Everything you need to know about Blockchain

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Blockchain is one of the most important technologies in today’s world. It has numerous implementations, out of which, the most famous one is cryptocurrency. In this article of Terminal Stack, we will explain you everything you need to know about Blockchain and how blockchain works.

WHAT IS A BLOCKCHAIN?

Blockchain is a specific type of database. A database is a set of information grouped together and held in the computer. In a blockchain there are many blocks of data linked with the previous blocks. 

Blockchain essentially consists of a digital ledger . The ledger is basically a record history information storing portal. These digital ledgers contain information about the transactions, and the information  is shared with each and every node of the blockchain.

A block in the blockchain contain :

  1. Data: if we take the example of cryptocurrency transactions. The data would consist of the transaction details, the sender’s name and the receiver’s name.
  2. Hash: There is an algorithm which converts the data to make a code of letters and numbers. This code is known as the hash code of the block. This means if we try to alter the information in the block the hash code of the block will also be changed accordingly.
  3. Previous hash: The block also stores the hash of the precious block. This helps in tracking history. The first block which  does not contain this previous hash code is known as genesis block.

Let us understand how a transaction in a blockchain is executed

The transaction is first requested and authenticated: Each user has its own public and private key.The request of the sender can only be decrypted by the receiver’s private key and the information of the transaction is transferred to the ledger using receiver’s public key.

Now a block is created with transaction details and a Hash code is generated.

After this the block is now sent to the nodes of the network which authorizes the block so that it could join the blockchain. A majority of nodes is required for the approval of the block, this process is called as consensus. Now the update is distributed all over the network and the transaction is completed.

Blockchain is considered to be very trustable technology, here is why:

The main objective of introducing the blockchain mechanism was to decentralize the authority and make the information accessible to everyone. Each user has a copy of the ledger. Each and every transaction is verified with consensus which makes it reliable.

Also changing the data in a block changes its hash code, so as the code is copied to the next block; the code of the next block also changes.This leads to corruption of all the further blocks and if anyone goes to change the code of each and every block it will take a lot amount of time thus makes it practically impossible, this feature makes blockchain mechanism more authentic.

Though it looks secure, it’s risky!!

Blockchains have the consensus rule for decision making. If we talk about cryptocurrency here, if a malicious group of miners come together to form an alliance which has more than 50% of the computing power they can make decisions of their own will. They can give themselves a whole amount of cryptocurrency if they want. This kind of attack is known as 51% attack.

FACT: A 51% double spend attack was successfully executed on the Bitcoin Gold and Ethereum Classic blockchains in 2018, where fraudsters misappropriated millions of dollars of value.

Different types of blockchains,

  1. Public blockchains: In these chains anybody can perform the transaction; also anyone can become a validator and take part in consensus.
  2. Private blockchains: In these no one can join without the administrators permission and being a participant or a validator is restricted.
  3. Hybrid blockchains: These are very complex mechanisms which have both centralized and decentralized features. There functioning differ with the proportions of centralization and decentralization used.

Also read: https://terminalstack.com/how-does-the-internet-work-explained/

If you liked this post, please do share it with your friends. Also, please do comment and let us know what do you feel about blockchain.

Thank you for reading!

References:

https://www.euromoney.com/learning/blockchain-explained/

https://en.wikipedia.org/wiki/Blockchain#Types

This Post Has 2 Comments

  1. Aradhya Gosavi

    Best article until now. It’s short and sweet. Accurately to the point. Especially the language used is understandable and and perfect for the audience.
    Point wise explanation is what required in an article to be interesting.
    Good one ✌️

    1. Arpit Pandey

      Thank you Aradhya! We are glad you loved it! 😀

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