent access to the data. Every block or node in the decentralized system has a copy of the blockchain. The set of data values is maintained by huge database replication and computational trust; there’s no central “office” copy of the blockchain. The only risk is the expense involved in the resources required in maintaining and processing the huge amount of data.

Openness:

The blockchain is an open system which has no access control and no authority is needed to update the information of the blockchain. The simplest GUI for blockchain is the “mobile wallet” where the transaction is done between the two people after identity verification. To ensure security, a proof of work is needed while adding a new block. There is still a debate going on this with regards to the huge data management and access control.

What are the areas where Blockchain is used?

The implementation of blockchain in areas of interest is under implementation and will take some time before they are rolled out for use. Here is a list of most obvious areas that blockchain will be used in.

Smart Contracts: In the real world, a third party is involved to make all parties follow the terms. The blockchain ledger will remove the involvement of that third party and the ledger will ensure that the terms are followed by the participants once the nailed conditions are met.

Internet of Things: The data shared between the things connected over the internet needs protection and the blockchain technology will ensure that the vast information of the IoT network is shared only with the trusted people.

Cloud storage: Right now, we must rely on a single cloud storage provider and they have control of our assets. With blockchain, this will be decentralized, and we will have control of the cloud. Adding hash and storing data at multiple locations will help in securing the data.

Digitized Identity: Blockchain technology will help in keeping digital identities safe and away from fraud. In this, the check will be performed to verify if the transaction was signed by a private key. Thus, only the owner would be the person to have the private key access.

Banking and finance domain is the only beginning of the blockchain effect, it has the potential to transform many more industries. It can change our voting system, education system, forecasting etc.

Please leave your comments and thoughts below about how you think blockchain can benefit the world?