What is Blockchain Technology?
The recent advancement in the field of digital technology has set the world on fire. The processes that used to take the significant amount of time now can be accomplished in mere seconds. People can send the money across the globe without paying hefty fees. Your business would no longer be confined in geometrical boundaries & could scale over the globe. People are no longer depended on the central element or ‘big hand’ that governs everything and keep a keen eye on everything we do. There are many other unbelievably amazing things can be achieved and all the credit goes to the blockchain technology.
The blockchain is distributed ledger network which records and validate the transaction time to time enabling the peer-to-peer transaction within transparent yet secured and decentralized network. Duh!!!
To keep thing simple, a blockchain is kind of database that stores transaction data and records of value. Though defining a blockchain as the simple database does not justify the ‘cool things’ that blockchain can do and the way it can store the transaction and related data. So let me explain the concept of blockchain and how this so-called database differs from a normal central database.
Generally, when any kind of transaction takes a place on the database, people have to rely on some sort of third party or ‘big hand’ such as government, banks, or other institutions to record the information for them. Thus, these third parties have actually created the bridge of trust between them and common people to ensure them their money is safe. In some cases, with a bank, a government will also affirm you that the money inside will be the safe even after the bank is devastated for some reason.
When we transfer the money to pay for the services and products, we have learned to trust these third parties that will pay take the right amount of money from your bank account and transfer it into seller’s account and if the dispute occurs the third party will maintain the transaction. Hence, people trust the banks and credit card companies (actually the database where company store relevant information and maintain the transactions) to keep their personal information safe and maintain the financial transactions. Though there are still backdoors or loopholes are left in their system that some can cause some issues related to privacy and security.
That’s where blockchain comes out of nowhere and provides the same trust but with increased privacy transparency, and security. The blockchain database is not controlled by any central institutions or authority, government or banks but its user dominate and clear the transactions when people pay for services and other goods. These users are called the ledgers and they are all distributed across the globe and hence blockchain is also called “distributed ledger” or “shared ledger” technology. All the information related to users including their transaction are recorded in this decentralized database where the user can see their transaction getting verified without trusting banks or government. Unlike banks all the transactions take a place on the block chain network are irreversible which means you cannot revert the transaction and if the money is gone it’s gone.
Each transaction which is completed or validated is counted as the single block and goes into blockchain as the permanent database. Each time a block gets validated or completed, a new block is being created. It is worth to note that each block contains the users’ addresses and other transaction-related data which cannot be deleted and stays there forever making blockchain immutable. There are myriad numbers of such blocks infused to each other in a chronological manner and connected to each other through hashing system. Numbers of blocks are getting added every day resulting in the uncontrollable size of blockchain creating issues of storage and synchronization. The Bitcoin Blockchain was designed so that a new block is created every 10 minutes through the process called mining (you can say mining is the process of validating the transaction where the user will get rewarded with the small fraction of bitcoin).
Being more technical, the blockchain is a peer-to-peer system with no central authority managing data flow. The blockchain, digitized, decentralized, public ledger technology, will allow users to complete transactions with each other. Right now, the most popular use of the blockchain is with Bitcoin and other cryptocurrencies, but there are many other applications of the blockchain and how it can be used in our future.