An In Depth Look Into Blockchain Technology
Blockchain, a brainchild of the of the mysterious pseudonym Satoshi Nakamoto,
is an indisputably ingenious innovation. The technology allows digital information to be distributed to users without being copied, thus creating the spine of a new kind of internet. The Blockchain technology was originally invented for the sole purpose of governance of the digital currency, Bitcoin, however, tech pioneers have devised and continually devise other potential uses for arguably the most disruptive technology.
Bitcoin (BTC), tagged – quite appropriately the “digital gold”, currently has a total currency value of close to $9 billion (USD) with Blockchain technology being central to its development as well as other emerging altcoins. Similar to the internet, understanding how the Blockchain works is not a strict requirement for utilizing the technology. However, having a basic knowledge of the Blockchain technology would help you get a grasp of why the technology is revolutionary.
Essentially, Blockchain works like a spreadsheet which is duplicated thousands of times across a network of nodes. This spreadsheet, by design, gets regularly updated with trade transactions.
This is essentially how the Blockchain functions i.e. information on a Blockchain exists as a shared database that is continually updated and reconciled. One of the amazing benefits of the Blockchain technology is the fact that this database of information and trade transactions is not stored in any single location and not governed by one central node or computer. Records kept on a Blockchain is indeed public and easily verifiable by anybody.
The fact that the Blockchain is not governed by any central node – instead, it is hosted by millions of nodes/computers concurrently over the internet – means it cannot be hacked.
Durable and Robust
Blockchain technology, similar to the internet, has a built-in robustness. The Blockchain stores blocks of records that are the exact same across its network and as such, this stored information cannot:
- Be governed by a central authority &
- Does not have any single point of failure
Since the invention of the first Blockchain based digital currency (Bitcoin) back in 2008 to this recent date, there has been no significant disintegration of the Bitcoin Blockchain (problems recorded with Bitcoin to date have been as a result of hacking or mismanagement). These issues are not attributed to the underlying concept of the Bitcoin Blockchain but to bad intentions (hacks) and human error. As with the case of the internet’s (which has been around for about thirty years) durability, the Blockchain technology is revolutionary and it is set to stay as it gets developed further.
Incorruptible and Transparent
The Blockchain technology network functions in a state of consensus whereby it automatically checks-in with itself on a ten-minute loop. Essentially, the Blockchain technology functions as a self-auditing ecosystem of digital assets’ value, it reconciles all transactions that occur in ten-minute intermissions. Each group of these reconciled transactions is called a “block”. As a result of the Blockchain automatically reconciling transactions, there are two resultants properties yr.
- Transaction records are embedded within the Blockchain network as a whole and it is publicly accessible by every and anybody.
- The Blockchain cannot be corrupted. To alter any unit of information on the Blockchain network, a huge amount of computing power is required to override the entire network.
While there is a possibility of this occurring theoretically, it is not practically feasible. Taking control of the Blockchain network to garner bitcoins would destroy the value of the digital currency itself.
A Network of Nodes
The Blockchain is made up of a network of computing nodes i.e. computers that are connected to the Blockchain network. These connected nodes (computers) use a client to perform transaction validating and relaying tasks, they automatically receive a copy of the Blockchain when they (nodes/computers) join the Blockchain network. Collectively, these nodes create a powerful second-level network. Each node that joins the Blockchain network is an “administrator” of the network and has an incentive for its participation as part of the Blockchain network i.e. ‘mining’ Bitcoin (in the case of the Bitcoin Blockchain).
‘Mining’ is sort of a misnomer, in actuality, it means each of the nodes competes to win Bitcoin (BTC) by cracking computational puzzles. While Bitcoin was the primary reason for the Blockchain technology invention, currently, there are over 800 altcoins available in the crypto sphere. Likewise, there have been other adaptations of the Blockchain technology concept with the Ethereum Blockchain especially being used as a working board for alternate Blockchain adaptations in industries ranging from finance, transportation, e-commerce etcetera.
Blockchain technology offers an enhanced security for digital information via its storage of records across its network, thus eliminating the risks associated with records being held at a central location. Additionally, the Blockchain technology being decentralized translates as the network lacking a centralized point of vulnerability that can be exploited by hackers.
The Blockchain technology’s added security also comes from the use of encryption technology as its security methods, unlike the internet whereby users mostly rely on the ‘username-password’ system which opens up well-documented security issues. In the Bitcoin Blockchain, there exists the public and private “keys”. The public key which is a long, randomly-generated string of alphanumeric digits is the users’ address on the Blockchain. Users receive Bitcoin to this address (also called a wallet address).
The private key is a password (also a long, randomly-generated string of alphanumeric digits) acts as a personal user’s password for their wallet address. This private key is used to access your digital assets. While the Blockchain safeguards your digital assets (Bitcoin in this illustration), users are mandated to safeguard their private keys.
How Blockchain Technology Works
So, let’s break down how the Blockchain technology actually functions. When a new transaction occurs or an existing transaction is edited, these information enters into a Blockchain. This information is evaluated and verified by the nodes connected to the Blockchain via the execution of algorithms.
Since the Blockchain is consensus-based, a majority of connected nodes would need to come to a consensus about the validity of the history and signature of the transaction information after which the new block of transaction information is accepted into the Blockchain ledger and a new block is added to the transaction chain. Otherwise, the block of information is denied and not added to the chain. The distributed consensus model allows the Blockchain run as a distributed ledger without the need for a centralized governance.
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