For those who are keen on banking, cryptocurrency, and online investments, then I believe you understand what the term “blockchain,” means. For those who are not well versed with it, this article will be of great help to you. Unless ignorant of the outside world, I am pretty sure that you have come across and have a little knowledge of bitcoin technology. This article caters to that. Fortunately, this is not complex terms used in a rocket science class. It is straightforward to understand blockchain.
What is blockchain?
Blockchain means a chain of blocks but not in real sense. Well, that wasn’t so hard to understand. But hold your horses, we haven’t even begun to touch the subject. That is just the basic definition to help you grasp the concept. This word is a combination of two words – block and chain, which in this context refer to digital information (the “block”) stored in a public database (the “chain”). Let’s first analyze “Blocks”. These are digital pieces of information and are further subdivided into three parts:
- Blocks store information that deals with transactions – This includes information about the date, time, and amount in dollars that you have spent on your recent purchases in online and physical stores.
- Blocks store information of transaction participants – This is a block that deals with information about purchases from your online store that is typically recorded using a unique “digital signature,” sort of like a username, instead of your actual name.
- Blocks store information distinguishing blocks from one another – Just like our names identify us from one another; each block has a unique code called a “hash” that allows distinguishing one block to another. For example, when a consumer makes a splurge purchase on Amazon and while still at it you decide to buy another similar product. Although details of both transactions will look almost identical, we can always make a distinction between them using their unique codes.
A single block on the blockchain stores up to 1 MB of data, meaning that a single block can house a few thousand transactions under one roof, depending on the transaction size.
How blockchain works?
Every time a block stores new data, this information is added to the blockchain. Like I said earlier, blockchain is a chain of multiple blocks strung together. However, four things need to happen before adding a block to the blockchain:
- A transaction must take place – when trying to purchase on an online store by clicking multiple checkouts prompts, you finally succeed with the process.
- The transaction needs to be verified – When a transaction is made, verification needs to be done to confirm that it happened. This job is left to a network of computers that continuously check whether the transaction occurred the way you said it did. They get the transaction details, including the time the transaction took place, the amount ($), and participants.
- That transaction must be stored in a block – After transaction verification, the transaction needs to be stored on the block. These include your digital signature, the transaction’s dollar amount, and the store’s digital signature. This transaction and others like it will join thousands of it in blocks.
- That block must be given a hash – Verified block’s transactions would be assigned unique identifying code called a hash. The latest block added to the blockchain is also given a hash. Once a block is hashed it is then added to the blockchain.
Once a block is added to the blockchain, it becomes visible to public vicinity, which means anyone in public can see it. You will realize that you have access to transaction data if you look at Bitcoin’s blockchain. You will also access information on when (“Time”), where (“Height”), and by who (“Relayed By”) the block was added to the blockchain.
Is Blockchain Private?
The contents of the blockchain are viewed by anyone on their PCs, Android, or IOS tool. However, users can also connect their PCs to the blockchain network, allowing them to receive information on added blocks in the blockchain, which updates automatically. The system works just like a Facebook News Feed that shows live updates once a new status is updated. There are thousands even millions of copies since each computer in the blockchain network has its copy of the blockchain. Spreading information across a network of computers makes it hard to corrupt the information even though copies of the blockchain is identical. To corrupt the system, a hacker will be forced to manipulate each copy, which will take forever since there are millions of them.
A closer look at Bitcoin blockchain, you will realize that access to identify user’s transaction information is not granted. You can only identify a user using a digital signature or username since transactions on the blockchain is not entirely anonymous. This leads us to ask this question: if you can’t tell who is adding blocks to blockchains, what makes networks holding the blockchains credible?
Is Blockchain Secure?
Blockchain technology is very safe, and its security is accounted for in several ways. One way to ensure the safety of blockchain is by storing new blocks linearly and chronologically. Meaning that they are always to the end of the blockchain. For instance, in Bitcoin’s blockchain, each block has a position on the chain, called a “height.” To make it even harder to crack, each block has its hash, and also the hash of the block before it. Security is also beefed-up by creating hash codes using a mathematical algorithm that turns digital information into a string of numbers and letters. The hash code will always change whenever information is edited.
If you had any doubt about blockchain technology, I hope that this article has shed some light, and you have some understanding of it works. In the beginning, you may get confused trying to understand the whole thing. The system is also very secure, and you can count on it for financial services.
Naman Modi is a Professional Blogger, SEO Expert & Guest blogger at NamanModi.com, He is an Award Winning Freelancer & Web Entrepreneur helping new entrepreneur’s launches their first successful online business.
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