Blockchain is a method of storing data that makes it difficult or impossible to alter, hack, or defraud the system.
A blockchain is simply a digital log of transactions that is copied and disseminated across the blockchain’s network of computer systems. Each block on the chain comprises a number of transactions, and whenever a new transaction happens on the blockchain, a record of that transaction is recorded to the ledgers of all participants. Distributed Ledger Technology refers to a decentralized database that is administered by several people (DLT).
Blockchain is a sort of distributed ledger technology (DLT) in which transactions are recorded using a hash, which is an immutable cryptographic signature.
This implies that if a single block in a chain is modified, it will be instantly clear that the chain has been tampered with. Hackers would have to modify every block in the chain, across all distributed copies of the chain, if they intended to destroy a blockchain system.
Blockchains like Bitcoin and Ethereum are continuously expanding as new blocks are added to the chain, increasing the security of the ledger dramatically.
Why is blockchain technology generating so many trends?
Many efforts to generate digital money have failed in the past.
Trust is a major concern. How can we believe that if someone invents new money called the X dollar, they won’t take a million X dollars for himself or steal your X dollars?
Bitcoin was created to address this issue via the use of a blockchain, which is a form of a database. Most regular databases, such as SQL databases, contain a steward who can make changes to the data (e.g. giving themselves a million X dollars).
Blockchain is unique in that it is managed by the individuals who use it, rather than by a central authority. Furthermore, bitcoins cannot be counterfeited, hacked, or double-spent, so those who hold them may be certain that they are
How Does a Blockchain Work?
The mission of cryptocurrency is to enable the capture and application of digital content without such ability to change it. In this approach, a blockchain serves as the basis for immutable ledgers, or transaction records that cannot be changed, erased, or destroyed. Blockchains are sometimes known as distributed ledger technologies because of this (DLT).
The blockchain idea was initially introduced as a research project in 1991, and it was used before Bitcoin in 2009. The emergence of cryptocurrencies, decentralized finance (Defi) apps, non-fungible tokens (NFTs), and smart contracts has skyrocketed the usage of blockchains in the years thereafter.
Blockchain Transaction Process
Blockchain Decentralization: Consider a corporation that has a server farm with 10,000 machines that is used to keep track of all of its clients’ account information in a database. This corporation owns a warehouse facility where all of these computers are housed under one roof, and it has complete authority over each of these systems and the data they hold.
However, there is a single point of failure as a result of this. What if that location’s power goes out? What if the connection to the Internet is lost? What happens if it all burns down? What if a malicious actor uses a single keystroke to wipe everything clean? Data has been lost or damaged in any circumstance.
A blockchain allows the database’s data to be distributed across several network nodes in different places. This not only adds redundancy to the database but also ensures that the data stored there is accurate—if one node of the database is tampered with, the other networks are still not affected, prohibiting a public figure from altering the data.
If one user tampers with Bitcoin’s transaction record, all other nodes will cross-reference each other, making it easy to find the node with the wrong data. This approach aids in the creation of a precise and visible timeline. This ensures that no one node in the network may change data.
As a result, data and history (such as bitcoin transactions) are irreversible. A blockchain may store a range of data, including legal contracts, state identifications, and a company’s goods inventory, in addition to a list of transactions (such as with a cryptocurrency).
Because of the decentralized structure of Bitcoin’s blockchain, all transactions may be observed in real-time by utilizing a personal node or blockchain explorers. As new blocks are verified and added, each node’s copy of the chain is updated. This implies you could follow Bitcoin throughout the world if you wanted to.
For example, exchanges have been hacked in the past, resulting in the loss of every Bitcoin held on the exchange. While the hacker may remain anonymous, the Bitcoins they stole may be tracked. It would be known if any of the Bitcoins stolen in these thefts were relocated or spent someplace.
Of course, the Bitcoin blockchain (as well as the majority of others) stores encrypted data. This implies that only the record’s owner may decode it and expose their personal information (using a public-private key pair). As a consequence, blockchain users may keep their identities private while maintaining transparency.