What is Blockchain Technology
Nowadays everyone is talking about blockchain and it has gained huge popularity when this technology was adopted in cryptocurrencies.
Many Industries are using blockchain technology to enhance their business, like the financial service sector, banking sectors, manufacturing sectors, health care sectors and many more.
But before we move further, one question arises.
What is Blockchain?
We have simplified the definition of the buzzword,
blockchain is a digital logbook of transactions, in which individual data, transactions or records are called blocks, which are linked together in a single list known as chain.
Blockchain are used for storing data like transactions and when these data are registered on the blockchain they cannot be changed or eliminated.
We can use Blockchain technology in different ways like Payment processing and money transfers, digital Ids, Data sharing, Digital voting, Weapons tracking and many more.
Blockchain may further be divided into three categories depending on the need and its applications.
Also read: Data Science - Extract data from insight
In public blockchain no one has complete control on the network, so anyone can access, download and add nodes in the network. This helps to ensure the data security as it is not controlled by a single entity or an organisation.
Public blockchain consume an enormous amount of energy, time and money but in return it ensures trust and security.
We use it mainly in cryptocurrencies like Ethereum, Bitcoin and Litecoin.
Private blockchain is the exact opposite of public blockchain, in which data is controlled by a single entity who can read/write and audit the blockchain because only that person has the permission to access the blockchain.
Private blockchain is much faster and cheaper because it consumes less energy, time and money as compared to public blockchain.
But in terms of security it is less secure because it can be accessed by the blockchain owner who can delete/override commands on a blockchain if needed.
Ripple and Hyperledger work on the mechanism of private blockchain.
Consortium blockchain is like a hybrid of private and public blockchain in which some nodes perform the consensus process and some nodes may be allowed to do the transactions.
This type of blockchain is not granted for a single entity but for a group of approved individuals who have the permission can only access consortium blockchain.
The positive part is that it is very fast and consumes very low energy which reduces the transaction cost.
Projects like Voltron, We.Trade and BankChain work on consortium blockchain.
We have discussed about what is blockchain and types of blockchain, but there are few terms that were used in blockchain, let’s discuss the basic terms used in blockchain :
Nodes are devices like computers, laptops or bigger servers which form part of the blockchain networks and used for storing and distributing the data like transactions that have been carried out.
Nodes are responsible for accepting or rejecting the block of transaction after checking if it is valid or not. All the nodes are connected to each other so that they can exchange the latest block of data and stay up to date.
Miners and digital mining
Mining is used to verify and secure the new Bitcoin transactions.
People who do “mining” are known as “Miners”, they are responsible for performing all the transactions correctly and adding the bitcoin transaction data to the bitcoin’s global public ledger.
All the miners are nodes but vice versa may not be true.
Cryptocurrency is a digital or virtual form of currency which can be used as a medium of exchange and the transaction data are stored in the computerized database using the blockchain mechanism and is secured by cryptography.
All the transactions are managed and processed by miners.
Transfer of funds is very easy and no fee is charged as there is no interference of third parties like banks and credit card companies. But due to its anonymous nature, possibilities of illegal activities like tax evasion and money laundering increases.
Bitcoin is a cryptocurrency and it is a decentralized digital currency which means it is not supervised by any authority or institute.
All the Bitcoin transactions are verified by network nodes using cryptography and the data are stored in blockchain.
All individual bitcoin transactions are safely handled by “miners” for which they are rewarded with new bitcoins which they can spend as their new bitcoins on goods and services.
Today many companies and suppliers are accepting transactions in the form of Bitcoins, like Microsoft and Overstock allows customers to use bitcoin for buying products and using services.
It is a technique of protecting the exchange of data between the users and making it more secure. In this process the original information is converted into another form known as ciphertext and only authorized persons can only decipher it and access the original information.
Token is a unit of value which is used to represent a digital balance issued by an organisation and the data is recorded in the database using the blockchain technology.
There are many types of token but commonly there are two categories:
These tokens are used for a specific purpose like buying or using goods and services. Cloud services like Google Drive, AWS and Microsoft Azure charges to reserve a certain amount of storage space which you can pay in the form of tokens.
This token is used to authenticate a person’s identity by storing some personal information in the database. Security tokens are of many different forms which includes hardware tokens, wireless Bluetooth tokens and programmable electronic key fobs.
Hash is a function that converts numbers and letters into an encrypted output of a fixed length and since it is a fixed length which makes it near impossible to guess the length of the hash if someone was trying to hack the blockchain.
A Hash is necessary to manage blockchain in cryptocurrency.
Initial Coin Offering (ICO) acts as a way to raise funds where a company or an organisation creates a new coin, app or a service to raise money, and all the interested investors buy services, apps or the new coin which becomes new a new cryptocurrency token issued by that company.
If you want to participate in an IOC, you have to buy a digital currency and then understand the working of cryptocurrency wallet and exchanges.
Hyperledger is an open source community that develops tools, libraries and stable frameworks for Blockchain deployments.
It was introduced by Linux Foundation in December 2015, today it works as a global collaboration which is hosted by Linux Foundation.
Hyperledger hosts projects by developing blockchains and distributed ledgers so that industries could collaborate and advance the industry goals of distributed ledger and smart contracts collectively.
Blockchain is a decentralized data storing technique, originally utilized for creating bitcoin and digital currency but today it is used in various industries.
Blockchain development requires various programming languages to create different types of features and interfaces to develop a fully functionable blockchain application.
Blockchain developments include building infrastructure, protecting against cyber-attacks so that no issues could be found while using it.