Blockchain is a digital ledger or database that records transactions or information securely and transparently. We can think of it as a decentralized database that is maintained by a network of computers rather than a single authority. Blockchain removes the secrecy around how information-namely transaction data -was handled. It is distributing a list of transactions that is constantly updated and reviewed. Each block in the chain contains a list of transactions or information, which is verified and added to the chain by multiple users in the network. Once the block is added to the chain, it cannot be altered, providing a secure and tamper-proof record of all the transactions or information that have occurred.
Blockchain has decentralised nature and strong security features, it has the potential to revolutionize the way we transact and exchange information, making it more efficient, trustworthy, and accessible to everyone.
Blockchain was Described in 1991 by a group of researchers and was originally intended to timestamp digital documents so now one can temper them. But it was not adopted that easily. In 2009 Satoshi Nakamoto introduced the digital cryptocurrency Bitcoin which was made using blockchain technology.
How does it work?
A blockchain is a chain of blocks that contains information. Each block contains the Data, Hash, and Hash of the previous block.
Data: The data stored in the block depends on the type of blockchain bitcoin is a digital currency so it stores the details of transactions.
Hash: Hash is a unique identity of a block it is different and unique for every block. Generated block generates its hash if the data is in the block is changed then the hash of the block also changes and now we can detect which block’s information is tampered with as the change in information makes the change in hash and it no longer is the same block.
The hash of the previous block: Hash of the previous block creates the chain of the block and makes it secure and helps to detect the change in the chain. Suppose if one of the hash is changed then the block’s hash is changed (Let’s name it a Z block). Now the next block of the Z block contains an old hash of the Z block and hence can not detect the previous block. Hence the change is detected. Isn’t it amazing.
Now days our computers are very fast supposed if I tamper with a block then I can calculate the hash of the block and change will never detect. So here comes the term Proof-of-work.
Proof-of-work: Proof-of-work slows down the creation of the blocks. Proof-of-work also depends on the chain. In bitcoins case, it takes 10 minutes to calculate the proof-of-work and add a new block to a chain. Hence the security of a blockchain is due to both hashing and the proof-of-work. But there is one more thing that makes blockchain secure which is decentralization.
Decentralization: Instead of using a central entity to manage the chain, blockchain uses peer-to-peer and anyone is allowed to join. Suppose 20 people join the chain then everyone gets a copy of the chain. If someone created a new block it is sent to everyone in the chain. Each node then verifies the block to make sure that it has not tempered. After everything is checked out each node adds this block to its own blockchain. Blocks that are tempered with get rejected by the other nodes in the network. Now, this makes Blockchain impossible to tamper.
Smart Contracts: These contracts are simple programs that are stored on the blockchain and can be used to automatically exchange coins based on certain conditions.
Application of blockchain:
Cryptocurrency: Blockchains are best known for their crucial role in cryptocurrency systems like Bitcoin, Ethereum and others. That provides fidelity and security of a record of data and generates trust without the need for a trusted third party.
Drug Traceability: When a manufacturer produces the drug and marks it with a unique code and with this unique code wholesaler, pharmacists and patient verifies the origin of the product.
Collecting taxes: Smart contract adjusts the tax calculation during the payments where a GST invoice is issued by the seller then the buyer pays the bill with GST and seller pays the supplier and finally, the tax goes to the government.
Supply Chain Management: Blockchain can be used to track the movement of goods and products throughout the supply chain, providing transparency and accountability.
Healthcare: Blockchain can be used to securely store and share patient data, ensuring that only authorized individuals have access to sensitive information.
Voting: Blockchain can be used to create a secure and transparent voting system, ensuring the votes are counted accurately and that the result is tamper-proof.
Real Estate: Blockchain can be used to record property transactions, reducing the need for intermediaries such as real estate agents and lawyers.
Blockchain is also used in industries like loan management, KYC system, Trade Finance, the Mortgage industry, and many more
Benefits of Blockchain:
- Security: Blockchain provides a secure and tamper-proof record of transactions or information, making it nearly impossible to hack or alter.
2. Transparency: Blockchain provides transparency by allowing all users in the network to view and verify transactions or information.
Efficiency: Blockchain provides a fast and efficient way of transacting, reducing the need for intermediaries and speeding up the process.
Decentralization: Blockchain is decentralized, meaning that it is not controlled by a single authority, making it more resilient to attacks and providing more control to the users in the network.
Challenges in the blockchain:
Blockchain has a lot of challenges like high initial cost, energy consumption, privacy, public perception, integration with legacy systems etc.
Conclusion:
Blockchain is a revolutionary technology that has the potential to transform many industries. Its decentralized nature, security features, and transparency make it an ideal solution for many applications, including cryptocurrencies, supply chain management, healthcare, real estate, and voting, as more companies and industries begin to adopt blockchain technology, we can expect to see even more innovative and transformative use cases emerge in the years to come.
Blog by Kirti Lulle