Learn the Blockchain Technology Facts, What and how it works. In this article, you will also find pros and cons of blockchain technology.

What Is Blockchain Technology?

Blockchain is a chain of different computers located in different locations or regions, these computers called Nodes. The responsibilities of these systems is to maintain a secure and decentralized record of each transactions and its verification, but they are not limited to just cryptocurrency use. Blockchains can be used in any industry, basically, this term shows the ability of makings things unable to altered for security purposes; no one can change a block. With the help of that, we dont need any other trusted third parties to control or handle, as most humans can make mistakes, but this Blockchain system is errorless.

Bitcoin is the main factor which promoted Blockchain Technology more than any other factor since 2009 when bitcoin was introduced. After the success of Bitcoin too many new crypto projects released few of them are categorized as decentralized finance (DeFi) applications, non-fungible tokens (NFTs) and smart Contracts.

Blockchain Technology Facts

Blockchain’s security is based on its decentralized and immutable ledger, making it resistant to tampering and fraud. The cryptographic techniques used in Blockchain ensure the integrity and privacy of data. Additionally, consensus mechanisms like Proof-of-Work and Proof-of-Stake add layers of security to the network.08-Feb-2024.

As Blockchain’s Security is using decentralized and unchangeable Ledger, its impossible to temper or change data that reduce the risk of frauds and Scams.

How Does a Blockchain Work?

A traditional database, like spreadsheets or databases, stores and enters information. However, the key difference between a traditional database and a blockchain is the structure and access to the stored data.

A blockchain is a distributed system where multiple copies of transaction information are stored on multiple machines. The information is collected and entered into a block, similar to a spreadsheet cell. The block is then encrypted using an encryption algorithm, creating a hash. The hash is then entered into the next block header and encrypted with the other information, creating a chained series of blocks. This ensures the validity of the transaction.

Transaction Process

The blockchain process involves transactions, which are initiated using a cryptocurrency wallet. In Bitcoin, transactions are sent to a memory pool, where they are stored and queued until a miner or validator picks them up. Once entered into a block, the block fills with transactions, and it is closed and encrypted using an encryption algorithm before mining begins.

The network works simultaneously to generate a randomly-generated hash, with each miner starting with a nonce of zero. If the nonce is less than the target hash, a value of one is added, generating a new block hash. This process continues until a miner generates a valid hash, winning the race and receiving the reward.

Blockchain Decentralization

A blockchain network allows data to be distributed among multiple network nodes, ensuring redundancy and maintaining data fidelity. This prevents alterations to a record at one instance, preventing any single node from altering the information. The distributed information and history, like transactions in cryptocurrency, are irreversible due to encrypted proof of work. A record can be a list of transactions or a variety of other information, such as legal contracts, state identifications, or a company’s inventory.

Blockchain Transparency

Transactions on the Bitcoin blockchain are transparently viewed through personal nodes or blockchain explorers, allowing for easy tracking of Bitcoin’s movement. Each node has its own copy of the chain, updated with new blocks. This decentralized nature allows for easy traceability of Bitcoin’s movements. However, exchanges have been hacked, resulting in large amounts of cryptocurrency loss. Hackers, despite being anonymous, can easily trace Bitcoin’s extracted crypto due to wallet addresses published on the blockchain. Blockchain records are encrypted, ensuring anonymity and transparency for users. This allows for easy tracking of Bitcoin’s movements.

Is Blockchain Secure?

Blockchain technology enhances decentralized security and trust by storing new blocks linearly and chronologically at the “end” of the blockchain. The hash of each block is unique, and any data change alters the previous block’s hash. This ensures that the network rejects altered blocks as they do not match, ensuring a secure and trustworthy system.

A hacker can alter a blockchain network to steal cryptocurrency from others, requiring control over a majority of the network to insert their copy at the right moment. This 51% attack requires controlling more than 50% of the network to successfully execute. Timing is crucial in this attack, as the network is likely to have moved past the blocks they are trying to alter due to the fast hash rate of the blockchain network. The Bitcoin network hashed at 348.1 exahashes per second (18 zeros) on April 21, 2023.

Bitcoin vs. Blockchain

Blockchain technology, first introduced in 1991 by Stuart Haber and W. Scott Stornetta, aims to prevent tampering with document timestamps. Bitcoin, launched in 2009, was the first real-world application of blockchain technology. Satoshi Nakamoto, the pseudonymous creator of Bitcoin, described it as a peer-to-peer electronic cash system without a trusted third party. Bitcoin uses blockchain to transparently record transactions between parties, ensuring a secure and trustworthy digital currency.

How Are Blockchains Used?

Blockchain technology has become a popular method for storing transactional data, with companies like IBM, AIG, Pfizer, and Siemens experimenting with its use. IBM’s Food Trust blockchain aims to trace the journey of food products to their locations, a crucial aspect in the food industry. This technology has been used to identify the source of outbreaks of E. coli, salmonella, and listeria, as well as hazardous materials that may have accidentally been introduced to food. By tracking a food product’s route from its origin to delivery, brands can identify potential problems earlier, potentially saving lives. This is just one example of blockchain implementation, with many other forms of blockchain implementations available.

Banking and Finance

Blockchain integration is revolutionizing business operations, particularly in banking. Traditionally, financial institutions operate during business hours, which can be extended to Monday morning, causing transactions to take up to three days to verify. However, blockchain technology can expedite transactions, allowing them to be processed in minutes or seconds, regardless of holidays or time. This not only improves efficiency but also allows for faster and more secure fund exchange between institutions. Moreover, blockchain can significantly reduce the settlement and clearing process for stock traders, which can take up to three days or longer if trading internationally. In essence, blockchain can significantly improve the efficiency and security of business operations, reducing the time and costs associated with transactions.