What is Blockchain Technology?

Blockchain technology is a secure and transparent ways of recording and sharing data provided by blockchain are now revolutionizing different industries. Although most people are familiar with it when talking about cryptocurrencies such as of Bitcoin, it has much broader applications. If you want to know how it changed the modern world, first you should learn the basics of blockchain.

History of Blockchain

Blockchains were first proposed in 2008 by Satoshi Nakamoto, who to this day remains an anonymous pseudonym. Nakamoto further refined the design, working on the principles behind Hashcash and using a similar proof-of-work technique to prevent spamming in the form of a denial-of-service attack.

It is this feature that was used by Bitcoin, a well-known cryptocurrency, to create a public ledger that records each and every transaction that takes place across the network. It got to the point that the Bitcoin blockchain files, which contained every transaction and record on the network, were growing so large as to be unwieldy. It eventually breached the 200 gigabyte mark by the time we were getting towards 2020, specifically hitting 20 gigabytes by August 2014.

Why is Blockchain Important?

Legacy databases, like real estate selling, require financial transaction recording assistance. When bidders lose a ticket, without a ticket broker, both the buyer and the seller can be alleged for non-payment statuses, which might cause legal trouble for both parties. This is resolved by establishing an irreversible transaction record (in the form of a blockchain) that exists as a decentralized data-store with all users. In Real Estate, this gives a singular ledger for both sides, which updates transactions in real-time. This technology is widely adopted across industries, including the creation of virtual currencies like Bitcoin.

What Are The Features of Blockchain Technology?

The following are the key characteristics of blockchain technology:

Decentralization

In the context of blockchain, decentralization is the process of shifting power and decision-making from a centralized entity—a person, an organization, or a group—to a distributed network. Decentralized blockchain networks use transparency to lessen the requirement for participant trust. Additionally, these networks discourage users from abusing their power or dominance over one another in ways that impair the network's functionality.

Immutability

Something is said to be immutable if it cannot be modified. Once a transaction has been entered into the shared ledger, nobody else can alter it. If a transaction record contains an error, the error must be corrected by adding a new transaction, and the network can see both transactions.

Consensus

Rules regarding participant consent are established by a blockchain system to record transactions. Only when the permission of the majority of network participants is obtained can new transactions be recorded.

How Does Blockchain Work?

The following steps provide a brief overview of the intricate blockchain mechanisms. Most of these steps can be automated by blockchain software:

Step 1 – Record the Transaction

A blockchain transaction documents the transfer of digital or physical assets between participants in the network. It is stored as a block of data and may contain information similar to this:

• Who was involved in the transaction?
• What happened during the transaction?
• When did the transaction occur?
• Where did the transaction happen?
• What caused the transaction?
• How much portion of the asset was traded?
• How many of the pre-conditions are fulfilled by the transaction?

Step 2 – Gain Consensus

Most users on the distributed blockchain network must agree that the recorded transaction is valid. The rules of agreement can differ depending on the kind of network, but they are usually set up at the very beginning.

Step 3 – Link the Blocks

Transactions on the blockchain are grouped into blocks, each with a cryptographic hash linking them together. If any block's content is altered, the hash changes, signaling tampering. This secure linkage prevents editing. Adding new blocks strengthens the entire chain, akin to building a tower with wooden blocks. Removing a middle block breaks the tower.

Step 4 – Share the Ledger

Every participant receives a copy of the most recent central ledger via the system.

What are the Types of Blockchain Networks?

The blockchain contains four primary categories of distributed or decentralized networks:

Public Blockchain Networks

Public blockchains are open to all users and permissionless. Each participant is entitled to read, edit, and validate the blockchain. The main uses of public blockchains are mining and trading cryptocurrencies such as Litecoin, Ethereum, and Bitcoin. 

Private Blockchain Networks

Private blockchains, also known as managed blockchains, are controlled by a single organization. The authority decides who can join the network and what privileges they have. Due to access limitations, private blockchains are only partially decentralized. One example of a private blockchain is the digital currency exchange network for businesses called Ripple.

Hybrid Blockchain Networks

Hybrid blockchains incorporate components from public and private networks. Businesses can install permission-based private systems in addition to public ones. They maintain public access to the remaining data while controlling access to particular data stored in the blockchain. They let members of the public verify whether private transactions have been finished through the use of smart contracts. Hybrid blockchains, for instance, can allow the public to access digital currency while maintaining the privacy of bank-owned currency.

Consortium Blockchain Networks

A collection of organizations governs consortium blockchain networks. Pre-selected organizations are equally accountable for data access rights determination and blockchain maintenance. Consortium blockchain networks are typically preferred in industries where many organizations share common goals and benefit from shared responsibility. One non-profit blockchain consortium that attempts to improve cooperation amongst maritime industry operators and digitize the shipping sector is the Global Shipping Business Network Consortium.

What Are Blockchain Protocols?

The various blockchain platforms available for application development are called blockchain protocols. Every blockchain protocol modifies the fundamental blockchain concepts to fit particular sectors or uses. Below are some subsections that contain examples of blockchain protocols:

Hyperledger Fabric

Tools and libraries are part of the open-source Hyperledger Fabric project. Businesses can use it to quickly and efficiently create private blockchain applications. It is a general-purpose, modular framework with unique access control and identity management features because these features can be used for various applications, including trade finance, supply chain tracking and tracing, loyalty programs, and financial asset clearing and settlement.

Ethereum

Building public blockchain apps is possible with Ethereum, an open-source, decentralized blockchain platform. Ethereum Enterprise is intended for commercial applications.

Corda

An open-source blockchain initiative called Corda is intended for commercial use. You can create compatible blockchain networks and operate in strict privacy by using Corda. Businesses can transact directly and profitably by utilizing Corda's smart contract technology. Financial institutions make up the bulk of its users.

Quorum

An open-source blockchain protocol called Quorum is based on Ethereum. It is specifically made to be used in consortium blockchain networks, in which several members each own a portion of the network, or private blockchain networks, in which a single member owns all of the nodes.

What are the Benefits of Blockchain Technology?

Asset transaction management benefits greatly from blockchain technology. Several of them are listed in the following sections:

Advanced Security

The highly trust and security provided by blockchain systems for modern day digital transactions. They fear that someone will alter the foundation software, cranking out money for themselves fraudulently. Yet Blockchain establishes an secure fundamentals beneath the software system that hardly a piece of data can be altered by utilizing the three principles of Cryptography, Decentralization, and Consensus. The record of transaction cannot be changed by a single user, and because there is no single point of failure.

Improved Efficiency

B2B transactions are often intricate processes that can delay operations especially when compliance and third-party agent regulatory outliers come into play. These transactions are quicker and more effective as the blockchain is very transparent and smart contracts with trust and transparency if the developer implements them correctly at the time of writing the smart contract.

Faster Auditing

This necessitates that businesses can originate, share, store, and reassemble e-transactions in an auditably secure manner. Due to the fact that blockchain data is immutable over time, every record is sorted by time. The data is transparent, hence faster audit processing

Conclusion

We all know that blockchain technology made us to changed a lot in many industries by recording data in blocks and providing the base structure to the technology. Its use, notwithstanding cryptos, redefines transactions as well. Its basics are essential to know. Security and efficiency are provided by decentralization, immutability and consensus. Public, private, and hybrid —these are all types of versatile networks which will meet the needs of your business. Customized solutions such as Hyperledger Fabric and Ethereum are available.