If you are giving your time to read this article then certainly you must be among those people who are going crazy listening to the world talking endlessly about a few terms like blockchain, cryptocurrency, bitcoin etc ? and you finally decided to decode these technical words.
Let me tell you, that you are investing your time in the best article that can clear all your doubts. So beginning with the first question.
What is blockchain?
Explaining it by focusing on literal terms, it is a chain of various blocks that contain information. The concept of blockchain came in 1991 but it became popular after the launching of Bitcoin by Satoshi Nakamoto in 2009. Each block of blockchain has three parts :
1. DATA STORING PART
All the necessary information is included for example in the case of bitcoin details of the sender, receiver, no of bitcoins sent or received is stored
It is a unique code, resembling in function to human fingerprints which is specific. So if any information is modified in the block the hash of that block is changed.
3. HASH OF PREVIOUS BLOCK
Due to this, the formation of a chain of blocks takes place. If the hash of any block is changed, the chain will be disrupted.
How does blockchain work?
Step 1 – Information is stored in a block. For example, A owns 5 Bitcoins and he wants to give 2 bitcoin to B, so details of A and B and no. Bitcoins will serve as information.
Step 2 – Block is made public, such that all the users can verify. As A has 5 Bitcoins, so he is eligible to make a payment of 2 Bitcoins.
Step 3 – Users will verify and accept or reject the block according to the situation.
Step 4 – If approved it will be added to the blockchain of the users of the entire community.
Why is blockchain considered a safe way of transaction?
This is because it is protected by cryptography, also the recorded data can’t be easily changed.
Let’s understand why?
Peer to peer network
This means the ledger (chain of blocks) is shared between the users. Every user gets a full copy of the blockchain. Any new block is added into everyone’s chain after verification, in case of any discrepancy block is rejected.
Proof of Work
The process of solving complex mathematical problems is called proof of work. It slows down the creation of the network hence reduces the chances of tempering. For example, if any hacker changed information in one block then definitely he has to change the hash of succeeding blocks which will take hundreds of years due to proof of work.
Now the question arises various firms want to adopt blockchain in their system but they want to keep their information confidential. This takes us to the topic of our article.
Types of Blockchain
- As the name indicates this is open for all. (Publicly accessible)
- Ownership is fully distributed.
- No restriction on participants.
- Everyone controls operations hence there is the immutability of records.
- More secure.
- This is blockchain is specific to firms and organisations.
- Operations are centralized.
- Can be manipulated as governed by a network administrator.
- Invitations are sent for joining this blockchain network.
- This is intermediate between a public and a private blockchain.
- This blockchain network has a group of known people or trusted organizations.
- This has two types of users:
- Those who can control the blockchain.
- Those who can just access information according to their function.
So this was all about the basic framework of blockchain. Hope your doubts are cleared and you are all ready to take the next step of the Crypto journey!