Blockchain definition stated that it’s a list of digital currency blocks chained together using cryptographic nodes as the ledger system.
It’s known to be more like a peer-to-peer transactions, without any kind of third-party.
The term ‘Blockchain’ is coined from two words – Block (digital records), and Chain (connected cryptographic links).
The blockchain technology eliminates the need for middlemen, by providing a decentralized and trust-less ledger with no exposure to fraudulence.
This also helps in making transactions faster by simply removing financial institution protocols.
In financial industry, there are lots of middlemen (e.g. payment processors, banks, and credit cards companies etc).
Intermediaries like these, are institutions that help to establish trust between buyers and sellers of cryptocurrency, ensuring accurate transactions.
These are the reason why cost of transactions tends to be costly, or cheap depending on speed.
How it works: Blockchain explained
Blockchain is not an app, but group of networked cryptographic nodes connected together with its own paths of links for specific transactions.
These cryptographic nodes are large network of computers that runs the blockchain network.
They validate and keep records of every transaction by solving complex mathematical algorithms, which also helps in mining new cryptocurrency.
Each of these nodes has a complete history of all transactions, and no one can change any data without letting the whole systems.
However, these transactions are listed publicly, and can be seen with the use blockchain explorer.
The first ever blockchain-like protocol was proposed by a cryptographer named David Chaum in 1982.
Later in 1991, Stuart Haber and W. Scott Stornetta wrote about their work on Consortiums.
However, it was Satoshi Nakamoto who invented and implemented the first blockchain network, and also deployed the world’s first digital currency, Bitcoin.
Who owns the Blockchain technology?
It’s the technology behind the blockchain, and cannot be owned – just like the internet network.
However, anyone can use the cryptographic technology to run and own their own blockchain and network.
How secured is Blockchain?
If a hacker starts changing records in one ledger, all other nodes would reject it, since new record will not match the stored data.
There’s no centralized authority that can manipulate a Blockchain.
The only way to manipulate data is for every single node to conspire together, which is unlikely.
In the case of Bitcoin, there are roughly 10,000 different Bitcoin nodes spread across the world.
Some blockchains are susceptible to 51 percent attacks, whereby, a group of attackers controls more than half of a blockchain’s computing power.
For large networks, like Bitcoin’s blockchain, that’s very unlikely to happen, but it still remains a threat for smaller blockchains with fewer miners.
Benefits of blockchain technology
1. Fast Transactions: It is very fast, because it has cut out the middlemen that tends to delay most transaction and validation.
2. Cost effective: Blockchain is very cheap compared to what middlemen charge to move finance between financial institutions.
3. Privacy: It is secured to the extent that transaction details only remains within the nodes in the networked systems and cannot be seen by humans.
Types of Blockchain
In the world, there many types of blockchain technologies, but below are the most basic meaning to all of them.
1. Public Blockchains
Public blockchains are open, decentralized networks of computers accessible to anyone wanting to request or validate a transaction (check for accuracy).
Those (miners) who validate transactions from every blockchain wallet receive rewards.
These public blockchains use either proof-of-work, or proof-of-stake consensus mechanisms to mint more cryptocurrencies.
Two common examples of a public blockchain include the Bitcoin (BTC) and Ethereum (ETH) blockchains.
2. Private Blockchains
Private blockchains are not open, they have access restrictions, and people who want to join will require permission from the system administrator.
They are typically governed by one entity, meaning they’re centralized. For example, Hyperledger is a private, permissioned blockchain.
3. Hybrid Blockchains
Hybrid blockchain (also known as Consortiums) is combination of public and private blockchains that centralized and decentralized features.
For example, Energy Web Foundation, Dragonchain, and R3.
A sidechain is a blockchain running parallel to the main chain, and the typical example of a it is the Liquid Network.
It allows users to move digital assets between two different blockchains and improves scalability and efficiency.
Blockchain in real world
The blockchain technology is playing a prominent role around us, and in ways that have nothing to do with finance and payments.
As many promising real-world use cases like faster cross-border payments and smart contracts, blockchain technology is here to stay.
As more companies realize how the blockchain can help them, they’ll commit more resources, money, and time into the technology.
Understandably, blockchain technology will remain a complex topic for many, but it really doesn’t have to be for you.
I hope this guide gave you the confidence to have conversations with friends and acquaintances about the blockchain.