Blockchain technology is incredibly popular nowadays. For the past few years, everyone who uses the internet has heard about the word: Blockchain. So whether you like it or not, in 2022, this is a technology you must familiarize yourself with.
In this article, we will talk about what blockchain technology is, how they work, what problems they solve, and if you can use them too?
What Is A Blockchain Technology?
As the name indicates, a blockchain is a block containing information. This technique was originally described in 1991 by researchers and was intended to timestamp digital documents. They did this to prevent the documents from backdating or tampering with them.
To understand a blockchain’s role better, you can compare it with this example. When you run a business, you or your accountant, writes down all the financial information or strategies in a book. In other words, it’s like a ledger where all your information is stored and can be an Excel document too.
Similarly, a block is a technology that stores your information of all kind and secured in ways I will talk about in the article below.
Birth Of The Concept Of Blockchain
So, in that sense, you can think of it as a notary. However, the technology went unused and unnoticed until it was adopted by a researcher called Satoshi Nakamoto. Nakamoto used it to create the digital cryptocurrency Bitcoin in 2009.
To explain further, a blockchain is a distributed ledger that is completely open to everyone. Moreover, they have a unique characteristic: once data is recorded inside a blockchain, it is nearly impossible to change or tamper with it.
How Does The Distributed Ledger Work In A Blockchain Technology?
To understand this, we have to look at an individual block. Each block in a blockchain contains some data, the block’s hash, and the previous block’s hash. Furthermore, the stored data depends on the Blockchain.
The Bitcoin blockchain, for example, stores the details of transactions made, such as the sender, receiver, and the number of coins.
A block also has a hash that can be equated with a fingerprint in the real world. The purpose of the hash is to identify a block and all of its contents. Furthermore, similar to a fingerprint, a hash is always unique.
Therefore, once someone creates a block simultaneously, its hash is also calculated.
When we try to change something inside a block, the hash also changes. Therefore, in other words, hashes are very useful and important to detect changes in the contents of a block.
If the fingerprint or hash changes or someone tries to tamper with it, the block does not remain the same anymore.
Anatomy Of The Hash In A Blockchain Technology
As I discussed before, in addition to the block’s hash, here’s what you need to know. There is a third element in every block apart from the information and hash. It is the hash of the previous block. In this way, a chain of secure and encrypted blocks are formed in the network.
Take an example; you have a chain of three blocks. The USP of a blockchain is that, while every block gets its own hash, a part of it also carries the hash of its previous one.
Moreover, let’s name them Block 1, Block 2, and Block 3. Regarding the previous hash number, Block 3 refers to Block 2, and Block 2 refers to Block 1.
The first block is special as it cannot point to any previous block. Therefore, it is the first block created in the chain called Genesis block.
How Is A Blockchain Secure?
Let’s say you tamper with the second Block or Block 2 in our case. By doing so, you are tampering the hash which is an absurd identity number of its following block. Furthermore, it will change the previous hash of Block 3 and all the following blocks.
Finally, your tampering or changing the data of Block 2 will make the rest of the following blocks invalid as they do not have the same hash. However, using hashes is not enough to prevent tampering with the data.
What Is Proof-Of-Work In A Blockchain?
To mitigate the above problem, blockchain technology has something called proof-of-work. For example, in the case of Bitcoins, it takes about ten minutes to calculate the required proof of work and add a new block to the chain.
Thus, this mechanism makes it very hard to tamper with the blocks because if you tamper with one block, you will need to recalculate the proof of work for all of the following blocks.
Decentralising The Core Of A Blockchain Technology For Added Security
In addition to this, there is one more way blockchains secure themselves, and that’s by being distributed in a network. Instead of using a central entity to manage the chain, blockchains use a peer-to-peer where everyone is allowed to join. When someone joins this network, they get a complete copy of the Blockchain.
These are computers spread worldwide and are called nodes. The node can, therefore, verify that everything is still in order. To explain this better, let’s see with an example.
When someone creates a new block, as you can see in the image below, that block is sent to everyone in the network. It means they agree about what blocks are valid and which aren’t.
Preventive Measures Of Blockchain Technology
If anyone tampers a block or tries to change the information, it will be rejected by the other nodes in the network. Therefore, if you still want to tamper with a blockchain, you must make the same changes in all the blocks.
Moreover, you have to calculate the amount of time it will take to make the changes in each block.
The reason the Blockchain technology is so secure, and it is impossible to tamper with is because it requires a consensus of 51% of the nodes. Since this percentage is spread worldwide, the hacker or fraudulent can’t hack each computer.
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What Are Smart Contracts In Blockchain Technology?
Blockchain eliminates the need for middlemen like banks, brokers, and exchange apps. This makes one question that if no one vouches for the legitimacy of a contract, what should they trust? Ideally, once you start using Blockchain technology, you must trust the software and the mechanism itself.
But to make things a little better for us, there is a new improvement: the smart contract. As the name indicates, this contract works like a hardcopy contract you would make with a trader in the real world. In this contract, you store information details like from whom and to whom the transaction is happening.
Furthermore, you can also store information about the transactions to ensure it reaches the right person. It is like a checklist for the nodes that verifies a transaction on Blockchain. For example, you are sending Bitcoins from A to B, but a node tries to tamper with it and tries to send it elsewhere.
So, now instead of going from A to B, the Bitcoin is going to D. But thanks to the smart contracts and nodes, the moment they deny the transaction from A to D, it goes safely to B.
The concept of Blockchain technology is divided among people. From the expert’s point of view, it is simply a new technology that will make our lives better than it is today. But thanks to the massive hype of Bitcoins and cryptocurrency, many people think this technology will somehow make them rich overnight.