If you know about Cryptocurrency, you probably have heard of Blockchain too. Blockchain is a record-keeping technology that acts as a digital ledger of transactions that is stored on thousands of servers across the globe. Anyone on the network can view everyone else’s entries in real-time and that makes it difficult for users to gain control of it. Each block in the chain holds a number of transactions and whenever a new transaction takes place on the blockchain, a record of that transaction is added to all participant’s ledger. The blockchain technology is decentralized and the database handled by multiple participants is known as Distributed Ledger Technology (DLT).
Transactions on Blockchain are recorded with a function called a hash. A hash converts an input of letters and numbers into an encrypted output of a fixed length and it is essential to blockchain management in cryptocurrency.
How it works
Blockchain is a public electronic ledger built on a peer-to-peer (P2P) system that is openly shared among different users to create an unchangeable record of transactions. Each transaction is time-stamped and linked to the previous one. So every time a set of transactions is added, the data becomes another block in the chain. Once new data is entered, it cannot be removed. In order for a block to be added to the blockchain, four things must occur:
- A transaction must take place.
When you make a transaction, it will be stored in a block along with other users’ transaction data.
- That transaction must be verified.
After the transaction takes place, it will be verified by a network of computers confirming the details of the transaction including the transaction’s time, dollar amount, and participants.
- The transaction must be stored in a block.
After the verification, the transaction amount and your digital signature are all stored in a block along with hundreds or thousands of other transactions.
- The block must be given a hash.
When all of the block’s transactions have been verified, it must be given a hash, which is a unique, identifying code. After hashing, the block will be added to the blockchain.
Advantages of Blockchain Technology
- Transparency
The use of blockchain technology has made transaction histories become more transparent because Blockchain is a type of distributed ledger and all network participants share the same records. This can be only updated through consensus, which means everyone must agree on it to make changes. Also, changing a single record of transactions would require the alteration of all following records and the collusion of the entire network. Because of that, the data on blockchain will always be accurate.
- Decentralised
This is the major advantage of Blockchain Technology. The blockchain system is entirely decentralized and it is not possible for any government or an authority to control the network. That makes Blockchain a fair and secure system.
- Security
Since the data on the blockchain is often stored in thousands of computers on a distributed network of nodes, the data and the system are highly resistant to cyber-attacks and technical failures. There is no chance of failure at all because a single node going offline will not affect the availability or security of the network. Many other conventional databases rely on a single or a few servers and are more vulnerable to attacks and failures compared to Blockchain technology.
- Stability
Verified blocks are very unlikely to be reversed. Once the data is registered and stored into the blockchain, it is extremely difficult to remove it or change it. This makes blockchain a wonderful technology for storing financial records or any other transaction data because every change is tracked and recorded permanently on a public ledger which is distributed on a network of computers.
- Trust
In the Blockchain system, every participant’s identity remains confidential. It offers complete anonymity and privacy to participants, so everyone can deal with others safely through this secured system. In normal centralized networks, users will have to provide their details such as name, address, and account details. That makes them vulnerable to thefts and hacks. It will not happen in the Blockchain system because of its decentralization and the anonymity it provides.
Blockchain is a revolutionary technology and it surely can be the future. We have seen the impact of Blockchain technology in recent years all around the globe as the number of users and transactions increases day by day in the system. The blockchain system is definitely going to stay as more and more business industries and governments use this technology because of the advantages it offers.
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