Blockchain is the word that you might be hearing frequently. But most of us are not completely aware of what blockchain is or how to describe it to others. Mostly people think that Blockchain is Bitcoin and vice-versa. But it’s not the case. In fact, Bitcoin is a digital currency or cryptocurrency that works on Blockchain Technology.
Blockchain was invented by Satoshi Nakamoto. As the name suggests, blockchain is a chain of blocks that contains information. Each block consists of a number of transactions and each transaction is recorded in the form of Hash. Hash is a unique address assigned to each block during its creation and any further modification in the block will lead to a change in its hash.
A block has mainly 3 parts:
- Data/Information part- contain the information of the transaction incurred
- Hash- Unique ID of block
- Previous Hash- Hash of previous block
Figure — Blockchain architecture
Since in a Blockchain, every block has the hash of its previous block, therefore if anyone tries to temper with the data in some block then the hash of the block will be changed. So he will have to change the ‘Previous hash’ of next block. In doing so, the present hash of the next block will also change. Eventually the intruder will have to change the hashes of every block in the Blockchain which is not easy at all. Hence, the data in the Blockchain is temper proof and maintains its authenticity.
Features of Blockchain:
- Data stored in blockchain is immutable and cannot be changed easily as explained above. Also the data is added to the block after it is approved by everyone in the network and thus allowing secure transactions. Those who validate the transactions and add them in block are called miners.
- Blockchain is Decentralized as well as an open ledger. Ledger is the record of the transactions done and because it is visible to everyone, therefore is called an open ledger. No individual or any organization is incharge of the transactions. Each and every connection in the blockchain network has a same copy of the ledger.
- Blockchain is Decentralized network i.e., it has no central authority to control the network as there is in the client server model.
- Blockchain provide a peer to peer network. This characteristic of blockchain allows the transactions to involve only two parties, the sender and the receiver. Thus it removes the requirement of ‘third party authorization’ because everyone in the network is themselves able to authorize the transactions.
- For instance, if I am sending some money from US to my friend in India through bank, then the bank will be the trusted third party. First it will verify the transaction and then may cut some charges for the transaction. Hence the blockchain comes into sight. It aims at removing trusted third party so as to makes the transaction fast and cheap.
The blockchain technology is increasing and improving day by day and has a really bright future in the upcoming years. The transparency, trust and temper proof characteristics have led to many applications of it like bitcoin, Ethereum etc. It is a pillar in making the business and governmental procedures more secure, efficient and effective.