If you have been following the cryptocurrency market over the past few years, you have probably heard about blockchain technology. Thanks to different sources of information that try to explain this concept in a complicated way, most people, including those who have invested in crypto, don’t understand what it is all about. Luckily, you will find every bit of information you need to know about this technology in this comprehensive piece. Read on!
What Is Blockchain?
Just like other technologies, cryptocurrencies such as bitcoin depend on some type of database that can track huge volumes of transactions and keep them safe. This is where blockchain technology comes in.
Invented and 2009 by Bitcoin’s anonymous founder (or founders) Satoshi Nakamoto, this cutting-edge technology consists of various “blocks” that hold large volumes of timestamped transactions. Every block is linked to the various one through what is known as cryptography, hence forming a chain.
Cryptography is the technology that ensures the security of the blockchain. Users can only edit the sections of the blockchain they own and can only do this if they have private keys – which are mandatory to write files on the blockchain network. Cryptography is also trivial since it ensures that every user’s copy of the distributed blockchain stays in sync with others.
The blockchain network is innately resistant to data alteration. It is basically a public, open, shared, and distributed ledger that can record transactions among parties in a certifiable, permanent, and efficient manner. Blockchain is used as a distributed ledger and is managed by a peer-to-peer network that sticks to a protocol for authenticating novel blocks. Once data is recorded on a block, it cannot be altered. To change one block, subsequent blocks must be changed, which is a challenging task. The only way data can be changed on a blockchain network is through majority collusion.
How Safe Is The Blockchain Technology?
Even though we cannot shun away from the fact that few cases of hacking and fraud have been reported on different networks, we must acknowledge the fact that blockchain technology is generally safe. By design, this technology is secure and represents a shared or distributed computing system with unmatched levels of Byzantine-like fault tolerance. This technology allows data management in an autonomous and decentralized manner; thus, it is suited for rather critical functions such as transaction processing, food traceability, documenting or voting provenance, medical record-keeping, and more.
Types of Blockchain
There are different types of blockchains. They include:
- Public Blockchains
Public blockchains are large, distributed networks that function via a native token. Anyone can participate in a public blockchain and at any level. This means that anyone interested can have an open-source code that is maintained by the community within the blockchain. The Bitcoin network is a good example of a public blockchain.
- Permissioned Blockchains
Just like public blockchains, permissioned blockchains are large and distributed systems that operate on native tokens. Nonetheless, not everyone can participate in these networks at any level. This is because permissioned blockchains control the roles users can have within their networks, and their core codes may or may not be open source.
- Private Blockchains
Private Blockchains are smaller than public and permissioned blockchains, and they don’t rely on native tokens. The membership in their networks is closely controlled. In private blockchains, members are astoundingly trustworthy, and even confidential information can be traded without any challenges.
Do All Blockchain Types Rely On Cryptography?
Factually, you cannot mention blockchain and fail to mention cryptography. This is because all types of blockchain rely on cryptography to allow users to securely manage the ledger in a decentralized manner.
How Does The Blockchain Technology Work?
As mentioned earlier, blockchain is made up of blocks that record current transactions. All blocks permanently go into the blockchain, and new ones are developed once the old ones are completed. Blocks are linked to each other in a linear and sequential way, and every block contains a hash of the previous block. The blockchain contains all data, from the first-ever block to the last one.
Once a transaction is complete, its information is permanently recorded on the blockchain. It can only be distributed but cannot be copied or deleted. Blockchain technology is secure since all blocks are added to the network with complex cryptography that is nearly impossible to crack.
It’s worth mentioning that there is no third-party involvement in any blockchain network. This is because details of every transaction are recorded publicly, which can be verified by other users. All participating computers – popularly known as nodes share the database of a blockchain network. Each node has a copy of the blockchain, which means anyone with it can access the public records of all transactions that have ever happened within the network.
Thanks to greater transparency, improved traceability, increased efficiency, and better security that comes with blockchain, this technology has proved its potential to transform the existing financial landscape as we know it. Experts now face the challenge of creating a practical approach to its adoption – since millions of people around the world now want to have a piece of this disruptive technology.
Mphasis 