Blockchain Technology – Beginners Guide
Blockchain surely was an ingenious invention which has evolved into something far more than it was anticipated to be. It is also one of the biggest buzzwords in the tech world right now and is a rather curious technology with advantages aplenty.
The first major application of Blockchain was the Bitcoin which is not a new word for most of us. Bitcoin is a cryptocurrency and Blockchain is its backbone.
To understand what exactly a Blockchain is, a few questions have to be answered. Hopefully, after going through the following article, you will be quite familiar with the basics of all things Blockchain and how it is used. Let us start from the beginning.
What exactly is Blockchain?
To put it in simple words, Blockchain is a new and secure way of storing and moving data around so that instead of data remaining centralized in a single location, it will be distributed throughout a network and held together with the help of cryptography.
Everything that we do, be it paying our bills, shopping, even browsing online through random sites generates some kind of data which is moved around.
Usually, related data is stored all together in the same location to make it easier to access.
But Blockchain is the new way of storing this data.
Currently, centralized authorities like banks help us to make transactions.
But Blockchain decentralizes this data and gives us a digital ledger of transactions anyone one on the network can see and this data is made highly secure with the help of cryptography.
Information stored in a Blockchain exists as a shared database which is continually updated.
Since. it isn’t stored in a single location, the records are public and easily verifiable which means that no centralized information exists for a hacker to corrupt.
How Does Blockchain Work?
So, imagine that we have a lot of data which is split into some blocks each having a specific size. This data is actually a track record of all the transactions that have ever occurred since the beginning of the Blockchain.
For example, for the Bitcoin, this data is the record of all the Bitcoins to be ever transacted starting from the first Bitcoin transaction.
These blocks of data will be linked together using a unique digital signature which corresponds to the data in the block.
If any data inside the block changes, the signature will also change because the signature is created using a technique called hashing.
This chaining of data blocks makes the data immutable which means that, when a block is chained to another block, it’s data can never be changed again as it will affect the connected blocks which will, in turn, affect the whole network and that is not possible.
The signatures are created in such a way that nobody can change the information that is put on a Blockchain.
A block will only be accepted on the Blockchain if the signature starts with a consecutive number of zeroes.
Since not all the signatures do not meet this requirement, they must be repeatedly altered until they start with consecutive zeroes.
Since the data in the block associated with the signature shouldn’t be affected, a small specific piece of data is added to every block that has no purpose other than being repeatedly changed to find a suitable signature.
This piece of data is called the nonce of the block.
Thus, a block of data contains transaction data, a nonce and associated signature. The process of repeatedly changing the nonce to find an eligible signature is called mining and this is what miners do.
Miners constantly try different nonces employing trial and error using some mining software that is specific for that particular Blockchain.
Finding a signature that starts with zeroes is not easy and requires a lot of computational power and time, and luck too.
Consider that a corrupt miner has altered the transaction data in a block and is now trying to find new signatures for the rest of the blocks so that the network can accept this change in data.
Then he/she will also have to find signatures for the blocks that are being added constantly to the end of the chain. For this, he needs more computation power than an entire Blockchain network.
Since millions of users are mining on Blockchains, a single corrupt entity will never have more computational power than an entire network making the Blockchain immutable.
Thus, once data has been added to the Blockchain, it can never be changed again. And more the number of miners on a Blockchain, the more secure it is.
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Blockchain Stats and Facts
Features of Blockchain
- Security – Blockchain systems are highly secure because there is no chance that it will get hacked as the information is decentralized and since the data is immutable.
- Immutable Data – Since altering transaction data inside the Blockchain requires the changing of signatures for all the subsequent blocks of data, the data inside a Blockchain are immutable.
- Faster System – Blockchain transactions are way faster than the traditional methods of transactions like banking and online transactions.
- Decentralized Storage – Data is not all stored together in a single location but is distributed throughout the Blockchain thus making it almost impossible to hack. Also, the owner has direct control over his transaction through the signature which is linked to his/her transaction data.
- Solution to Double Spending – Double spending is the risk that the user may send the same units twice. But with Blockchain, the users can vote on the transactions to be added to the latest block. Once this block has been relayed through the network, anyone can actually verify whether the user actually owns the coins that he/she wishes to spend.
Pros/Cons of Blockchain?
- Faster processing
- Peer to peer global transactions
- Supply chain management
- Power of use
- Uncertain regulatory status
- Huge in size
Application of Blockchain?
- Cryptocurrencies – Blockchains are used for decentralizing cryptocurrencies as the records in Blockchains are permanent, comprehensive and public. Click here to know more about Cryptocurrency MLM Software.
- Business – Blockchains are used in business for asset management, cross border payments, insurance claiming etc.
- Smart Properties – Blockchains are used for creating smart contracts like for encoding personal health records and to protect ownership rights, in Internet of Things (IoT) such as smart appliances, supply chain sensors and so on.
- Government – Blockchain helps communities by providing them with a self-management platform.
- Identity – Blockchains can be used to create passports, documents like wedding and birth certificates, for personal identification etc.
Future of Blockchain?
Blockchains have been used extensively for different applications but their entire benefits haven’t been reaped by most parts of the world.
There are many predictions when it comes to what future holds for Blockchain technology.
It is expected that government based cryptocurrencies will become an area of experimentation led mostly by the developing nations.
Blockchains may also be used for creating identity standards for individuals as well as for physical and virtual assets.
Since it is very secure, most of the trade happening globally may be conducted leveraging the Blockchain technology in the future years.
Blockchain has endless possibilities and how it will continue to grow is something that is left to the imagination.
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Blockchain – Conclusion
Blockchains offer a lot of advantages over the conventional methods. It is also being adapted more and more, not only by the companies but also by officials like the government due to its various facilities and secure nature. The possibilities are endless when it comes to Blockchains. The increase in the number of Blockchain jobs and the demand for individuals who are well versed in this technology is ample enough proof that the popularity of Blockchains will only continue to grow in time.