Blockchain Technology: What Is it and How Does It Work?
Transactional records are stored in the Blockchain technology which is known as the term “blocks”, of the public in multiple databases, which are known as “chains”. They are connected in a network through peer-to-peer nodes. “Digital ledger” is what this storage is typically referred to.
By MAISIE HARRIS
Each transaction is authorized by a digital signature from the owner, which safeguards and authenticates the transaction from tampering. So the information that the “digital ledger” contains is very secure.
Simply put, the digital ledger is just like a Google Spreadsheet that is shared with several computers in a network, where the transactional records are based on purchases that happened. The interesting fact is that everyone can see this data, but no one can’t corrupt it.
Blockchain Technology: Explained
Let’s suppose that you are transferring money to your friends and family from your bank account to theirs. You would have to log in to online banking and then transfer the amount you wish to the other person, all this by using their account number. When the transaction is finished, your bank updates the transaction records. It seems fairly simple, right? But there are potential issues that most people neglect.
These transactions could be tampered. A lot of people who know the truth are wary of using these transactions. That’s why there have been more and more third-party payment apps. But this is the main reason why the blockchain was created.
It’s true that Blockchain, technologically, is a digital ledger that is receiving a lot of attention recently. But what are the other reasons why it has become so popular? Let’s try to understand the whole concept.
Keeping a record of data transactions is very important for the business. Most of the time, this information is passed through third-party brokers like lawyers increasing time, the cost for the businesses. or brokers, or it is handled in-house. But fortunately for everyone, Blockchain avoids this long process and helps to make the transactions very quickly, saving money and time.
Most people assume Bitcoin and Blockchain can be used interchangeably, but that is not the case in reality. Blockchain is a technology that supports different applications that are related to industries like supply chain, manufacturing, finance, and more. Bitcoin uses Blockchain technology in order to be more secure.
With many advantages, Blockchain is an emerging technology, in an increasingly digital world:
Highly Secure: To conduct fraud-free transactions, it uses digital signatures, making it impossible to change the data and corrupt it.
Decentralized System: You would need the approval of regulatory authorities like banks or the government for transactions, but with Blockchain, transactions are done with the consensus that is mutual between users. This results in safer, smoother, and faster transactions.:
How does Blockchain Technology Work?
Recently, it is possible that you might have noticed that Blockchain technology is being integrated by a lot of businesses. But we need to understand, how does this technology work? Is this a simple addition or a significant change? The advancements of Blockchain have the potential to be revolutionary in the future, but as for now, they are very young. Let’s begging to explain this technology:
Three leading technologies are combined for forming Blockchain
- Cryptographic Key
- Peer-to-peer Network with leading technologies.
Cryptography keys – consists of two keys. One of them being the Public Key and the other Private Key. These keys make sure that the transactions are successful between all the parties included. Every individual possesses these two keys. They help to secure digital identity references which is the most important aspect of Blockchain technology. Digital Signature is what is what this identity is referred to.
A peer-to-peer network is merged with the digital signature, a huge number of people who act as authorities, use digital signatures to reach an agreement among other issues on transactions. When the deal is finalized, by a mathematical verification it gets verified, which does result in a successful and safer transaction between two network-connected parties.
The Process of Transaction
The way it confirms and authorizes the transactions is one of blockchain technology’s best features. For instance, if two people wish to perform a transaction with a public key and private key, respectively, the first individual party should attach the transaction information to the public key of the second individual. This information is gathered into a block.
This block does contain a timestamp, a digital signature, and other relevant and important information. It should be noted that the block does not include any of the identities of the parts included. Block is later transmitted across all of the network nodes, and when the right person uses his private key, the transaction gets completed. For the transaction a digital wallet is needed.
A Bitcoin wallet is a software program in which Bitcoins are stored. Bitcoin wallets facilitate the sending and receiving of Bitcoins and give ownership of the Bitcoin balance to the user. Besides that, wallet, Ethereum Wallet is also very popular.
How Blockchain works:
Hash Encryptions: This technology uses hash encryptions in order to secure the data, using mainly the SHA256 algorithm to secure the information. The receiver’s address, the transaction, the address of the sender, and his/her private key details are all transmitted via the SHA256 algorithm. This encrypted information is called hash inception and is transmitted all over the world, and after the verification, it is added to Blockchain. This algorithm makes it impossible to hack the information.
Mining: The process of adding transactional detail to present digital/public ledger, in Blockchain Technology is called “mining”. Even though it is associated most with Bitcoin, it is used to refer to other Blockchain technologies as well. What mining does is generates the hash of a block transaction, which it is very tough to forge, ensuring the safety of the whole Blockchain, and it does all that without needing a central system.
Blockchain Technologies can be set up to operate in different ways, by using different mechanisms for the transactions, which is seen only by individuals who are authorized to, and everyone else is denied. The most well-known example of this technology is Bitcoin. It just shows how huge this technology has become. Blockchain founders are always researching other applications in order to expand the level of technology and influence of Blockchain. It seems that blockchain will rule the future world of the digital world.