The word is being thrown around, almost everywhere as the new in-thing in technology. But have you ever wondered, what is blockchain?
Well watch this video to get a quick overview.
So starting off, how is blockchain different from standard data management.
Blockchain was originally described by a group of researchers, who wanted to timestamp digital documents, so that backdating or tampering is not possible.
Blockchain is more like a distributed ledger, we add transactions to it, and entries once made cannot be changed,thus making the process of checking for any tampering, easier?
These blocks are de-centralized, meaning the data is not stored at any one location, but distributed across a network of personal computers. So the good is that not one company owns the system, and it can be used by everyone, and these networked systems helps run it.
A block consists of data, a hash of the current block and also the hash of the previous block.
The type of data stored is dependant on the type of blockchain. For example Bitcoin blocks store, information on the sender, receiver and the amount of coin.
The hash is like a digital fingerprint, and is unique for a block, this is calculated in accordance to the data stored within it, any change in the data, changes the hash, so we can know which blocks have altered data.
Hash of Previous block:
This is information of the block that comes before the current block, thus making a chain as the next block would point to the current one.
The first block in the chain is called the Genesis block, and it doesn’t point to another block.
If any alterations are made to a certain block, it’s hash changes, making it invalid, as no other blocks point to it. This actually invalidates all the blocks after the altered block.
Computers are super fast these days and can calculate thousands of hashes per second, so in order to mitigate this,
Block chain has a mechanism called proof of work, which if we take bitcoin as a example, to add a new block to the chain it would require 10 minutes of required proof of work. So tampering one block, we would need to recalculate the proof of work for all the following blocks.
Another advantage of this system is that it’s de-centralized via a peer to peer network, and anyone can join. When a user joins , they get a full copy of the a blockchain, from the network they join and are added as a node.. Their node can be used to verify if all data is in order, by the network. If any node has been tampered with, this node will be rejected by the network.
In order for the tampered data has to be accepted, the hacker would have to first recalculate hashes for all the blocks after the tampered block, calculate the proof of work for all the blocks and also take control of at the very least 50% of the computers on the network, and change the data there. Hence no one can easily tamper with data in a blockchain.
Satoshi Nakamoto in 2009 introduced the crypto currency Bitcoin.
Bitcoin is a popular example of blockchain for money transactions, and the main difference is that there is no financial middlemen such as a bank, or investment service, but transactions are validated by personal computers all over the world, and these users earn a small percentage in the process.
Bitcoin ownership is managed on a network of computers, and as only one person can own that bitcoin, the ownership can be verified via blockchain, as it can be spent only once. So counterfeiting is not possible.
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