Today’s generation is all about technology. Technological inventions are transforming society and making their way in our day-to-day lives. We are using technology in several ways- from using GPS navigation to voice notes for giving commands. The latest technologies that are gaining attention globally include augmented reality, IoT, and of course Blockchain. Lately, blockchain has become a buzzword in the technology space. Whether you’re involved in the cryptocurrency market or have been following tech news, you may have heard about “blockchain,” the record-keeping technology behind bitcoin.
For most people, blockchain and bitcoin is the same thing. But this is just a misconception. Bitcoin is, in fact, the first successful implementation of blockchain technology. Blockchain is an innovative technology and creating cryptocurrencies is one of its major applications. Besides supporting Bitcoin and other digital coins, Blockchain technology has numerous applications also. Now let’s take a closer look at what Blockchain is.
What is Blockchain Technology?
In the simplest words, the blockchain can be defined as a distributed, decentralized, public ledger. It holds transactional records as a chain of blocks that are controlled by no single authority. The blockchain technology makes it possible to securely transfer the ownership of units of value using public-key encryption and proof of work methods. It ensures security and transparency because the ledger is completely open to everyone on the network. Let’s take an example to understand this better. For instance, you want to send money to someone who lives in a different location. Typically, you’ll either go to the bank or use a payment transfer application like PayPal. All these available money transfer options involve third parties for processing the transaction. The involvement of an intermediary costs an extra amount of your money which is taken as a service charge. This method is not costly but also vulnerable to fraud. But these issues can be solved by blockchain. This technology has the potential to replace third parties and make payment transfer easier, quicker, and secure. With the help of blockchain, the funds can be directly processed, without the need for any third party.
Blockchain is not centrally controlled by a bank, corporation, or government. Blockchain, also known as Distributed Ledger Technology (DLT), allows all the network participants to reach an agreement, commonly known as consensus. All the network participants have access to the stored data and stored information cannot be changed or altered. This eliminates the chances of fraudulent activity or duplication of transactions. Similar to creating a Google Doc, blockchain also creates a decentralized distribution chain that is shared will all the participants.
How Blockchain Works?
A blockchain comprises a chain of blocks that contain data. Each block in a blockchain network stores some information along with the hash of its previous block. The network uses public and private keys to create a digital signature. Each block has a unique hash that ensures the security of the data. The information is tamper-proof because if the data inside the block is altered, the hash of the block will also be changed. The nodes on the network validate the transactions. The network participants perform mathematical verification and reach a consensus to agree on any particular value.