30 Aug What is a blockchain? It’s working and technology in detail.
A blockchain is a database that is distributed amongst the nodes of a computer network. The database stores electronic information in a digital format. They are primarily known for their role in cryptocurrency operations. They maintain a secure and decentralized track of the transactions. The impressive feature of a blockchain is that it allows recording and securing data without any third-party interference.
The main difference between any other database and a blockchain is its structure. The blockchain consists of blocks that hold key information. They have a set storage capacity, and when they reach maximum capacity, they close and get linked to the previous blocks on the network. New information will be added in new blocks, which will then become a part of the blockchain.
How does it work?
A blockchain’s function is to allow digital information to be stored securely on the network while ensuring it is not altered in any way. This way, the blockchain remains unchanged and cannot be deleted or erased. Blockchains are also commonly known as distributed ledger technology (DLT).
Blockchain was first used commonly in 2009 by Bitcoin. In the following years, it was commonly used for cryptocurrencies, NFTs, and smart contracts.
Suppose there is a company with thousands of servers with information stored in their database under one roof. They own a warehouse where all the computers are connected. This, as a disadvantage, would give a single point of failure. In a situation where the electricity goes out, the internet connection lags, or an intruder attacks your system, the database will be lost. This system would be categorized as centralized.
The blockchain is decentralized which means the data stored is spread out amongst network nodes. Moreover, this helps in keeping the network redundant and also maintains security against bad actors. If any user tries to compromise the blocks, the blockchain will verify the validity through previously stored blocks. This makes it easier to pinpoint any incorrect information user tries to add to the network. The blockchain maintains transparent events and ensures no one can change information in the database.
This makes blockchain transactions irreversible and their history can be seen by all users on the network. The information stored on the network is not limited to cryptocurrency but includes legal contracts, inventory, and other important information.
As blockchain offers a decentralized system, it allows all transactions to be viewed by having a personal node by utilizing blockchain explorers. These allow you to view the blocks in real-time. Essentially this means that you can track Bitcoins through various locations. As a simple example, if an exchange is hacked, the hacker is completely anonymous. However, Bitcoins are easily traceable as they are stored on the blockchain. If a stolen Bitcoin is moved, or stored someplace else, it can be located.
This comes with another layer that the Bitcoin blockchain is encrypted. You may only access it if you’re the owner and in possession of the public and private keys. This allows users to maintain anonymity while ensuring the security of their assets.
How Secure is the blockchain?
Blockchain caters to decentralized security and attains trust in various ways. New blocks are always stored in chronological order. This means they are added at the end of the blockchain. Once it has been added, it is nearly impossible to delete or alter. It can only be done if the majority of the network unanimously decides to do it, which to an extent is unlikely.
Each blockchain consists of a hash. A hash is a mathematical function that has to be resolved, validated, and then included in the network as a block. In a case where one would try to tamper with the information stored inside a block, the hash codes will subsequently alter. This will make it stand out amongst all the other blocks, and eventually be deemed as an illegitimate block.
Moreover, as the cryptocurrency industry has enormously grown, the cost to actually tamper with the blockchain would be tremendous. It would be expensive and also bear no results. If a bad actor tries to compromise the network, it would alert other users as they would notice the drastic changes. The value of that particular cryptocurrency would plummet as mistrust would increase resulting in no profit to the attacker. The blockchain is designed to be more valuable if one becomes a part of it, rather than attacking it.
Blockchain is an essential mechanism in today’s crypto world. It enables millions of users to maintain trust in this decentralized system and become a part of it. The biggest advantage it offers is a lack of ownership and no centralized authority controlling the blocks and the information stored in them. In this day and age, blockchain has proved to be more secure and reliable than banking operations. It’s the popular opinion but a trusting one; You may put your faith in the blockchain networks after all.