There is a strong likelihood that you have heard the term “blockchain” within the past year. Even while we all have a general grasp of what it is, the majority of us could not explain why it is discussed in every innovation and technology forum.
This essay highlights the most significant Blockchain principles so that you may engage in any discourse about the topic without getting lost in the introduction. In fact, this article will provide you with all the information you need to begin imagining your own Blockchain use cases. You will discover what it is and how it operates.
1. What Is A Blockchain?
Before defining Blockchain, we shall define what it is not. Numerous individuals misinterpret the phrases and concepts, resulting in frequent errors such as the following:
Blockchain technology is NOT a cryptocurrency.
“Blockchain is the prevalent technology. Bitcoin is only its initial incarnation in the mainstream.” — Marc Kenigsberg.
- Blockchain is NOT a language for programming.
- Blockchain is NOT a form of cryptographic encoding.
- Blockchain is NOT an AI or ML-based technology.
- Blockchain is NOT a Python framework or library
Blockchain is a record of immutable, time-stamped series of data that is controlled by a network of computers rather than a single centralized system. The network’s data is encrypted using cryptographic encryption.
This decentralized system cannot be controlled by a central authority. Moreover, everything is transparent, and the data cannot be modified, duplicated, or destroyed. Data transactions are available to all network participants. Next, we will understand it through a simple illustration.
How does Blockchain Function?
Have you ever collaborated online using a shared spreadsheet? Imagine a spreadsheet that is shared across thousands of computer networks. When any user in the network makes modifications, they are visible to everyone. Let’s gain a deeper grasp of the three foundations of blockchain technology.
Three Key Elements of Blockchain Technology
Decentralization, transparency, and immutability are three wonderful characteristics that Blockchain Technology gives to several businesses, which contributed to its rise to prominence.
Decentralization: Prior to the advent of Bitcoin and BitTorrent, we had only seen centralized services. It’s that straightforward; a central entity will control all network information flow. You must communicate with the central entity in order to retrieve any information from a specific database.
Our conventional banking systems utilize a centralized structure. Due to the fact that only bank transactions are permitted, we have little control over our finances. A decentralized system, on the other hand, enables secure transactions between users without the requirement for a third party such as a bank.
This characteristic allowed cryptocurrencies to penetrate the financial sphere. The vitality of the Blockchain network is enhanced by its transparency.
Transparency: Transparency is one of the most commonly misunderstood aspects of Blockchain Technology among the general public. They are confused between openness and privacy. Let’s clear the situation here.
The transparency feature enables everyone to view the network’s transactions. However, it is impossible to determine the true identity of the individual conducting a transaction protected by cryptographic identification.
Therefore, if you check the transaction history, you will see the person’s public address rather than their name. Next, we shall discuss the third intriguing characteristic, immutability.
Immutability: Once entered into the blockchain network, information cannot be altered. Its immutability is one of the best characteristics that contribute to its adaptability in the financial industry. It means that the function accepts a string as input and returns a string of fixed length.
Due to the fact that the blockchain is not owned by a single company and operates on a shared network, it is in fact, a public network. Its decentralized design prevents any hackers from corrupting the network. As a result, it has become the most preferred system for preserving transaction records in the financial sector.
Now you may want to know about nonce in Blockchain; read our article to learn more.