Blockchain is a technology that has become popular in recent years. Many companies around the world are figuring out where they can incorporate this technology in their daily routine to make services they provide better. IN essence, blockchain is a ledger. A ledger is a book that is used to make a note of some transaction that involves more than one party. Blockchain can also be thought of like a dairy that cannot be manipulated by anyone.
What exactly is blockchain?
In order to understand the true use of blockchain, let us take a small example. Suppose you have to transfer some amount of money to a friend. You go to the bank, and you put in a request asking them to transfer the money, and you give the details of your friend’s bank account, and your bank debits the money from your account and then transfers it to your friend’s account. Now, there is a list or book that the bank maintains that records all the transactions that are happening from your account. Now suppose your friend says that he or she has not received the money that you have transferred, you will show him or her a copy of the transaction receipt from the bank, and the dispute is settled. The real problem in this situation is that the ledger of the bank can be forged by a third party like a hacker as they please. All a hacker has to do is change one entry in the bank diary to make it seem like the money has not been transferred at all. This is where blockchain comes into the picture.
In order to understand how blockchain works, let us take another example. Think of a spreadsheet that Is being shared by a group of friends. Now, this sheet has many copies of it made, meaning that everyone in the group has a copy of the sheet in their computers. Now, if this sheet is the bank’s transaction sheet, like in the previous example, then the hacker who is trying to manipulate the entries of the sheet will not have an easy job. He or she will have to edit all the copies of the sheet, which is pretty impossible. This is how blockchain works. Anyone can access the sheet, but no one can edit it.
In the spreadsheets that are discussed above, there are rows and columns that are used to enter the data. In a blockchain, these are called blocks A block is essentially a small chunk of data that has been added to the blockchain. When many chunks of data are added in a chain sort of fashion where one is connected to another, the entity becomes a blockchain. Often, the first block of data in the blockchain is called the genesis block.
Just like how the spreadsheets in the example were distributed among a group of people, the blockchain ledger is also distributed in a network. All the peers in the network will have a copy of the ledger in their computers.
Why is blockchain better than a traditional ledger?
As we know, traditional ledgers can be manipulated, but a blockchain entry cannot. Some of the other key features which make blockchain a better option are:
Because the blockchain is shared by all the peers in a network, it becomes practically impossible for a hacker to manipulate the information. The hacker would have to physically change the entries in all the ledgers of every single peer in the network, which is practically impossible.
• Peer to peer:
The blockchain system has no central authority that has the complete right to change the data or manipulate the data. All the participants in the blockchain will talk to each other directly. This means that the exchange of data can be made directly with a third party.
Advanced cryptography methods are used to secure the data that make the blockchain ledger tamper-proof.
This is perhaps the most important feature of the blockchain. This gives the blockchain the ability to update the ledger with the consensus of all the parties that are involved. There is no central authority that has complete control to make changes or update the edger. Instead, the data in the blockchain can be updated, and the update has to be validated by all the peers in the network against strict criteria that have been defined in the protocol that is used by blockchain.
How does the technology work
A node will initiate a transaction by created and signing it. This transaction is sent to all the peers in the network using a protocol called the flooding protocol. The transaction has to be validated by at least 6 peers, and then it is added to a block that is put on the network. This block becomes a part of the main ledger. The transactions are then reconfirmed every time a new block is made.