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Blockchain – Basic concept – History – Working – Features – Applications of Blockchain

Introduction

This techinfoabout article is about the blockchain technology. This article will help you to get the basic concept of the blockchain technology. This technology is going to change the way our society and the internet functions today In this article you will learn the following things.

Content

  1. What is Blockchain
  2. Blockchain terms used in this article
  3. History of blockchain
  4. How blockchain works
  5. Features of Blockchain
  6. Uses or applications of blockchain technology

What is Blockchain?

The name of this technology “Blockchain” itself defines the very basic concept of this technology. That is, Blockchain is a chain of the blocks, in which every block is connected to a block that is previous to it. In this way every block is linked to the block previous to it and the block next to it in a long chain of blocks. These blocks are then distributed over a large P2P network.

Blockchain is an open distributed ledger that contains the record of the data in a verifiable and permanent way. Hacking a blockchain is almost impossible because blockchain distributes the data over a large p2p network, each peer acts as a node. Each node contains the data of all the blocks and all these blocks are connected to their previous blocks and the blocks next to them. That means to change even a single bit of information in a block one has to change all the blocks in a node, and this has to be done for around 51% of the nodes in a blockchain network for the change to be approved, and this is almost impossible to do.

Features like immutability, privacy, reliability and trust makes the blockchain technology suitable for various other fields than just the cryptocurrencies. This technology has a potential to impact almost every industry like manufacturing, financial, food industry, and many others.

Blockchain terms used in this article

  1. Block – A block is a record in a blockchain that contains A) A hash of a previous block. B) A time stamp. C) Data related to the type of blockchain (For example – Transaction data in cryptocurrencies)
  2. Digital Signature – It is a digital mathematical scheme that verifies the authenticity of an online document.
  3. Genesis block – It is the first block in a blockchain. This block does not have any previous block.
  4. Hash – It is a long string of letters and numbers that is generated by a hash function.
  5. Node – The computers that are connected to a large p2p network of a blockchain and has full historical data related to that blockchain are called nodes.
  6. Nonce – Any arbitrary number that can be used just once in creating a cryptographic hash function.
  7. P2P – Peer to peer networking is a distributed application architecture that distributes the workload between peers. All the peers are equally privileged participants in peer to peer networking.
  8. Smart Contracts – A computer protocol that facilitates the verification of a digital contract is called as a smart contract. A smart contract is immutable.

Brief History of a blockchain

The concept of blockchain was first described in 1991 by Stuart Haber and W. Scott Stornetta . In 2008 Satoshi Nakamoto used the concept of blockchain in Bitcoin (a digital currency), and then in 2014 blockchain was starts being recognizes as a technology that can have a great impact in areas other than the Bitcoin. After a decade of Launching of Bitcoin, Blockchain technology is finding its applications in large number of industries like Financial, manufacturing, Food industries.

How Blockchain works

Blockchain is a chain of connected blocks. Each block contains the hash of the previous block, a time stamp and the data. Even a small change in a block can lead to the generation of a whole new hash function that if not matched with the block next to it makes this new change in the block invalid.

Each block is connected to its previous block (except the Genesis block) with a hash function of that previous block. This block then generates a hash function which is stored in the block next to it. This chain of blocks is distributed to all the nodes in the blockchain network, each of these nodes then verifies the addition of new blocks and any update of a data in a previous block. If the majority of the nodes (say 51% of total) accepts it and verifies the new block, only then the block is made valid. To make any changes or add a new block to the blockchain, verification from majority of the nodes on the network is needed to approve the changes or addition of the new block. After the verification from majority of the network is done the new block is added and all the nodes on the network are updated.

In this way to change the data in a block one needs to change hash of all the blocks in the chain and this has to be done on at least 51% of the total nodes on a blockchain network, which is almost impossible to do.

Features of Blockchain

  1. Decentralized System – This technology works on a distributed peer to peer networking concept, thus, blockchain is not centralized to any single authority. Decentralization have the following features
  • It eliminates the involvement of any third party
  • It is very fault tolerance
  • It provides full transparency to the whole system as anything on a blockchain is visible to all the nodes.

2. A distributed ledger – Blockchain keeps record of everything that has ever been in the blockchain system, this record is verified, permanent and immutable. Distributed ledger has the following benefits

  • It assures the ownership of the owner of goods and intellectual property.
  • It removes the involvement of any intermediate party thus speeding up and securing the process.

3. Immutability – The data recorded in the block of the blockchain is immutable. All the blocks are cryptographically hashed and each block contains the hash of the previous bock. This full chain is distributed over a large network. To change even a single bit of information almost whole of the network has to be updated to make the change valid, which is kind of an impossible task to do. Thus the data on the blockchain is immutable.

4. Security – The data stored in a blockchain is completely secure from any fraud. Once the data is verified and stored in the blockchain, even a single bit of it cannot be changed. And this data is not under the control of any centralised party, there for your data is only yours in a blockchain and is completely secure.

Blockchain applications

This decentralized technology is going to change the way we use internet today. Here are some of its application that will affect your day to day life in future. Few applications are given below:

  1. Decentralized cryptocurrencies – “Bitcoin”, Probably everyone one has heard about this cryptocurrency, first application to use blockchain technology. Blockchain will transform the way we manage our money today. With the blockchain technology there is no need of any centralized authority to verify and process the transactions. Cryptocurrencies based on this technology are already getting famous all over the world. It provides a safer, less time consuming, verified environment for money transactions all over the world
  2. Financial services –There was always a need for a central authorized party for any financial work, sometimes which was error prone, very time consuming, money consuming process. But blockchain has shown its power here too. Things like smart contracts, smart bonds are already using blockchain technology, which makes them less time consuming, less error prone and no one needs to pay their money to a third party for their financial work.
  3. Personal identity – With blockchain technology you will be able to use your online identity to sign up anywhere online. This personal identity will be very safe from any frauds or spams. Blockchain provides a very secure environment. You can use your identity online anywhere without the worry of someone storing your identity and using your personal information for advertising. Blockchain will help in following areas in providing identity
    1. Digital passport
    2. Birth certificate
    3. Wedding certificate
    4. Death certificate
    5. Online account sign in
  1. Blockchain cloud storage –In a very near future blockchain cloud storage will have its impact on everything. The cloud storage provider store all your data and have control over it, but blockchain cloud storage is decentralised cloud storage facility that has no central authority to control your data on cloud.
  2. Ethereum – An open source platform that enables developers to build and deploy decentralised applications. Ethereum is based on blockchain.

Conclusion

Blockchain is in its initial phase today, but in a very near future blockchain will change how our society functions today. This new technology has a very high potential to impact almost every industry. There are a very huge number of applications that a blockchain can have, many yet to be discovered, more are discovered continuously. This technology will put a great impact on the internet, it will make all the systems transparent, safer, immutable, and permanent.

This was a basic concept about blockchain. To learn everything about blockchain, we recommend our viewer to buy and read these books.

  1. Blockchain revolution by Don Tapscott
  2. The Age of Cryptocurrency: How Bitcoin and the Blockchain Are Challenging the Global Economic Order by Michael J. Casey and Paul

 

 

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