How much do you understand about Blockchain Technology, and how does it work?

16/02/2022

Contributed by: Anderson Minhe

In the last few years, you've frequently heard the word 'blockchain technology, most likely to cryptocurrency like Bitcoin. In reality, you might be thinking, "what is blockchain technology?" It appears that Blockchain is an untruth, but only in a conceptual sense because there is no actual definition that a layperson can grasp. It is crucial to determine " what is blockchain technology? "including the technology that it uses and how it functions, and the ways it's growing in importance in the modern world.

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What is Blockchain Technology?

Blockchain is a method of storage that records transactions often referred to as the block of the public in a variety of databases, also known by the term "chain," in a network connected by peer-to-peer nodes. This type of storage is generally described as a "digital ledger."

What is BLOCKCHAIN? The best explanation of blockchain technology, Source: Youtube, Lucas Mostazo

Every transaction recorded in this ledger is approved through its digital signature, confirming the transaction and protecting it from manipulation. Therefore, the data that the ledger's digital version contains is highly secured.

What is the reason why Blockchain is Popular?

Suppose you want to transfer money to family members or friends using your account at a bank. You'll log in to online banking and make the funds to the person not using the account number. There's a problem that we tend to overlook.

These kinds of transactions could be altered very quickly. People aware of this reality are generally beware of these kinds of transactions. That's why there has been a growth in third-party payments in the last few years. This vulnerability is the reason Blockchain technology was developed.

Many people believe that Blockchain and Bitcoin can be utilized the same way; however, this isn't the case. However, Bitcoin is a cryptocurrency dependent upon Blockchain technology to protect itself.

What is blockchain and how can it change our society? | Ali Raza Dar | TEDxFHNW, Source: Youtube, TEDx Talks

Highly Secure

It utilizes an electronic signature feature to ensure that there are no fraudulent transactions, making it difficult to alter or alter an individual's data through other users who do not have a digital signature.

A decentralized System

You needed approval from regulatory authorities such as banks or government agencies to conduct transactions in the past. However, Blockchain is a different story. With Blockchain transactions, transactions are driven by the consent of users, which results in safer, smoother, and more efficient transactions.

Automatization Capability

It can be programmed and create a sequence of events, actions, and even payments regularly when the trigger requirements are met.

What is Blockchain Technology? How Does It Function?

In recent times you've probably noticed numerous businesses across the globe using Blockchain technology. What exactly is Blockchain technology function? Are these significant changes or just minor addition? The technological advancements in Blockchain are in their early stages and could revolutionize the world shortly. Therefore let's get started on deconstructing the technology.

Different types of Blockchain

There are four distinct kinds of Blockchains. The four types of blockchains are:

Private Blockchain Networks

Private blockchains work on closed networks and are generally suitable for private organizations and businesses. Companies can use private blockchains to alter their accessibility, authorization settings, and parameters applied to networks and other essential security options. Only one authority oversees the privately-owned Blockchain.

Public vs Private Blockchain | Difference Between Public and Private Blockchain, Source: Youtube, Learn with Whiteboard

Public Blockchain Networks

Bitcoin, along with other cryptocurrencies, came from public blockchains that also played an essential role in developing the distributed ledger technique (DLT). Public blockchains can also help remove specific problems and obstacles like security issues and centralization. Through DLT, information is spread over a peer-to-peer network instead of being kept in one place. Consensus algorithms are employed to confirm the authenticity of data. Proof of stake (PoS) and proof of work (PoW) are two commonly used consensus methods.

Permission-based Blockchain Networks

Sometimes referred to in the field of hybrid blockchains. These blockchains can be described as private blockchains which provide restricted access to authorized users.

Crypto Education - Permissioned vs Permissionless Blockchains Explained | Animation | Cryptomatics, Source: Youtube, Cryptomatics

Businesses typically establish these blockchains to make the most of both worlds. Additionally, they offer better organization in determining who can participate in the network and which transactions.

Consortium Blockchains

Similar to permissioned and permission-based blockchains, consortium blockchains contain private and public components. However, the fact that multiple organizations manage one consortium blockchain network. While these blockchains may initially be more challenging to establish, they will provide better security once they're in operation. Furthermore, they are ideal for working with many organizations.

The Process of Transaction

One of Blockchain technology's key attributes is how it validates and authorizes transactions. In the case of two people who want to conduct an operation using two keys: public and private or both, the private key of the first party will join the transaction data in the public keys of the other person. The information from both parties is then put into unison.

The block includes the digital signature of the person who signed it, an exact timestamp, and additional important, pertinent details. It's important to remember that the block does not contain the names of the involved people in the transaction.

Here's an example of a blockchain use case to illustrate the way Blockchain is used:

Advantages and disadvantages of Blockchain

As with all types of technologies, Blockchain also has many advantages and drawbacks to consider.

What Are the Advantages and Disadvantages of Block Chain Technology, Source: Youtube, Knowledge Hub

Advantages

One significant benefit for blockchains is the degree of security it offers. This also means that blockchains can protect and protect sensitive data through online transactions. For those who want speedy and efficient payments, Blockchain technology can provide this too. Omers consider being a benefit.

Disadvantages

Cryptography and Blockchain require the use of both private and public keys. According to reports, there are issues regarding private keys. If the user loses their private keys, they will face various challenges, which is one of the disadvantages of blockchains. Another issue is the limitations on scalability since the number of transactions that can be performed per network is restricted. This means it could take hours to complete multiple transactions and other tasks. It can also be challenging to modify or add information after the transaction has been recorded; Blockchain is a further drawback.

Conclusion

At Simplilearn, we offer the latest and most up-to-date training on the newest field of Blockchain can be found in The professional Blockchain Certification Program for Blockchain. In collaboration with the world-renowned institution, IIT Kanpur, this program can help you get back right on the right track.

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Hope this article is helpful to you, thanks for reading.

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