Cryptocurrency, Bitcoin, blockchain…
Have you ever wondered what do these all sound like?
Let’s jump into the topic. Blockchain is a powerful technology that allows cryptocurrency existence. Bitcoin is one of the leading cryptocurrencies or virtual currencies. Blockchain technology is introduced for Bitcoin. Investors exchange US dollars for cryptocurrencies (Bitcoin), implement encryption techniques or methods to transfer the funds securely.
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Definition of Blockchain
A blockchain is an effective distributed database shared among multiple nodes of the network. Blockchain has the ability to store personal and other information in a digital way. Blockchain is playing a vital role in digital currency systems like Bitcoin, Ethereum and other cryptocurrencies, for maintaining decentralized transaction information in a secured way.
The key innovation of blockchain is it ensures the security, safety and fidelity of every recorded information. On the other hand, it provides trust without the involvement of third-party resources (banks, central authority, etc).
The primary difference between blockchain and database storage is how well the information is well-structured. Blockchain will collect the data together in the form of groups, called blocks. Each block will hold a set of data. Every block will have a storage capacity or limit. Once the storage is reached, it will be linked to another block and then form a chain of the information called a blockchain.
What is Blockchain Technology?
So far we’ve discussed what is blockchain, now let’s discuss blockchain technology. Blockchain technology is the kind of structure that helps to store the transactional related information in multiple databases in a network connected via peer-to-peer nodes. The data storage is mostly referred to as the “digital ledger”. On this ledger, every transaction or other personal information is authenticated through individual owners, using the digital signature technique. This is the process to authorize and also safeguard the information from tampering. It is said that the transaction information or data that has digital leger is highly secured.
Keeping it simple, let’s consider Google spreadsheet as the digital ledger. This spreadsheet can be shared among multiple computers over a network. It contains the transactional related information of every customer, number of orders, date of purchase and more. Any authorized person can access the data but nobody can edit or modify the data.
Key Properties of the Distributed Ledger
- Distributed – All the participants over the network will have a copy of the distributed ledger. This ensures complete transparency.
- Secured – Every record is encrypted using cryptography keys.
- Time-stamped – Every transaction timestamp is securely recorded on the individual blocks.
- Immutable – Validated records or information are irreversible. It means they cannot be updated or deleted.
Importance of Blockchain
It’s no surprise that small and large organizations drive on the information. It runs even better when the information is received accurately and faster. Blockchain is the best solution for delivering the information as it offers shared, quick and transparent data stored on the ledger, network members can access the information.
Blockchain networks are responsible for tracking orders, managing payments, handling production, etc. Network members can check every single detail of the transaction (end-to-end), it givers great confidence for network members.
Advantages of Blockchain
Immense trust – Trust is what everyone looks for. With blockchain, network members can receive accurate information in a timely manner. These blockchain records can be shared with members of the network only. It means, the members who have access permission can view the information.
Better security – An agreement on data accuracy must come from every member of the network. On the other hand, the transaction information that is stored on the blocks is immutable. It means these records are permanent. It is impossible to delete the records.
Efficiency – Thanks to the distributed ledger. It is shared through authorized members of the network. No member’s time gets wasted. The transaction speed often gets improved. Smart contracts are stored and executed on the blockchain automatically.
Reduced costs
Did you know that the nature of the block can reduce your organizational cost? Yes! It provides great efficiencies while processing every transaction. On the other hand, no manual effort is required. Few tasks such as amending information, aggregating, auditing and other tasks can be eliminated. Blockchain helps to reduce costs as there are no middlemen involved. No need for third-party services or vendors is required. Blockchain technology has the potential to process everything without hassles.
Transparency
It’s an open fact that every company need to have individual databases. Having a blockchain can be helpful for the companies, as the blockchain has the capability to store the information’s identically in several locations. Authorized people with permission access can view similar information at similar times. It means blockchain can offer complete transparency. Every transaction that happened on the blockchain can record immutably. These are recorded as the date and time-stamped. No need to worry about hackers or fraud on the network. Only authorized members can view the transaction history.
Automation
Want to increase the process of the transaction? Yes! This can be possible using smart contracts. Every transaction can be automated using smart contracts. This approach can improve the speed and efficiency of the process. The transaction can be automated when it satisfies the pre-specified conditions. Thanks to smart contracts, they help to reduce manual intervention and depend on other resources to verify whether the contract is satisfied or not. Let’s consider, if a customer wants insurance, they will submit all the required documents, if all the documents are valid, the insurance is automatically claimed and paid.
How Does Blockchain Work?
Have you ever noticed that thousands of businesses are interested in blockchain technology? It’s true. Many organizations are integrating this blockchain technology into their processes.
Blockchain technology is still young. This has immense potential to become revolutionary in upcoming years. Let’s have a look at the technologies involved in the success of blockchain.
Basically, blockchain is the combined version of three key technologies such as
- Cryptographic keys
- P-2-P network that consists of a shared ledger
- Computers to store the records and transactions of the network
If you’re planning to invest in cryptocurrency then you need to have a clear understanding of the cryptography keys. Hope you’re familiar with the cryptography keys. There are two primary cryptography keys involved in blockchain technology i.e private and public keys.
These private keys and public keys help users while processing transactions. Two parties can successfully process their transaction with high-level security. Every individual user will have unique public and private keys, they further use for secure digital identification purposes. Here this identity reference is the key factor of blockchain technology. In terms of cryptocurrency, this digital identification or originality is denoted as the “digital signature”. This is used while authorizing and handling the transactions.
On the other hand, a digital signature is connected with the p-2-p network. It’s nothing but several individuals who serves as authentic user’s use digital signature to get an agreement on the transaction. No unauthorized users can access the data. As there are mathematical verifications are performed to process a secured transaction on the network between two parties. Blockchain users utilize private and public keys while performing transactions or processing other interactions over the network.
Conclusion
Blockchain is the decentralized ledger of every transaction around the peer-to-peer network. With the help of blockchain technology, participants on the network can accept or confirm the transaction by avoiding third parties. No central authority is involved during the phases of the transaction. The key advantages of blockchain are accurate tracking, cost-effective, permanent ledger, accurate tracking and more.
