1.3 – What is Blockchain?

Having discussed the concept of Decentralization, there is one technology currently available which is built upon this principle. Blockchain.

Blockchain is a decentralised and distributed ledger technology that underlies cryptocurrencies like Bitcoin and has a wide range of applications across various industries. At its core, a blockchain is a chain of blocks, where each block contains a list of transactions. Unlike traditional databases, which are centralised and managed by a single entity, a blockchain is decentralised and maintained by a network of computers, known as nodes.

Here are some key features and components of blockchain:

Decentralization: Instead of being stored on a single server or controlled by a central authority, the entire blockchain is distributed across a network of nodes. Each node on the network has a copy of the entire blockchain.

Cryptography: Cryptography plays a crucial role in securing transactions on the blockchain. Each participant on the network has a pair of cryptographic keys: a public key (used as an address) and a private key (used to sign transactions). This ensures the security and integrity of the data.

Blocks and Transactions: Transactions are grouped together into blocks. Each block contains a cryptographic hash of the previous block, creating a chain of blocks. This linking mechanism ensures the integrity and immutability of the data on the blockchain.

Consensus Mechanism: To validate and add a new block to the blockchain, a consensus mechanism is used. This mechanism ensures that all nodes agree on the state of the blockchain. Bitcoin, for example, uses a proof-of-work consensus algorithm where nodes (called miners) solve complex mathematical problems to add a new block.

Immutability: An immutable object is one that cannot be changed. Once a block is added to the blockchain, it is extremely difficult to alter. Changing the information in a block would require changing all subsequent blocks, which would need the consensus of the majority of the network. This immutability enhances the security and trustworthiness of the data.

Smart Contracts: Smart contracts are self-executing contracts with the terms of the agreement directly written into code. These contracts automatically execute and enforce the terms when predefined conditions are met. Ethereum is a blockchain platform well-known for its support of smart contracts.

Public and Private Blockchains: Blockchains can be public, where anyone can join the network and participate, or private, where participation is restricted to a specific group of entities. Public blockchains are typically associated with cryptocurrencies, while private blockchains are used for business applications. Blockchain has applications beyond cryptocurrencies. It is used in supply chain management, healthcare, finance, voting systems, identity verification, and more. The ability to create transparent, tamper-resistant, and secure records has made blockchain technology appealing in various domains. As we can now tell, it is a revolutionary technology that provides a decentralized and secure way to record and verify transactions and offers innovative solutions to longstanding challenges in different industries.

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