The buzz around the new technology, Blockchain has instilled a sophistication among the masses. But in reality, it is much similar to familiar concepts. Blockchain is simply an immutable distributed digital ledger originally developed to keep track of the transactions of Bitcoin.
Sketching the Structure
The decentralized network is a mesh of volunteers providing the computation power in exchange for specific tokens. Nodes are the volunteers (devices) connected to the network, and the Blocks mirror the pages of a ledger where the transactions are recorded. Every set of transactions are verified before it is stored in the block; and once the block is connected to the chain of blocks, the data stored is irrevocable. The block generated is duplicated and stored in almost every node, thus creating a reliable and immutable database.
The Complete Picture
Suppose, Alice wants to send N number of tokens to Bob, Alice would type in Bob’s credentials to transfer the fund, and that is pretty much about the visible layer.
The transaction data will be encrypted with cryptographic keys and then the request will enter the transaction pool where all such transaction requests are dropped for verification. A certain group of nodes pick up the transaction requests up to a specific number and verify the authenticity of the transactions.
Once the authenticity is verified and approved, then the nodes fight to add their block into the Blockchain. Since every node extracts transaction data from the transaction pool individually, the data in the nodes can be completely different. The algorithm generates a random value and creates its hash. Whichever node identifies the value or finds a value less than the hash generated by the algorithm, gets the right to add its block to the Blockchain. But, only after more than half of the nodes nod for the proof of work.
Mining is the process of adding transactions to the Blockchain. Nodes attempt to add their generated block of transactions into the blockchain, and so they fight it out with their computational power to add the block. The node whose block gets accepted in the end is paid with a commission as an incentive. As the network’s computational power is increased, the algorithm increases the complexity of the hash to maintain a balance for the blocks generated.
So What is the Difference?
Since there is no central authority and is taken care of by the predefined codes, there can be no scams and fraudulent schemes to steal away your funds. And since every transaction is executed only after the verification of other nodes, the possibility of data manipulation is greatly reduced. Even if the alleged hackers managed to tamper the transaction data, s/he must manipulate the data in all the nodes to secure a transaction which is almost impossible.
It is true that Bitcoin is the pioneer of Blockchain, but it is not a synonym. It is a good thing that people have started to widen their perception and are exploring the industries which would benefit greatly from Blockchain implementation. For example, manufacturing could be revolutionized with Blockchain. The consumers are often blank about the information on the raw materials used to build the product. Introduction of Blockchain would mean, the data right from the procurement of raw material to the assembly to produce final product is available with just a scan.
Blockchain can solve a lot of today’s problems in information and security. Although it is a decade old, we are taking a cautious approach towards it, which is, of course, a right thing to do for its stupendous upheaval in the financial sector. All there is to do is to keep probing Blockchain for the global community to arrive at the ultimate regulations for open usage of the technology.