In recent years, you have regularly heard the term “blockchain technology,” probably about cryptocurrencies, such as Bitcoin. You may be speculating, “What is blockchain technology?” » Blockchain seems to be a cliché, but in a hypothetical sense.
Because there is no real meaning that laypeople can easily understand. It is imperative to respond to the question of “What is blockchain technology?” by counting the technology used, how it works, and how it is becoming vital in the digital world.
What is Blockchain technology?
Blockchain remains a recording system that makes modifying, hacking, or manipulating the system impossible or difficult. A blockchain is a distributed ledger that duplicates and distributes transactions across the network of computers participating in the Blockchain.
Blockchain technology is a structure that stores transactional records, also called blocks, of the public in multiple databases, called a “chain,” on a network connected via peer-to-peer nodes. Typically, this storage is called a “digital ledger.”
The digital ledger is like a Google spreadsheet shared among multiple computers on a network, where transaction records are stored based on actual purchases. The fascinating thing is that anyone can see the data but cannot corrupt it.
Why is Blockchain Popular?
Transfer money to family or friends from your bank account. You will log in to online banking and transfer the amount to the other person using your account number. Once the transaction is completed, your bank updates the transaction records. Seems pretty simple, right? There is a potential problem that most of us overlook.
Technologically, Blockchain is a digital ledger that has recently gained attention and popularity. But why has it become so popular? Well, let’s dive into it to understand the whole concept.
Most people think Blockchain and Bitcoin can be recycled interchangeably, but this is untrue. Blockchain is the technology capable of supporting various applications related to multiple industries such as finance, supply chain, manufacturing, etc. However, Bitcoin is a currency that depends on Blockchain technology to be secure.
Blockchain is an emerging technology with many benefits in an increasingly digital world:
Highly Secure
It uses a digital signature feature to make fraud-free transactions, preventing other users from corrupting or modifying an individual’s data without a specific digital signature.
Decentralized System
Approval from regulatory authorities, such as a government or bank, is generally required to conduct transactions. However, with Blockchain, transactions occur with the mutual consensus of users, allowing for smoother, more secure, and faster transactions.
Automation Capability
It is programmable and can automatically generate systematic actions, events, and payments when activation criteria are met.
Structure and Design of Blockchain
A blockchain is a decentralized, immutable, and distributed ledger composed of a blockchain, each containing a set of data. Cryptography techniques connect blocks and form a chronological chain of information.
A blockchain structure is designed to ensure data security through its consensus mechanism, which has a network of nodes that favor the validity of transactions before adding them to the Blockchain.
Blocks
A hunk in a blockchain is a mixture of three main mechanisms:
1. The header comprises metadata such as a timestamp with a random number used in the mining process and the preceding block’s hash.
2. The data unit contains the main and current information, such as transactions and smart contracts, stored in the block.
3. Finally, the hash is a unique cryptographic value that represents the entire block used for verification purposes.
Block Time
Block period refers to the time it takes to produce an original block in a blockchain. Changed blockchains have different block times, ranging from seconds to minutes or even hours.
Shorter lock times can result in faster transaction confirmations but higher chances of conflicts. In comparison, longer lock times can increase transaction confirmation time but reduce the chances of disputes.
Hard Forks
A hard fork in a blockchain mentions a permanent divergence in the history of the Blockchain, resulting in two distinct chains. This can happen due to a fundamental change in a blockchain protocol, and not all nodes accept the update. Hard forks can create new cryptocurrencies or split existing ones, and their resolution requires consensus among network participants.
Decentralization
Decentralization is the critical mouth of blockchain technology. In a decentralized blockchain, no central authority can control the network. In decentralization, decision-making power is distributed among nodes that collectively validate and agree on transactions to be added to the Blockchain.
This decentralized nature of blockchain technology helps promote transparency, trust, and security. This also reduces the risk of relying on a single point of failure and diminishes the risks of data manipulation.
Public Blockchain
It is a type of Blockchain that is open to the public and allows anyone to join the network to transact and participate in the agreement process. Public blockchains are translucent because all transactions are publicly recorded.
How Does Blockchain Technology Work?
In recent years, you may have noticed that many companies worldwide are integrating Blockchain technology. But how exactly does Blockchain technology work?
Is this a necessary change or just an addition? Blockchain advancements are still young and have the potential to be revolutionary in the future, So let’s start by demystifying this technology.
Blockchain is an arrangement of three cutting-edge technologies:
- Cryptographic keys
- A peer-to-peer network containing a shared ledger
- A computing medium for storing network transactions and records.
Cryptographic keys comprise two keys: the private key and the public key. These keys help in the creation of successful transactions between two parties. Each individual has these two keys, which allow them to produce a secure digital identity reference.
This secure identity is the most critical aspect of Blockchain technology. This identity is a “digital signature” used to approve and control cryptocurrency transactions.
The digital signature merges with the peer-to-peer network. Many people acting as authorities use digital signatures, among other things, to achieve consensus on transactions.
When they authorize a transaction, it is certified through mathematical verification, resulting in a successful, secure transaction between the two parties linked to the network. In short, Blockchain users use cryptographic keys to perform different types of digital connections on the peer-to-peer network.
Is Blockchain Secure?
Nowadays, as the blockchain industry grows day by day, the question arises: Is Blockchain secure? Or how safe is Blockchain? As we know, after adding a block to the end of the Blockchain, the previous blocks cannot be changed anymore.
If a data modification is attempted, the hash blocks continue to change, but with this change, there will be a rejection as there is no similarity to the previous block.
They would have to control and insert most of the network at the right time. This is a 51% attack because more than 50% of the network must be controlled to attempt it.
Timing is everything in this type of attack: by the time the hacker takes action, the network has likely exceeded the blocks it tried to modify.
