What is behind Blockchain

You may have come across terms such as blockchain, bitcoin and cryptocurrency at some point over the past few years. But what exactly are those? Blockchain is the technology behind almost all digital currencies in the world. Without blockchain bitcoins and cryptocurrencies would not exist.

According to Don & Alex Tapscott, blockchain can be referred to as an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value. Simply put, blockchain is a public ledger that records anything of value.

Basic Terminology

• Record : Any kind of transaction or deal
• Block : A bundle of records
• Chain : A set of blocks
• Node : Computers in the network

For example, let's consider a transaction where a deal gets included in blockchain in which one party sells two coins for $100.

Step 1 : A record is created regarding the trade. The record consists details about the trade including digital signatures from each party.

Step 2 : The record is checked by the computers in the network called “nodes” in order to make sure the transaction is valid.

Step 3 : The record is then added to a block. The blocks contain a unique hash for each block with the hash of the previous block.

Step 4 : Each of the blocks are added to the blockchain where  each blocks are connected together with the unique hash codes.

What if hash is changed?

As the blocks are connected using a unique hash of every block, a block contain the hash of the previous block too. So when changing a hash of a block, the hash of the next block should also be changed accordingly and so on. Recalculating hash of all the blocks need a massive undertaking of computing power so it is considered that changing a hash is impossible.

There are some key advantages to using blockchain for various needs.

• Trust and Transparency : One of the main reasons to use blockchain is trust and transparency. As this is a public ledger each and every person can see what is happening in the blockchain.
• Cost Effective : As blockchain is a peer-to-peer network where any person can work directly and there is no need for a central third party to work on behalf of someone.
• Unbreakable : Blockchains are unbreakable as the blocks are connected with a unique hash. Once a transaction is completed and added to the blockchain they are protected by cryptography.
• Availability : Due to the positivity of blockchain being a peer-to-peer network and a public ledger it is available for everyone.
• Decentralized : This is the most important and core advantage of blockchain. It can be said that all the other advantages exist due to this key feature found in blockchain.

Blockchain is going to be used for more than just currency and transactions. To give you an idea of how seriously it’s been studied and adopted, IBM has 1000 employees working on blockchain-powered projects. It can be seen that blockchain technology can be used to change the lives of millions of humans with related to business, technology, and many other ways.

Shavindi Pathirana

29-01-2019

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