For the Beginners: What Is Blockchain Technology? Step-by-Step Tour through Technology
The popularity of blockchain technology has skyrocketed in recent years. The benefit of knowing blockchain has increased as more governments and businesses use the technology.
If you keep up with tech news, you’ve probably heard a lot about blockchain technology. But, if this is your first time hearing the term, do you know what Blockchain technology is? What is the mechanism behind it? How can I learn more about this innovative technology?
To be a part of the next generation you need to learn about blockchain technology and how our economy will change shortly. So, with a basic explanation of the notion, we’re here to assist you in comprehending these technical phrases.
What Is Blockchain?
“Blockchain technology is an incorruptible digital ledger of economic transactions that can be configured to record anything of value, not only financial transactions.”
Blockchain technology is based on a distributed ledger of transactions that is shared across computers in a peer-to-peer network. Every computer on the network has access to this shared record and participates in the process using specific software. Transactions are verified by the machines on the network in blocks of data. The network adds the block to the end of a chain of other blocks when a computer verifies the transactions. These blocks form an unbroken chain that stretches back to the system’s earliest transactions.
Remember that it’s a long chain of blocks that are constantly developing, and you can’t change it by traveling back in time. If someone tries to go back in time and change a block, it will change all the blocks since then. We can see if any of the blocks have been changed because there are numerous blockchain peers on a distributed system. As a result, changing or breaking any block in the past will be extremely difficult. That is why blockchain technology is described as immutable or unchangeable.
The Architecture of Blockchain Technology
The following are the key components of the blockchain technology architecture:
Blocks are the building blocks of blockchain technology. The blocks are organized in a linear pattern, with the most recent block linked to the most recent block. Each block contains data, and the structure of that data is dictated by the blockchain technology type and how it manages the data.
Let’s look at the bitcoin blockchain technology as an example. The essential information about a transaction is contained in a block in the bitcoin blockchain, which includes the receiver, the sender, and the amount of bitcoin exchanged.
The Genesis Block is the initial block in any blockchain. The genesis block is the only one without a prior block. This helps to understand the start of the new chain. Then the hash is a key piece of information in a block. The hash is used to determine whether or not a block is authentic and should be added to the current chain. Every block’s hash is unique, therefore it can’t be copied by a rogue block. It’s also a starting point for figuring out what’s in the block. This allows the block to safeguard its contents. As a result, if someone tries to change the information within the block, the hash value will change as well, resulting in a warning that other blocks will not accept. The structure of each block can be broken down into three parts: data, hash, and prior block hash.
When one peer delivers information to another peer, this is referred to as a transaction. It is an essential component of any blockchain, and without it, no transaction would be possible.
A transaction is made up of data such as the sender, receiver, and value. It’s akin to a credit card transaction on a modern platform. The main distinction is that there is no centralized authority involved in this transaction.
A user transmitting bitcoin to another user is a simple example. The transaction triggers a change in the state of an agreed-upon blockchain; because the blockchain technology is a decentralized network, all nodes must keep it up to current. As a result, a blockchain state is generated, with each node containing an exact copy of the ledger. A state change can be triggered by any single transaction.
A block, as we previously discussed, comprises several transactions. The number of transactions that can be stored in a block is limited. It is determined by the block, transaction size, and any imposed limit on the number of transactions that can remain in a block. The transaction is verified by independent nodes using the consensus technique that was chosen. Each transaction can technically have one or more inputs and outputs. The transactions are linked in this way so that blockchain technology can keep track of all expenditures.
Consensus is the final component in blockchain technology architecture. It refers to the process of validating a transaction. A distinct consensus technique can be connected to each blockchain. Proof-of-Work (PoW) is used by bitcoin, whilst Proof-of-Stake is used by Ethereum (PoS). There are several more forms of consensus approaches, which are mentioned below.
A set of rules is provided by consensus algorithms. It must be adhered to by all members of the network. Nodes should also participate to impose a consensus procedure. The consensus approach cannot be implemented without the cooperation of all nodes. This also means that the stronger the network becomes as more nodes join to participate in the consensus procedure.
Bitcoin has a large network and provides a strong incentive for miners. It also features one of the largest mining communities in the world. Any blockchain lesson for beginners will provide more information on blocks.
When it comes to making their point, the miners occasionally follow their allegiance. For example, if a change to the blockchain is required, miners can choose to at least resist the change.
If more than 51% of the miners or nodes participating in the consensus process are controlled by one party, the network can be hijacked. This is known as a 51% attack since it involves one entity controlling more than half of the nodes. They can create phony transactions and allow for double-spending.
How Does It Work?
Step 1: A transaction is requested in the first step. The transaction can be for the transfer of information or a monetary asset.
Step 2: To symbolize the transaction, a block is produced. The transaction, however, has not yet been verified.
Step 3: The transaction-containing block is now sent to the network nodes. It is sent to each node if it is a public blockchain. The data, the previous block hash, and the current block hash are all included in each block.
Step 4: The nodes now begin validating the consensus technique that was employed. Proof-of-Work (PoW) is employed in the instance.
Step 5: Following successful validation, the node is rewarded for their efforts.
Step 6: You’ve completed the transaction.
All of these procedures provide the highest level of network security.
Types of Blockchain Technologies
There are four types of blockchains:
- Public Blockchain
Anyone who wants to request or validate a transaction can use open public blockchains decentralized networks of computers (check for accuracy). Those who validate transactions (miners) get rewarded.
Proof-of-work or proof-of-stake consensus procedures are used in public blockchains (discussed later). The Bitcoin and Ethereum (ETH) blockchains are two popular instances of public blockchains.
- Private Blockchain
Private blockchains aren’t public, and access is restricted. The system administrator must permit everybody who wants to join. They are usually centralized and managed by a single entity. Hyperledger, for example, is permission, private blockchain.
- Hybrid Blockchain
Hybrid blockchains are a combination of public and private blockchains with both centralized and decentralized functionality. Energy Web Foundation, Dragonchain, and R3 are just a few examples.
Just remember that there isn’t universal agreement on whether these concepts are synonymous. Some people distinguish between the two, while others believe they are interchangeable.
A sidechain is a blockchain that runs in the opposite direction of the main chain. It improves scalability and efficiency by allowing users to move digital assets between two separate blockchains. The Liquid Network is an example of a sidechain.
This brings us to the conclusion of our blockchain technology for beginners tutorial. Blockchain is a very unique technology. As a result, more businesses will begin to incorporate blockchain technology into their operations. Blockchains can be set up in a variety of ways, with different mechanisms for securing a consensus on transactions that are only visible to authorized users and hidden from the rest of the world. The most well-known example of how big Blockchain Technology has gotten is Bitcoin. Blockchain’s founders are also experimenting with a variety of different uses to raise the technology’s level of sophistication and influence. Blockchain technology appears to be positioned to control the digital world of the near future, based on its success and rising adoption.
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