BlockChain Technology and how does it work

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The BlockChain technology was founded by the pseudonym of Satoshi Nakamoto and launched in the year 2008 to serve the public transaction ledger of the cryptocurrency bitcoin. In this article, we will cover “Blockchain Technology”.

Blockchain technology is an intelligent discovery. If you are involving in sectors like banking, investing, or cryptocurrency over the last many years, many times you have heard about the “blockchain” technology, the reputed technology behind Bitcoin. So, when you would have tried to learn about blockchain technology, you may have seen the definition like “blockchain is a distributed, decentralized, public ledger”.

The blockchain has created the backbone of a new kind of internet as making Digital information be distributed. We can say blockchain technology is a time-stamped sequence of unchangeable records of data. The computer clusters help to manage the data and cryptography theory bind and secure every block of data.

So, in this article, we are going to cover all things related to blockchain things. So let’s have a look at “Block Chain Technology”.

What is Blockchain Technology?

The BlockChain technology is called a Distributed Ledger Technology (DLT) that stores transactional data or block of the user in multiple databases globally connected through P2P (peer to peer) nodes. This storage called ‘Digital Ledger’. The transactional storage of data is unchangeable and transparent due to the use of decentralization and cryptographic hashing.

To understand BlockChain we can take the example of Google Documents. We create a doc and share to people or individual, the document gets distributed not copied. It creates a decentralized distribution chain that provides access to everyone to the doc at the same time. As there are real-time records of all document changes which makes it completely transparent.

All the transactions are authorized by the digital signature of the user who owns it and keeps it safe from tampering. So, we can say all the transactions that the digital ledger has are very secure.

A Quick Overview of Blockchain Technology:

Distribution of Digital Information, not copied or transferred.
Decentralized of all information as it stores in multiple databases or locations.
It uses the digital signature, so it’s impossible to change or corrupt the data of anyone without the digital signature.

How does BlockChain Work?

There are three main concepts of BlockChain i.e. block, nodes, and miners.

Block

Each chain in the blockchain contains many blocks and every block contains three fundamental elements:

The data stored in the block.
A nonce of 32-bit whole number. It gets developed randomly while the block created, which then generates a block header hash.
The header hash is of 256-bit number wedded to the nonce and should begin with a big number of zeroes.

A nonce develops the Cryptographic hash while the first blockchain is created. The data which is stored in the block is considered as Signed and eternally tied with nonce and hash unless it will not be mined.

Miners

Every transaction gets recorded by Miners to the BlockChain, so it is like an accountant. The miners keep the system update with new and existing payment records. So, there will be proof of payment if anyone wants to get it valid.

Using the mining process, miners develop a new block on the chain. This is not an easy process to mine any block, especially on the big chains as every block in the blockchain contain a unique nonce and hash, which also points to the old block in the chain

Every block takes around 10 minutes in mining. Miners try to solve the complex mathematical problem to find a nonce that develops the hash. When the solution found, it is called Proof of Work that shows a miner has spent lots of time solving the problem. The contained transaction is confirmed if the block is solved. So, it takes around 10 minutes to confirm the transaction if someone receives bitcoin in his or her wallet.

Doing any change in any of the blocks will require re-mining to all the block which comes after or before. That is why it is very difficult to manipulate the blockchain. Miners get a reward when the block successfully solved or mined as all nodes in the network admit the change.

So performing miners on the blocks, we need huge computing power in terms of CPUs or memories because it takes lots of time to mine any block.

Nodes

So, there are two types of nodes in the blockchain the first one is a Full Node and the second is a partial node.

Full Node – The full node is a computer that stores the entire blockchain and it also verifies the block. So, the full node verifies the block and then only it stores it in the blockchain. When we are talking about the Full node, we need a huge amount of storage.

Partial Node – When we want to have blockchain or wallet on any small devices like mobile phones, tablets. In that case, we need to have the software on these devices to do any transaction of blockchain, Then mobile phones become the partial node.

Once a block added to the blockchain, it will be available publicly to view or even you can also view it.

What are the advantages & disadvantages of BlockChain?

Advantages:

Transaction accuracy as there is no involvement of humans in the verification.
It is hard to change or manipulate the data due to the decentralization of blockchain storage.
The transaction is very secure and private.
The transactional storage of data is transparent.

Disadvantages:

It is very costly to mine bitcoin as the consumption of power is very high.
Low amount of transactions per second.
The maintenance cost of the hardware to execute a high level of transactions and performing complex processes.

Type of BlockChains

Mainly there are two types of BlockChain; Public and Private blockchain. But there are various kinds too like Hybrid and Consortium blockchains. So, these types share some similarities, so let’s have a look at those before details of these. Each blockchain made of a cluster of nodes that functions on a P2P (peer-to-peer) network system. Each node has a copy of the Shared Ledger that updated in a timely. These nodes verify transactions, receive transactions, and then create the blocks.

Public BlockChain

The public blockchain has less permission, unrestrictive distributed ledger system.
If a user/node part of the public blockchain can access new and old records, verification of the transaction, or do a proof of work for any incoming block and then do the mining.
The public blockchain is basically for mining and exchange cryptocurrencies.
Bitcoin and Lite coin blockchains are common examples of public blockchains.
It is very secure if users strictly follow security rules & methods.

Private BlockChain

Private blockchains are restrictive and permission blockchain and used in the organization or enterprises.
All things are in the control of organizations like Security, authorizations, access, and permissions.
Multichain, Hyperledger projects (Sawtooth, Fabric), etc. are examples of the private blockchain.

Consortium BlockChain

The consortium blockchain is a semi-decentralized blockchain network, more than one organization handles this.
More than one organization can function like a node in this blockchain type and exchange records or do the mining.
This type of blockchain used by banks, government organizations.
R3, Energy Web Foundation, etc. are examples of the Consortium blockchain.

Hybrid BlockChain

It is the combination of the public and private blockchains and uses the features of both types like permission-based or permission-less systems.
In this type of blockchain, some specific data of blockchain may allow being accessible in public rest will be confidential in the private network.
Dragonchain is an example of a Hybrid blockchain.

Conclusion

So we have covered all the basics of Blockchain Technology and How does it work. Thanks for reading this article, if you like this article and its relevance to you, please leave a meaningful comment or feedback.

Thanks
IB Staff