Blockchain is a type of Distributed Ledger Technology. By using fragmentation and cryptographic hashing, we make the history of digital assets unchanged and crystal-clear.
Let’s understand blockchain technology by taking the example of Google document. We create a document and share it in a group. The sent document is not a copied document but the original document distributed. This forms a decentralized distribution chain which gives access to document at the same time to all. It Provides transparency of data as all modifications are performed in real-time.
Blockchain is rising and brings a revolution in technology. It helps in reducing risks, finding stamps fraud and provides transparency as well.
It contains information about transactions. Transactions generate the hash. It updates every 10 minutes.
Blockchain is composed of 3 technologies:
- Public key Cryptography
- P2P Network
- Blockchain’s Protocol
How does Blockchain Technology work?
Blockchain has three important aspects:
Each chain consists of numerous blocks and each block has three components:
- Block Data
- Nonce which is 32-bit whole number generates automatically when we create a block. Further, it creates a block header hash.
- Hash, a 256-bit number. It is a string of numbers and letters. It must start with zeroes. Depends on current and previous transactions.
When the Block has created, nonce generates a header hash. The Block data is permanently tied to the hash and nonce unless it is mined.
A procedure through which miners create new blocks on the chain is mining.
In the blockchain, each block has its different nonce and hash. It also references the last block in the chain. Block mining does not look too simple especially for giant chains.
They use peculiar software to figure out the improbable math problems of finding a nonce that generates a hash. The nonce is 32 bits and hash is 256 bits so there is a possibility of more than 4 billion hash combinations that must mine to find out the right one. When they found they called it “glorious nonce” and the block is added to the chain.
If we perform any modification to any block in the chain, we not only re-mine that particular block but all the blocks that come after. That’s why it’s quite difficult to modify blockchain technology. So finding glorious nonce requires a certain amount of time and good computation power.
When the Miner successfully mines the block, It is honour financially.
Firstly, Nodes manage the functioning of the network and replicates of the blockchain and each node maintains its copies of the blockchain. We can analyze every activity in the ledger as blockchain provides transparency.
Then, a unique identification number is given to each member that shows their transactions. With the combination of public reports and system reports the blockchain maintain probity and increases the confidence of the users.
3. Things which can Blockchain Technology Perform:
1. Formation of Digital Identification
The identity of blockchain technology achieves through cryptographic keys. Private and the public key combination makes a strong digital identity.
2. Serves as database
Blockchains are modernization in data registration and distribution and they maintain both static data i.e. registry and dynamic data i.e. transactions.
Data stores on blockchains, in case of registry:
- Unencrypted Data- Completely transparent and can be read by each blockchain member in the blockchain.
- Encrypted data- Read by only those members having a decryption key. The key helps to access the data on the blockchain and provides info like who added data and when it was added.
3. Unchanged at all (Immutability)
Because it requires a lot of efforts to modify an entry in the database as it requires changing all the data that comes after.
A wallet is a combination of string and numbers like 17c166815550e4540862202b200e127f33781b21. This will appear in blocks as transactions take place. It won’t disclose any information except wallet number and it is also a public key.
5. Digital Signature
To perform a transaction we need two things, an address (wallet) and a private key.
For example, A decides to send coins to B, they must sign the message. It contains transactions and its private key. The two keys system is at the centre of cryptography and encryption and it uses antecede the existence of Blockchain.
When a message is sent then it is broadcast in the Blockchain Network. After that nodes work on the message to make sure that transaction it contains is valid. After validity confirmation, it is placed in the block and no changes can be made later.
6. Fundamentals of Blockchain Technology
Here are Some principles of Blockchains:
1. Peer to Peer Transmission
It means that the connection between two peers is always happening directly, rather than passing through the central node. It stores data to each node on the blockchain. Then it passes to adjacent nodes and information transmits in the complete network through this way.
It’s not possible to perform any modifications after transactions have been recorded on the blockchain. This is because each record has been linked with the previous one and are permanent and they enter in the order in which they occur. They are available to all the nodes.
3. Distributed Database
The database and every node on the blockchain have complete access to the blockchain. Nodes cannot control the information it contains but it can substantiate the records of the blockchain. This can accomplish without a mediator.
This is completely decentralized and as a result, there is no point of failure so it cannot bring down the blockchain. Blockchain nodes are logically centralized.
7. Uses of Blockchain technology
In this, we are going to study, where it can be applied.
1. Warranty claim
We know that settle out the warrant claims are gradual, costly and difficult to get the claim. But implementing smart contracts using Blockchain makes the process easier.
However, if anyone wants to make a claim, there is a quite long process. Human activities are time taking and errors are also possible there. Blockchain ensures that it fulfils all conditions for warranty claim and completes in an automatic way. The payout is automatic when the obligation is fulfilled and human involvement is minimum as well.
2. Identity verification
Identity verification wastes a lot of time. Using Blockchain technology we can do verification in a few minutes. Identity verification data is located online centrally and with the use of Blockchains, it will fade away. Hackers will not attack as there is no central point. Data is completely secure when protected by Blockchain. Thus, it leads to huge betterment in identity verification.
3. Storage of files
Google uses centralized methods and developed electronic archiving of documents. Hackers eyes are always on the centralized sites. Blockchains with smart contracts reduce this threat.
But there is not enough space within Blockchains itself. We can go for decentralized cloud storage such as Storj, Sia and so on. Moreover, it works like other cloud storage. The important thing is data hosts on an anonymous user’s PC instead of data centres.
Lawbreakers have to hide the money they have looted. This can be done with fake bank accounts, gambling or other activities as well but there are proper rules and regulation in the current cryptocurrency system and it provides transparency of transactions as well.
Blockchain with its smart contracts can deliver money looted tactics ineffective and traceable.
5. Social Media
Right Now, Social Media companies use personal data of their clients and make a good amount of money.
But Blockchain smart contracts enabled users to sell their data if they want to.
What are Smart Contracts?
Smart Contracts defines rules and regulations in the same way traditional contract does. But the difference is that smart contracts automatically accomplish those duties. They are coded so they applied on the attainment of norms.