What is a blockchain?
A Blockchain is a distributed ledger that is completely open to anyone. In simple terms, a blockchain is a chain of blocks that contains information. Once some data has been recorded in a blockchain, its very difficult to change it.
All Blockchains are linked to each other. Every Block has a summary of the previous block. The first block in the chain is called as the ‘Genesis Block.’ Bitcoin is the first-time, real-life implementation of Blockchain Technology.
Three types of blockchain
• Public blockchain.
A public, or permission-less, blockchain network is one where anyone can participate without restrictions. Most types of cryptocurrencies run on a public blockchain that is governed by rules or consensus algorithms.
• Permissioned or private blockchain.
A private, or permissioned, blockchain allows organizations to set controls on who can access blockchain data. Only users who are granted permissions can access specific sets of data. Oracle Blockchain Platform is a permissioned blockchain.
• Federated or consortium blockchain.
A blockchain network where the consensus process (mining process) is closely controlled by a preselected set of nodes or by a preselected number of stakeholders.
How does a Blockchain work?
Blockchain, sometimes referred to as Distributed Ledger Technology (DLT), makes the history of any digital asset unalterable and transparent through the use of decentralization and cryptographic hashing.
Blockchain is a combination of three leading technologies:
• Cryptographic keys
• A peer-to-peer network containing a shared ledger
• A means of computing, to store the transactions and records of the network
Cryptography keys consist of two keys – Private key and Public key. These keys help in performing successful transactions between two parties. Each individual has these two keys, which they use to produce a secure digital identity reference. This secured identity is the most important aspect of Blockchain technology. In the world of cryptocurrency, this identity is referred to as ‘digital signature’ and is used for authorizing and controlling transactions.
Every chain consists of multiple blocks and each block has three basic elements:
1. The data in the block
2.Hash (a 256-bit number only used once called as ‘nonce’)
3.Hash of previous Block.
The data stored in a block depends on the type of Blockchain.
Example: A Bitcoin Blockchain stores the following details:
3.Amount of coins
What is a Hash?
Hashing refers to the transformation and generation of input data of any length into a string of a fixed size, which is performed by a specific algorithm. In particular, the Bitcoin hash algorithm is SHA-256 or Secure Hashing Algorithm 256 bits. This algorithm is a one-way cryptographic function as the original data can be retrieved via decryption.
Advantages & Disadvantages of Blockchain
One major advantage of blockchains is the level of security it can provide, and this also means that blockchains can protect and secure sensitive data from online transactions. For anyone looking for speedy and convenient transactions, blockchain technology offers this as well. In fact, it only takes a few minutes, whereas other transaction methods can take several days to complete. There is also no third-party interference from financial institutions or government organizations, which many users look at as an advantage.
Blockchain and cryptography involves the use of public and private keys, and reportedly, there have been problems with private keys. If a user loses their private key, they face numerous challenges, making this one disadvantage of blockchains. Another disadvantage is the scalability restrictions, as the number of transactions per node is limited. Because of this, it can take several hours to finish multiple transactions and other tasks. It can also be difficult to change or add information after it is recorded, which is another significant disadvantage of blockchain.
• A blockchain is a database that stores encrypted blocks of data then chains them together in a way that it stores information; blockchains store data in blocks that are then linked together via cryptography.
• As new data comes in, it is entered into a fresh block. Once the block is filled with data, it is chained onto the previous block, which makes the data chained together in chronological order.
• Different types of information can be stored on a blockchain, but the most common use so far has been as a ledger for transactions.
• In Bitcoin’s case, blockchain is used in a decentralized way so that no single person or group has control—rather, all users collectively retain control.
• Decentralized blockchains are immutable, which means that the data entered is irreversible. For Bitcoin, this means that transactions are permanently recorded and viewable to anyone.