Understanding Block chain Technology

What Exactly Is a Blockchain?

A blockchain is a distributed database or ledger that is shared among computer network nodes. A blockchain, like a database, stores information electronically in digital format. Blockchains are best known for their critical role in cryptocurrency systems like Bitcoin, where they keep a secure and decentralised record of transactions. The blockchain’s innovation is that it ensures the fidelity and security of a data record and generates trust without the need for a trusted third party.

The way data is structured differs significantly between a traditional database and a blockchain. A blockchain collects information in groups known as blocks, which hold sets of data. When a block’s storage capacity is reached, it is closed and linked to the previous filled block, forming a data chain known as the blockchain. All new information that follows that newly added block is compiled into a newly formed block, which is then added to the chain once it is complete.

A database typically organises its data into tables, whereas a blockchain, as the name suggests, organises its data into chunks (blocks) that are linked together. When implemented decentralized, this data structure creates an irreversible data timeline. When a block is completed, it becomes permanent and becomes a part of this timeline. When a block is added to the chain, it is given an exact timestamp.

In Simple Terms, What Is a Blockchain?

A blockchain is simply a shared database or ledger. Data is stored in data structures called blocks, and each network node has an exact replica of the entire database. Because if someone tries to edit or delete an entry in one copy of the ledger, the majority will not reflect this change and will reject it, security is ensured.

How Many Block chains Exist?

The number of active blockchains is increasing at an alarming rate. There are over 10,000 active cryptocurrencies based on blockchain as of 2022, with several hundred more non-cryptocurrency blockchains.

What Is the Distinction Between a Private and a Public Blockchain?

A public blockchain, also known as an open or permissionless blockchain, is one in which anyone can freely join the network and set up a node. Because of their open nature, these blockchains require cryptography and a consensus system such as proof of work (PoW). In contrast, a private or permissioned blockchain requires each node to be approved before joining. Because nodes are trusted, the layers of security do not need to be as strong.

What Exactly Is a Blockchain Platform?

A blockchain platform enables users and developers to build new applications on top of existing block chain infrastructure. One example is Ethereum, which has its own cryptocurrency called ether (ETH).

However, the Ethereum blockchain enables the development of smart contracts, programmable tokens used in initial coin offerings (ICOs), and non-fungible tokens (NFTs). These are all built around the Ethereum infrastructure and secured by Ethereum network nodes.

Who Created the Blockchain?

Stuart Haber and W. Scott Stornetta, two mathematicians who wanted to implement a system where document timestamps could not be tampered with, proposed block chain technology in 1991. 

Nick Szabo, a cryptographer, proposed using a blockchain to secure a digital payment system known as bit gold in the late 1990s (which was never implemented).

Is Block chain Secured?

In several ways, blockchain technology achieves decentralised security and trust. To begin, new blocks are always stored in a linear and chronological order. That is, they are always added to the blockchain’s “end.” It is extremely difficult to go back and change the contents of a block after it has been added to the end of the blockchain unless a majority of the network has reached a consensus to do so. This is due to the fact that each block contains its own hash, as well as the hash of the block before it and the previously mentioned timestamp. A mathematical function converts digital information into a string of numbers and letters to generate hash codes. If that information is changed in any way, the hash code will change as well.

Assume a hacker, who also operates a node on a blockchain network, wishes to alter a blockchain and steal cryptocurrency from everyone else. If they changed their single copy, it would no longer be in sync with everyone else’s copy. When everyone else compares their copies to each other, this one copy will stand out, and the hacker’s version of the chain will be dismissed as illegitimate.

Blockchain Advantages

  1. Accuracy in Blockchain:

Transactions on the blockchain network are validated by a network of thousands of computers. This eliminates almost all human involvement in the verification process, resulting in less human error and a more accurate record of data. Even if a computer on the network made a computational error, it would only affect one copy of the blockchain. That error would have to be made by at least 51% of the network’s computers for it to spread to the rest of the blockchain, which is nearly impossible for a large and growing network like Bit coin’s.

  1. Cost Reduction

Customers typically pay a bank to verify a transaction, a notary to sign a document, or a minister to perform a marriage ceremony. Blockchain eliminates the need for third-party verification, as well as the costs associated with it. Business owners, for example, pay a small fee whenever they accept credit card payments because banks and payment-processing companies must process those transactions. Bitcoin, on the other hand, lacks a centralised authority and has low transaction fees.

  1. Decentralization

Blockchain does not keep any of its data in a centralised location. Rather, the blockchain is replicated and distributed across a network of computers. Every computer on the network updates its blockchain whenever a new block is added to the blockchain. Blockchain becomes more difficult to tamper with by disseminating that information across a network rather than storing it in a single central database. If a hacker obtained a copy of the blockchain, only a single copy of the information, rather than the entire network, would be compromised.

  1. Effective Transaction

Transactions processed by a central authority can take several days to settle. If you try to deposit a check on Friday evening, for example, the funds may not appear in your account until Monday morning. Unlike financial institutions, which operate during business hours, typically five days a week, blockchain operates 24 hours a day, seven days a week, and 365 days a year. Transactions can be completed in as little as 10 minutes and are secure within a few hours. This is especially helpful for cross-border transactions, which typically take much longer due to time zone differences and the fact that all parties must confirm payment processing.

  1. Private Transaction

Many blockchain networks function as public databases, which means that anyone with an Internet connection can view the network’s transaction history. Although users can view transaction details, they cannot view identifying information about the users who made those transactions. It is a common misconception that blockchain networks, such as bitcoin, are anonymous, when they are only confidential.

  1. Secured Transaction

Once a transaction is recorded, the blockchain network must validate its authenticity. Thousands of computers on the blockchain race to confirm that the purchase details are correct. The transaction is added to the blockchain block after it has been validated by a computer. Each block on the blockchain contains its own unique hash, as well as the unique hash of the previous block. When the information on a block is changed in any way, the hash code of that block changes; however, the hash code of the block after it does not. This disparity makes it extremely difficult to change information on the blockchain without being noticed.

  1. Transparency

The majority of blockchains are completely open-source software. This means that anyone with access to the code can view it. This enables auditors to examine the security of cryptocurrencies such as Bitcoin. This also implies that there is no real authority in charge of who controls Bitcoin’s code or how it is edited. As a result, anyone can propose changes or upgrades to the system. Bitcoin can be updated if a majority of network users agree that the new version of the code with the upgrade is sound and worthwhile.

Is Block chain a Illegal Activity?

While block chain network confidentiality protects users from hacks and maintains privacy, it also allows for illegal trading and activity on the blockchain network. The Silk Road, an online dark web illegal-drug and money laundering marketplace that operated from February 2011 until October 2013, when it was shut down by the FBI, is probably the most cited example of blockchain being used for illicit transactions.

By using the Tor Browser and making illegal purchases in Bitcoin or other cryptocurrencies, users can buy and sell illegal goods without being tracked on the dark web. Current regulations in the United States require financial service providers to obtain information about their customers when they open an account, verify each customer’s identity, and confirm that customers do not appear on any list of known or suspected terrorist organisations. This system has both advantages and disadvantages. It allows anyone to access financial accounts, but it also makes it easier for criminals to transact. Many have argued that the good uses of cryptocurrency, such as banking for the unbanked, outweigh the bad uses of cryptocurrency, especially since most illegal activity is still carried out in an untraceable manner. While Bitcoin was initially used for such purposes, its transparency and maturity as a financial asset has resulted in illegal activity shifting to other crypto currencies such as Monero and Dash. Illegal activity now accounts for a very small percentage of all Bitcoin transactions.

Regulations

Many people in the cryptocurrency community have expressed concern about government regulation of cryptocurrencies. While it is becoming increasingly difficult, if not impossible, to end a decentralised network like Bitcoin, governments could theoretically make it illegal to own cryptocurrencies or participate in their networks. As large companies like PayPal begin to allow the ownership and use of cryptocurrencies on their platform, this concern has diminished.

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