We are pretty sure most of you would have heard about Bitcoin and why not! It’s the first digital currency that was discovered so far! But, do you know ever since the term “Bitcoin” flipped into the market, people started searching for the foundation technology behind its existence everywhere? Further Bitcoin and Blockchain, which is the technology behind it remained as the top searched words in the year 2017, which gained interest from researchers and data scientists worldwide (Source: Statistica Keyword Search Report 2018)!
Well, the revolutionary technology that has given birth to the very popular, oldest, and secure digital currency, Bitcoin is the Blockchain technology, and it has enormous potential than one could ever think of! There are multiple use cases beyond the digital currency market, it is applicable in finance, healthcare, banking, education, gaming, banking, entertainment and others. Taking this discussion further, let’s talk about blockchain technology, its working principle, applications, and much more!
What is Blockchain?
Blockchain in the most simpler terms is a set of digital information (called the “blocks”) that are stored securely in a public database (called the “chain”). The digital information that is stored over these digital blocks can be the transactions or other such sensitive details. In these digital blocks, the transaction details are stored with complete information like the transaction amount, the date and the time. Further, this decentralized digital ledger that is effectively used to record sensitive information like the transactions across different computers cannot be altered retroactively.
How does Blockchain work?
In order to understand the working of a blockchain, let’s first under the concept behind it with a simple case. A person “A” wants to lend a sum of 10 USD to the person “B”. Then in this very situation, person A is not required to have any permission from any intermediary person “C” for transferring the amount and in a similar sense, the person “B” is not required to take the permission of “C” to receive the sum of amount. Thus, it’s a completely decentralized process, in which the transaction takes place from the sender to the receiver, without any involvement of any intermediary party.
Every block that is present over the blockchain network not only contains any information but also contains a hash of previous block’s information. These hashes are the mathematical codes that are subjected to modification if in case the information in the blocks is modified. Hence, if a hacker tries to attack any of the blocks over this blockchain, then there will be a change in the information over the associated hash, which will not match with the original one and as a result, the transaction will stop. Thus, it’s secure, encrypted, and tamperproof. Now since you have understood the concept behind the working of Blockchain, let’s understand the basic stages that are involved in this case.
Stage 1 — Transaction Initiates
Suppose there are two parties, Party A and Party B, who want to transact a unit value, that can be a digital currency or any other digital assets. Then, they do not need any intermediary party to initiate the transaction process. They simply need to initiate the transaction.
Stage 2 — Block Allocation
Once the transaction is initiated, the transaction details are packaged up with other pending transactions into an entity called a “block.” This Block is sent to the blockchain system’s network of participating members, for our case there are two members A and B.
Stage 3 — Verification and Reviewing
The participating members who are present over the blockchain network evaluate the transaction and verify the credentials to know whether the details are valid or not.
Stage 4 — Blockchain Formation
Once the verification is completed, the verified block of transactions is time-stamped with a digital graphic hash. Each block that is involved in the blockchain network also contains a reference to the previous block’s hash, thus a long chain of blocks called the blockchain is created. This chain of records cannot be altered by anyone without taking the prior consent from the participating members
Stage 5 — Processing and Execution
Finally, all these processes are done, the final transfer takes place from party A to party B, without requiring the consent of any of the middle party.
Why do we need Blockchain Technology?
By now, you would have got an idea about what is blockchain, how does it work! Next, let’s talk about why do we need blockchain technology and why it is important for us.
Traditional banking generally takes more time for a transaction to process. But, by the means of Blockchain, the entire transaction process can be made faster, which can eventually provide a more convenient experience to the users.
Blockchains are decentralized in nature, which means that the users are given the total ownership access to their digital assets, which are encrypted with an access key. The users can thereby, easily transfer the asset to anyone, they want.
A centralized exchange is prone to hacking because the database’s security is totally dependent upon the third party’s trust. Unlike this, in the case of blockchain, the transaction details are completely immutable and nearly impossible to decode.
Application areas where the blockchain technology is used
Today, technology is changing at a great pace. Suppose you got a new Smartphone today, then you cannot be assured that the technology used in your phone will remain fresh for years. Within a short time, it will get outdated and new technology will pop up. But, this is not the case with blockchain technology that has got a brilliant technological aspect which will make it last longer than we can think.
No doubt each one of us aspires for a system that is more transparent, reliable, secure, trustworthy, and faster and in this search, Blockchain emerges as a great option to choose from, which is yet to see more applications in near future. The importance of this technology can further be realized with the fact that very soon a new era is coming where blockchain will get enrooted into more technicalities and will help in setting up a more convenient ecosystem, such as digital voting, citizenship identification cards and much more. So, rather waiting for the blockchain technology to come to your business, bring it today with the leading technology consulting firm, Pixel Softwares.