Blockchain technology is behind cryptocurrencies like Bitcoin, introducing decentralized, transparent, and secure ways of managing data and transactions. Blockchain is revolutionizing various industries including finance, supply chain, education, healthcare, etc.
What is Blockchain?
Blockchain is a decentralized distributed ledger that records transaction data in multiple locations through a distributed network of computers, without the need for any centralized monitoring system. The data stored in the blockchain is organized into blocks in chronological order and secured by cryptography. Blockchain transactions happen between users eliminating the need for an intermediary.
Blockchain data are immutable and transparent, which means once information is recorded, it is publicly available and data cannot be altered. The transparent, immutable, and decentralized nature of blockchain ensures the integrity of data avoiding the need for trust in central authority. This is particularly helpful for individuals and companies to store and transfer data securely.
What is a Block in a Blockchain
Blockchain got its name from the format it stores data. The block contains information on users’ transactions. Block can be split into two parts: header and body. Transactions are stored in the body part and other details are in the header part.
The blocks are cryptographically verified and chained together to form an immutable chain of blocks known as blockchain.
Looking to learn more about blocks in blockchain? click this like to read more.
Key Features of Blockchain
- Decentralization: Blockchain stores information across a network of computers or nodes instead of storing it on a single node.
- Permanent and secure: Blockchain transactions are cryptographically secured and validated. No one can change or edit the stored transactions in a blockchain.
- Immutable: Every transaction is recorded in a distributed ledger with a timestamp and secured with cryptography. Once data is added to the blockchain, it cannot be changed without network consensus.
- Transparent: Most blockchains are opensource, publicly available for participants to see the transactions stored in the network.
How Does Blockchain Work?
Blockchain works in a decentralized manner allowing multiple nodes that are located globally to maintain the transaction record.
When a user submits a transaction over the blockchain, it is broadcast to a peer-to-peer network. The nodes in the network validate the transaction. After validating the transactions, it is grouped with other verified transactions to create a new block. Each node in the network creates a block to add the verified transaction. The block is secured using a cryptographic technique. A single block will be selected by the network using a consensus mechanism- a set of rules that govern how nodes on the network agree on the state of the blockchain and the validity of transactions. Finally, the selected block is then added to the existing blockchain network.
Different Types of Blockchain Network
Blockchain networks are of three different types based on the level of decentralization and access.
Public Blockchain
A public blockchain is a decentralized network that is open to anyone to join and participate in the actions. Public blockchain networks are open-source, transparent, and permissionless. Examples for public blockchain are Bitcoin and Ethereum.
Private Blockchain
A private blockchain is not open to everyone, here a single entity governs the actions. This network requires some amount of trust among participants. It can be used by organizations for internal purposes. It follows a permissioned model with rules and requirements to participate in the network activities. Ripple is an example of a private blockchain.
Consortium Blockchain
Consortium blockchain is a combination of public and private blockchain. Multiple organizations collaborate to form a shared space and they jointly manage network activities. It can be either a permissioned or permissionless model based on the needs of the consortium members. Hyperledger and Corda are examples of consortium blockchains.
Understand the difference between a public and private blockchain by reading the following article.
Conclusion
Blockchain is a distributed ledger technology used to secure transactions in a transparent, decentralized, and immutable way. Blockchain has different use cases across various industries. They are transforming how the traditional system operates by bringing a new level of trust and security to digital space. From Banking to real estate, the use cases of blockchain are constantly exploring.
