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We all have heard about ‘Blockchain Technology’ before, in reference to Bitcoin and other Cryptocurrencies. Blockchain technology is the underlying technology behind all the cryptocurrencies. It is the critical element of all cryptocurrencies and without it, digital currencies like Bitcoin, Litecoin, Ethereum wouldn’t exist.
Blockchain technology is one of the most important and advanced technologies in the world. Multiple industries are accepting it to innovate the way they operate.
If you are new to cryptocurrencies and Blockchain, this article will give you a head start as we go further you will have an overview of what bitcoin and blockchain technology are.
What is Blockchain Technology?
Blockchain was invented by Satoshi Nakamoto in 2008. It is the structure of data that represents a financial ledger entry, or a record of a transaction. Each transaction is digitally signed to ensure its authenticity and that no one tampers with it, so the ledger itself and the existing transactions within it are assumed to be of high integrity. This basically means that each individual piece of data has only one owner. A global network of computers working on blockchain technology to jointly manage the database that records Bitcoin transaction.
The oldest form of blockchain technology was the Hash Tree which is also known as the Merkle Tree. The meaning of the tree was actually a series of data.
How Does Blockchain Technology Work?
We need to understand a few terms before, to how exactly it functions.
- Blockchain keeps a record of all data exchanges which is referred to as Ledger.
- Each data exchange is known as transaction and every verified transaction added to the ledger is a block.
Blockchain utilizes a distributed system to verify each transaction. Once signed and verified, the new transaction is added to the blockchain and it can’t be canceled.
To understand this, one needs to understand the concept of keys. With a bunch of cryptographic keys, you get a unique identity. Your keys are a public key and private key which helps you get your digital signature. The public key lets others identify you whereas the private key gives you the power to digitally sign and authorize different actions on behalf of the digital identity when used with your public key.
Here the public key is your wallet address and the private key is what lets you authorize transfers, withdrawals, and other actions with your digital property like cryptocurrencies. This is why it’s so important to keep your private key safe — anyone who has your private key can use it to access any of your digital assets associated with your public key and do what they want with it!
Every time a transaction occurs, that transaction is signed by the person assigning it.
For each transaction, the ledger will have the same data: a digital signature, a public key, a time stamp, and a unique ID. Each transaction is connected to the other, so if you mark back one transaction in the ledger, you may see the transaction done sometime back.
With these public and private keys, one needs to be careful as others can identify your identity seeing your spending habits etc.
Blockchain technology is basically the backbone for a transaction layer for the Internet, basically the foundation of the Internet of Value.
William Mougayar, an author of The Business Blockchain, described Blockchain this way
He took two entities (eg banks) that need to update their own user account balances when there is a request to transfer money from one customer to another. They need to spend a huge amount of time and effort for planning, simultaneity, messaging and checking to ensure that each transaction happens exactly as it should. Typically, the money being transferred is held by the originator until it can be confirmed that it was received by the recipient. With the Blockchain, a single ledger of transaction entries that both parties have access to can simplify, the coordination and validation efforts because there is always a single version of records, not two diverse databases.
The Downside of Blockchain
With every human-invented technology, there are downfalls associated with it.
There are people who believe that blockchain is overhyped and is not that efficient. After a few kinds of researches about Blockchain, there are few topics that come out.
Complexity- Blockchain involves new vocabulary. There is work being done on enhancing the blockchain glossaries.
Network Size- Blockchains are antifragile, that is they grow strong when attacked. For them to behave this way it requires a large number of user networks.
Human Error- The phrase ‘garbage in, garbage out’ holds true in a blockchain system of record, just as with a centralized database. Events need to be recorded evidently in the first place as the data stored in is not trustworthy.
Security Flow- Security flow of blockchain is the flaw that cannot be avoided. For example, when a network of computers working as nodes, provide a wrong informatio n, the wrong will become right. This is called a 51% attack and was highlighted with the launch of Bitcoin.
Above were some of the flaws that are associated with Blockchain
After reading the article it’s pretty clear that authentication and authorization, vital to digital transactions, are established as a result of the configuration of Blockchain technology making it the backbone technology in all aspects.
The Blockchain is going to be used for more than technology and transactions in the future.
Everything will be connected and tokenized by Blockchain one day.Also if you are planning to get into technical field Blockchain Technology would be like an asset to your career. You can achieve excellence in Blockchain Technology by learning it through various Blockchain certification courses available online.
Featured image: Unsplash