If you have ever interacted or held cryptocurrencies then you must have come across the term, Blockchain. So do you know what is this technology? This technology is often described with many jargons by people in cryptography, mathematics, and network engineering. Well how I see it, it is more straightforward than you might think. Let’s take a deep dive into the core concept.
What is Blockchain?
A blockchain is a database or ledger that is distributed among the nodes of a computer network. Just like any database, this technology saves the information electronically in a digital format. This technology plays a pivotal role in cryptocurrencies; mainly responsible for maintaining a secure and decentralized history of crypto transactions. Blockchain minimizes the involvement of third-party and creates a secure record of data that generates trust.
The only difference between a database and blockchain is how the data is structured. Blockchain has linked blocks and each block has a certain storage capacity and holds the information about transactions. After one block is filled, it is linked to the previous chain of blocks, and all new information of transactions is saved in a new block.
Public vs Private:
Blockchain can be either public (permissionless) or private (permissioned). The only difference between these two is that one is publicly available means anyone can access it like Bitcoin; On the other hand, private is only accessible to a few people who have the permission to access it.
How does it work?
To understand the working of this technology, we will have to demystify this. It is a combination of three innovative technologies.
- Cryptographic keys
- Peer to peer network containing a distributed database
- A means of computing
There are two types of cryptographic keys; public and private. Anyone associated with this technology has these two keys which help to create secure transactions with other parties. Any individual holding these two keys can generate a digital identity reference for himself. This digital identity reference aka digital signature is used to authorize and control transactions.
A peer-to-peer network is merged with digital signatures in which a lot of individuals act as an authority by using their keys in order to reach an agreement on transactions. When the parties authorize any transaction with their signatures, it is certified by mathematical puzzle-solving. When these transactions are certified by miners then these are stored in blockchain. In simple words, users apply their cryptography keys to perform different types of digital transactions over the peer-to-peer network.
Is blockchain secure?
Yes, blockchain is secure and not easily hackable. The reason behind this claim is the structure of the blocks. New blocks are always appended at the end of the blockchain. This block at the end holds the information of the previous block and that one holds the information of one before. This is how blocks are linked and if someone wants to alter the information of any block then he will have to alter the whole previous chain of blocks that are interlinked linearly and chronologically. Any block can be altered only if the majority of the network agrees on it.
Let’s assume a hacker wants to alter blocks and rob people of their crypto holdings. If the hacker only alters his own copy, then he will be caught when it is cross-referenced with the rest of the network. The copy of the hacker will be considered illegitimate because the majority of the network will not agree on it. Any hack can be successful only if 51% of the network agrees on the hacker’s copy of the network. A lot of resources and money are needed to pull such a task.
Such a hack will not go unnoticed because of a lot of several alterations. The users can transfer to a new version of the chain that has not been affected making all the efforts fruitless.
Use cases:
Blockchain is such an innovation that has altered the way our conventional systems were working. Some might see blockchain as a technology only used in cryptocurrencies, but the use cases go way beyond that. For example, some firms like Unilever, Siemens, AIG, and Walmart have already integrated this technology into their systems because it is the most reliable storage source.
- Banking and Finance is the industry that can benefit more from this technology. It can improve their operations. The banks only work five days a week and 8 hours daily. If the industry integrates this technology into their then it will save a lot of time and cost.
- Healthcare is another industry that can improve its operations by storing the patient’s data into this innovation. The Healthcare sector will have improved systems and patients without any worry because the data about their health cannot be altered.
- Property records can also be handled by integrating this technology into the sector. Property records saved on a trusted and secure platform will improve the efficiency of this sector overall.
- The supply chain is the next sector where this technology can bring a lot of improvements. Suppliers can record the origin of their products and companies can verify the authenticity of products.
The list of the use cases goes on in the fields like voting, currency, and many more.
Pros and Cons of Blockchain:
For all of its complexity, this technology’s potential in the form of decentralized record-keeping is beyond our imagination. The heightened security and lower transaction fees can bring more use cases in the near future. Let’s look at the pros and cons of this amazing technology.
Pros:
- Low human involvement has improved accuracy
- Cost and time reduction by eliminating the third party
- Efficient, secure, and private transactions
- Transparency is another amazing feature
- An alternative way to secure the personal information of citizens or customers
Cons:
- Low transactions per second
- This technology can be used in illicit activities.
- Data storage limitations
- Regulatory issues as law changes by jurisdiction
Conclusion:
With many practical applications for the technology already being implemented and explored, blockchain is finally making a name for itself in no small part because of bitcoin and cryptocurrency. As a buzzword on the tongue of every investor in the nation, blockchain stands to make business and government operations more accurate, efficient, secure, and cheap, with fewer middlemen.