What is Blockchain Technology?
Blockchain is changing the way we live. It is also changing the way technology works. In the distant future, people will view technology as the one that existed before blockchain and the one after blockchain. The impact of this wonder in future is going to be immeasurable and unimaginable.
Blockchain technology was first used by a person or group of people known by the pseudonym, Satoshi Nakamoto; for making Bitcoins. In 2008, he/she/it/they conceptualized Bitcoins and then distributed it. It has become a rage ever since. This loose concept could contain a secure history of data exchanges, while using a peer-to-peer network to time stamp and verify each exchange. It was also managed autonomously, without a central authority. This loose concept evolved to become the backbone of what is now the most famous cryptocurrency, the Bitcoin. People often call Bitcoin ‘digital gold’. This tells the importance of both, the bitcoin and the concept of blockchain.
To understand blockchain technology, one can picture a huge accounting book where every ledger can be edited and reviewed by multiple people. Anyone, anywhere, with an internet connection can use this accounting book and it does not belong to anyone. The entries/information are permanently stored across nodes, thus decentralizing and distributing the online database. Information exists as a shared — and continually reconciled — database. This is a way of using the network that has obvious benefits. No centralized version of this information exists for a hacker to corrupt. Meaning the records it keeps are truly public, relatively secure and easily verifiable. This is the basic concept of a Blockchain.
The Concepts Behind Blockchain
Durability & Robustness
Blockchain technology, in the simplest terms, is like a form of internet which has built-in robustness. This is so because Blockchains store information in blocks that are identical across its network. For this reason, no single entity can control the blockchain. Owning to the aforementioned feature, it will have no single point of failure. This makes it robust.
Transparency & Incorruptibility
The blockchain network is kind of like a self-auditing ecosystem of a digital value that automatically audits itself every ten minutes. The ‘auditing reports’ of transactions are saved in groups. Each group of these transactions is referred to as a “block”. As a result of this property, Blockchain inherits some additional properties;
- Blockchains are embedded with transparency. The data in the network as a whole is transparent (but secure), and by definition, it is public.
- It would not be easy to corrupt or alter any unit of information on the blockchain. This is because, to do so one will have to use a huge amount of computing power to override the entire network, which in today’s times is next to impossible.
A Network of Nodes
A node is a computer connected to the blockchain network using a client that performs the task of validating and relaying transactions. It gets a copy of the blockchain, which gets downloaded automatically upon joining the blockchain network.
A network of computing “nodes” make up the blockchain and together they create a powerful second-level network. Every node is an “administrator” of the blockchain, and joins the network voluntarily. It is through this working of nodes the network becomes inherently decentralized. Thus, it creates a wholly different vision for the internet to function.
By design, the blockchain is a decentralized technology, and the arguments stated above only further the case of decentralization. Anything that happens on it is a function of the network, as a whole. A global network of computers use blockchain technology to jointly manage the database that record transactions. A whole network, and not any one central authority manages it. Decentralization means the network operates on a user-to-user (or peer-to-peer) basis. Such forms of mass collaboration are possible and people have just started to investigate. One can use this feature to make different types of record keeping, like a land registry, fully public.
Peer-to-peer (P2P) Transmission
As stated above, this concept is in-line with the principle of decentralization. Communication always happens directly between peers, rather than through some central node. Each node stores information about what is happening on the Blockchain. After storing, it is passed to the adjacent nodes. In this manner information spreads through the whole network.
Distribution of Database
The database is distributed since Blockchain technology works on the principle of peer-to-peer transmission and decentralization. The database is the Blockchain and each node on a Blockchain has access to the whole Blockchain. No one node or computer regulates the information it contains. Every node is able to validate the records of the Blockchain. This is all done without one or several intermediaries in control of everything.
It is architecturally decentralized in such a manner that there is no one or several points of failure. There is no one point of failure that would bring down the Blockchain. Due to this property, there is no need of a central regulatory authority.
By storing data not in a single node, instead doing so across its network, the blockchain eliminates the risks that are inherent with data centralization. This is mainly because it lacks centralized points of vulnerability that computer hackers can exploit. Blockchain security methods use encryption technology.
Use of blockchain technology is not limited to one sector. It is being used in multiple areas.
- The most popular usage of Blockchain technology is in Cryptocurrency. Bitcoin has already made its name.
- Digital Wallets
- Smart Contracts
- Copyrights and Intellectual Property, etc
These are a few potential uses of the technology. As expertise in the field grow, its applications will also increase.
Limitations & Vulnerability
Any Blockchain network greatly depends on the amount of active users within it. A network should be a robust and have a widely distributed grid of nodes in order to operate to its full potential. There is also a theoretical possibility of a wide-scale capture of any given Blockchain network. If a single organization gains monopoly on the network’s nodes, it will no longer be decentralized in the manner its developers wanted it to be.
Cryptocurrency is probably a domain where Blockchain finds its maximum use. Many people believe that the Cryptocurrency market in its current form is in decline. This development also seems to be a setback to Blockchain.
- Blockchain is a network of databases, that is distributed among different nodes.
- No central authority controls the Blockchain. Nor can one person or organization turn off a Blockchain.
- Any node can validate a transaction.
- Communication on the Blockchain is peer to peer.
- Users of a Blockchain can be anonymous if they want.
- All transactions occurring on a Blockchain are recorded there, this makes it public and completely transparent, while still remaining anonymous.
- No one can alter a transaction once it is recorded and updated on the Blockchain
- Although a Blockchain is politically and architecturally decentralized, it is logically centralized.