The century we are living in is all about technology. With the rising modernization in our lives, people are adopting new technologies. Modern technology has made space in our lives. Technologies like IoT and augmented reality have gained popularity in this decade.
Blockchain technology has impacted different industries since its inception. Bitcoin is the first cryptocurrency that was developed on the Blockchain platform. Bitcoin is a digital currency that can be used in place of Fiat money. The technology underlying the success of cryptocurrencies is called blockchain.
What is blockchain?
Blockchain is a technology that holds the transactional records while keeping everything secure, transparent, and decentralized. Blockchain is like a chain stored in the form of blocks that have no authority. Blockchain is a distributed ledger that is open for everyone on the network. Once the information is stored in a blockchain, nothing can alter or change it.
The transactions on the blockchain are completely secured with digital signatures. Due to the encryption and digital signature, the data on the blockchain is tamper-proof.
The technology works on consensus, which means that all the network participants need to reach an agreement. The data stored on a blockchain is digitally recorded and has a history visible to all the network participants, which limits any chance of fraudulent activity or transaction duplication.
How does blockchain work?
Blockchain is a chain of blocks having data or information. Though blockchain was discovered earlier, the first popular application of the Blockchain technology came out in the year 2009 by Satoshi Nakamoto.
Each block in a Blockchain network stores some data and hash of the previous block. Hash is a unique code belonging to a specific block. When the data inside the Block is modified, then the hash of the block will also need modification. These unique hash keys make the blockchain tamper-proof.
Nodes on the network validate the transactions taking place on blockchain. In Bitcoin, these nodes are known as miners, and they work on the concept of Proof of work. To make the transaction valid, each Block should follow the hash of its preceding block. The transaction only takes place when the hash is correct. If someone tries to attack the network, the breach will be detected easily as the hash will not match. This makes sure that the blockchain is not altered, and any change if made, is reflected throughout the network, and so is detected easily.
Steps how blockchain allows the transactions to take place:
- Blockchain network uses public and private keys to form a digital signature to ensure consent and security.
- When the keys ensure the authentication, there arises the need for authorization.
- Blockchain allows the participants to reach consensus.
- To make a transaction, the sender uses a private key and announces the transaction. A block is created having information like timestamp, digital signature, and the public key of the receiver.
- The information of the block is broadcasted in the network and then starts the process of validation.
- Miners start to solve the puzzle related to the transaction to process it.
- Once a miner solves the puzzle, he receives Bitcoin as a reward. Such problems are called Proof of work problems.
- When the majority of nodes come to a consensus, the block gets timestamped and added to the blockchain. The block can have anything like money, data, or messages.
- Once the new block is added, the copies of blockchain are updated for the nodes present on the network.
Blockchain technology is the future of businesses. Due to its huge benefits and tamper-proof feature, many industries and organizations are going to adopt Blockchain technology.