Blockchain is a method of data storage that makes it hard or impossible for the system to be changed, hacked, or used improperly. Blockchain technology is a system for keeping openly accessible transactional records across numerous databases in a peer-to-peer network (referred to as “blocks” at times). A “digital ledger” is a common term for this kind of storage. The owner’s digital signature, which also serves to authenticate the transaction, validates every transaction in this ledger and protects it from fraud. Because of this, the information in the digital ledger is very secure.
Blockchain, also known as distributed ledger technology (DLT), uses a decentralised network and cryptographic hashing to make the history of any digital asset transparent and unchangeable. Blockchain technology is a distributed, decentralised ledger that keeps track of who owns which digital assets. Blockchain technology is a real disruptor for markets like payments, cybersecurity, and healthcare since it prevents any data stored on it from being altered.
By drawing a parallel between a blockchain and a Google Docs page, it is simple to comprehend how a blockchain works. When a Google Doc is shared with a number of individuals, it is simply disseminated rather than duplicated or transferred. As a result, a decentralised distribution network is created, enabling simultaneous access for all users to the fundamental content. No one is locked out while waiting for changes from another party because all edits to the document are being tracked in real-time, making changes completely apparent.
Importance of Blockchain
Blockchain is a new technology with several benefits in a society that is becoming more digital:
It uses a digital signature function to execute fraud-free transactions, making it difficult for other users without a specific digital signature to corrupt or edit an individual's data.
In the past, transactions required the approval of regulatory bodies like a government or bank; but, with Blockchain, transactions are completed by user consensus, resulting in smoother, safer, and faster transactions.
Ability to automate
When the trigger's requirements are satisfied, it can be programmed to automatically generate a series of activities, events, and payments.
Type of Blockchain
Blockchains can be categorised into four categories. Here are some of them:
Unpublicized Blockchain Networks
Private blockchains run on closed networks and are frequently successful for private companies and organisations. Private blockchains allow businesses to tailor the network's characteristics, their preferences for accessibility and permission, and other key security features. In a private blockchain network, just one authority is in charge.
Networks of public blockchains
Public blockchains help to solve several issues and challenges, such as centralization and security flaws. With the help of DLT, data is dispersed across a peer-to-peer network as opposed to being retained in one location. A consensus procedure is used to verify the veracity of information; proof of stake (PoS) and proof of work (PoW) are two common consensus algorithms.
Blockchain Networks with Permissions
Permissioned blockchain networks, also known as hybrid blockchains, are private blockchains that provide privileged access to approved users only. In order to obtain the best of both worlds, businesses usually set up these kinds of blockchains.
Similar to permissioned blockchains, consortium blockchains feature both private and public parts, but different organisations will take care of different parts of a single consortium blockchain network. Although setting up these kinds of blockchains can initially be more difficult, once they are operational, they can provide superior security.
How does Blockchain technology work?
Three of the most popular technologies are combined in blockchain:
- Encryption keys
- A peer-to-peer system with a shared ledger
- A technique for computing that allows the network’s transactions and records to be stored
The two keys used in cryptography are the private key and the public key. These keys make it easier for two parties to conduct transactions smoothly. Each individual uses these two special keys to establish a link to a secure digital identity. This protected identity is the main characteristic of blockchain technology.
A lot of people who function as authorities utilise the peer-to-peer network and the digital signature together to agree on transactions and other issues. They immediately approve a transaction, which results in a successful secured transaction between the two network-connected parties after it has been mathematically proven to be genuine. In conclusion, Blockchain users employ cryptography keys to carry out various types of digital transactions via the peer-to-peer network.