Blockchain Technology: A Peer-To-Peer Non-Banking Network

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Blockchain Technology: A Peer-To-Peer Non-Banking Network

‘Blockchain’ is one of the popular things we hear nowadays. But you may wonder what is it and what are its applications…?



Going by its name ‘Blockchain’, it is a chain of blocks comprising information. In simple terms, Blockchain is the distributive database which contains records called as ‘Block’. It was introduced back in 1991 by a group of researchers to time-stamp the digital documents eventually to keep the information intact. Unfortunately, they couldn’t make the right use of it.

Later in the year 2009, an unknown person named Satoshi Nakamoto, using this technology, developed a digital crypto-currency known as ‘Bitcoin’. Blockchain is a distributive ledger which is open and can be hosted by anyone. One more fact to notify is, the data once enters the Blockchain, it remains unchanged.

-        Working

Consider a block which has a data, a Hash of the block, Hash of the previous block. The type of data in the block will depend on where it will be used. For example, let's consider Bitcoin, in blockchain of Bitcoin, assume these things, data (transactional records), the hash value (A unique identifier which identifies a block and stores all information in it. It’s always unique. When a block is created, its hash value is also calculated. The change in block will change the hash value. Using this hashes we can detect the changes in blocks.), hash value of the previous block. Now we can say that it has formed a chain. This is the technique that makes Blockchain is so secure.

One more concept used in Blockchain is ‘Proof of work’. If we look in the blockchain of Bitcoin, it takes 10 minutes to add a new Blockchain. So, what happens in the Proof of Work Protocol?

Suppose a person A owes $50 to person. So, there should be a deduction of $50 from the account of person A and $50 should be credited in the bank account of person B. This process is Traditional Banking, in which both the person need to trust the bank.

Let's take another example in Bitcoin Blockchain. Suppose there is a ledger which has ‘person A has paid $50 to person B’ written over it. This ledger is public, visible to everyone, and anyone can add a new line in it. Someone who is adding the new line in ledger will have a pair of Public Key and a Private Key with him. With the use of this Public and Private key, Bitcoin ‘Minors’ can solve the algorithms. These keys are a string of numbers that can be of 250 bits. These signatures are for verification, hence no need of Banking because there’s already a block created on Proof of Work. For this they label it as ‘Distributed Trustless Consensus’.

Now if someone wants to validate a hacked block, they will have re-calculate the Proof of Work of each block, which is technically impossible. So, the security of Blockchain comes with the application of concepts like Hash and Proof of Work.



-        A Normal Transaction

A Blockchain is a decentralized and distributed network i.e., it is not owned by any company, a bank or a person. Blockchain uses peer-to-peer network which means every person in the world can have a copy of it. If someone creates a Block, then that block is broadcasted worldwide. The nodes verify the authentication of the Block for its addition and the fake Blocks are invalidated.

If you are willing to create a fake Block, you will need to change the Blockchain copy of each node. Then you have to calculate the Proof of Work of each Block in the chain. Now take the control of 50% of Blockchain network which is again impossible.

Blockchain is not just limited to crypto-currencies, it can be used in various industries by implementing different algorithms, and in millions of devices that can connect to the Internet.

That’s all for today. Have a nice day.

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