If you are involved in investing, banking, or cryptocurrency over the last decade, blockchain is a term you would be aware of. This is basically the record-keeping tech which is the basis of the Bitcoin network. However, most times the general definition of blockchain is wholly perplexing. The official explanation of a blockchain is “a distributed, decentralized, public ledger”. Doesn’t explain much right?
Therefore, we are going into the details of this process and how it works in the virtual world. And we intend to make it comprehensive enough for everyone.
What is Blockchain?
Basically, a blockchain can literally be seen as a chain of blocks. But not in the traditional context of the words. Here we definitely are talking about a block and chain. However, the block here refers to digital information. While the chain depicts the public database, it is stored in. The blocks are created out of digital segments of information. Specifically, there are three parts to that information:
- Blocks store data about transactions. Such as the time, date, and amount of cash paid for a recent purchase.
- They also have information about the participants involved in a transaction. A block for purchase would record the name of the brand as well as the customer. However, instead of an actual name, it is recorded without any identifying data. This is done by using a specific digital signature, which is similar to a username.
- Blocks accumulate data that distinguish each one from the other. Just like people have names to set them apart, each block has a code called the hash. That makes it distinguishable from other blocks. Hashes are cryptographic codes that are made out of exclusive algorithms. For instance, a customer is making a purchase from an online store. During the transit, they decide to buy something more. The details of the transaction would look nearly the same in the blocks. Yet each will have a different code that will highlight they aren’t the same.
To make it easier to understand, the examples we have given above encompass a single transaction. In reality, the numbers are slightly different. A single block on a blockchain for Bitcoin can store one MB of information. Depending on the size of transactions, a single block can hold several thousand transactions. Read more
How do Blockchains work?
When a block stores new information, it is included in the blockchain. As the name suggests, the chain consists of a number of blocks strung together. For this to happen, four things are responsible:
- A transaction should occur. A block gathers together thousands of transactions being made in a virtual store. This means that any purchase you make will be packaged in a block along with other user’s transaction data.
- A transaction needs to be verified. After a purchase has been made, the transaction is always verified. That is the job of a network of computers. Once a purchase has been made, the network proceeds to check if the transaction is happening properly. They confirm the purchase’s details, transaction time, dollars paid, and participants.
- The transaction has to be stored within a block. After the transaction has been checked to be accurate, it receives the green light. The customer’s digital signature, dollar amount, and the brand’s digital signature are all saved in a block. The transaction will join thousands of other transactions there.
- The block must be provided with a hash. When all its transactions are verified, the block must receive an identifiable code. It is then added to the rest of the blockchain.
When a block is added to the chain it becomes visible to the public. Even to the customer themselves. You acquire access to all transaction data on Bitcoin. All the information like when, where, and done by whom is on a blockchain.
Pros and Cons of a Blockchain
Although complex, the potential of a blockchain’s record-keeping procedure is limitless. Here are some of the advantages and disadvantages associated with it.
Transactions on a blockchain are solely based upon computer networks. This means that the process is mostly free of direct human involvement. This results in less chance of errors and an accurate information record.
Using blockchains takes away the need for a third-party to verify transactions. This leads to lessening the costs associated with it. For instance, business owners acquire a small fee when they accept credit card payments for banks to process transactions. While Bitcoin does not have any transaction fee whatsoever.
Bitcoin is a perfect example of the inefficiencies that might occur in the blockchain. The “proof of work” system adds a new block in about ten minutes to the blockchain. At this rate, the blockchain network is only able to manage 7 TPS or transactions per second. Although other cryptocurrencies like Ethereum work better than bitcoin, their blockchain processes are still limited.
Confidentiality on the blockchain networks secures the users from getting hacked or trespass of privacy. But this also allows for illegal activity and trading on a blockchain. It can be used to illicit business on the “dark web”. Silk Road, an online marketplace, that was shut down by the FBI a few years ago is a perfect example of it. It allowed users to browse their site without tracking identification. Furthermore, unlawful purchases could be made with the use of bitcoins.
What is the future of blockchain?
Since its advent in 1991, blockchain has gone through its share of public inspection over the last decades. Many practical applications of this technology have been discovered and explored since then. It now stands to make government and business operations more secure, accurate, and efficient. The question “if” companies will catch up on this technology is long past. It is now more a case of “when” will they. For more on this topic, contact our college essay writing service for the best content. We offer the most affordable essay writing service for the benefit of all.