Don & Alex Tapscott, the authors of the Blockchain Revolution (2016) quotes, “The Blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
WHAT IS BLOCKCHAIN?
Blockchain, the underlying technology that powers bitcoin, is one of the most upcoming technologies in the recent times. It is undeniably an exceptional invention by Satoshi Nakamoto. It was invented in 2009 to create the digital cryptocurrency, Bitcoin.
In the layman language, blockchain can be defined as a digital ledger in which transactions made in bitcoin or any other cryptocurrency are recorded chronologically and periodically. The blockchain is like the accounting method of the virtual currency, bitcoin, which uses Distributed Ledger Technology (DLT). The DLT system has numerous benefits for businesses and banks as it reduces the expenses, mistakes, and delays that are caused by other methods of recording.
HOW DOES IT WORK?
As the name suggests, blockchain is like a chain of blocks which contains information about the transactions taking place. A single block contains data, a hash of the block and hash of the previous block. The data stored in the blockchain depends on the type of blockchain we’re dealing in. For example, in the Bitcoin blockchain, the data contains information about the sender, receiver, and the amount of money that is being exchanged.
The hash of a block is always unique just like a fingerprint and it plays an important role in protecting the block. This block records all the transactions and once its memory is full the block goes into the blockchain as a permanent database. Soon after, a new block is generated. This happens because the memory of each block is limited i.e. 1 MB. Every new block formed contains the hash of the previous block. This is how an endless chain of blocks is formed. The blocks are connected to each other in a proper linear and chronological order.
The blockchain has the complete information about the transactions taking place between two people right from the genesis block to the most recently completed block. The blockchain is designed in a way that these transactions remain immutable, meaning they cannot be deleted. Each block is added through cryptography which ensures that the data remains meddle proof: the data can be distributed but not copied.
BLOCKCHAIN AND ITS ENHANCED SECURITY
The blockchain is an online network of a large number of people making real money transactions every second. In such a large network, which works on an online platform, it is very easy for the information to get distorted or tampered. But, blockchain has undoubtedly proven to be the most secure platform because its security methods use encryption technology. The upshot of bitcoin is that no user has to trust anyone else because no one can cheat the system.
An identical copy of all the transactions taking place is stored on each of the roughly 2,00,000 computers that make the bitcoin network. Each transaction leads to a change which is cryptographically signed to prove that the person transferring virtual coins is actually the owner of those coins. It is not possible that a person spends their coins more than once because once a transaction takes place, every node in the network will know about it.
The hash of every block is unique, similar to a fingerprint. This, kind of serves as a seal, since altering the block would require generating a new hash. The hash also serves as the link in the blockchain as every new block includes the hash of the previous block.
Proof Of Work (PoW) is another step taken towards the ultimate security of blockchain. It is a mechanism which slows down the creation of new blocks, it takes about 10 minutes to add another block to the chain. This mechanism makes it very hard to tamper with the blocks because if you tamper with a single block you need to calculate the PoW of all the following blocks. The security of the blockchain comes with its creative use of hashing and the PoW mechanism.
BITCOIN AND BLOCKCHAIN
Blockchain was innovated to keep bitcoin protected and secured, therefore being the main technological innovation of bitcoin. Bitcoin is governed by decentralized authority, meaning there is a peer-to-peer (P2P) payment network, this highly benefits its users because, any third party or middlemen are eliminated which helps in saving time and money.
The transactions are first recorded in blocks and eventually into the blockchain where it is verified and relayed by other bitcoin users. On an average, a new block is added after every 10 minutes into the blockchain through mining.
GROWING USE OF BLOCKCHAIN
In the contemporary world, some of the world’s largest companies are finding acceptance for blockchain. Financial companies like JP Morgan and The Deposi.
tary Trust & Clearing corporation are continuously experimenting with blockchain and other upcoming technologies to improve the efficiency of trading stocks and other assets. Technologists believe that Blockchain can help to avoid the delays in transferring the ownership of stocks while buying and selling stocks.