The blockchain is an ever-expanding network proving an alternative to traditional money, centralized banking, and transaction methods. It is changing the old conventional methods of financial transactions and constantly transforming the world.
Blockchain, also known as Distributed Ledger Technology(DLT), is simply defined as a decentralized network of recording information such as digital assets in a way that makes it almost impossible to change, hack or cheat the system. It allows rapid, secure, and clear peer-to-peer transactions.
How Blockchain Works?
Blockchain is a system of three fundamental concepts. It includes:
Every blockchain comprises of multiple blocks. They are records(files) that stores data permanently related to the network. Each block has three basic constituents:
- Data: Any data or information regarding the transaction.
- Nonce: It is a 32-bit whole number that is randomly generated when the block is formed.
- Hash: 256-but number attached to the nonce. Hash code is generated by a math function that takes digital data and develops a chain or more like a string of letters and numbers from it. It must contain two zeros digits.
When the initial block is created on the chain, a nonce produces a cryptographic hash. The information/data in the block is marked and perpetually attacked to the nonce and mince unless it is mined.
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Mining is done by miners who create new blocks on the chain by solving a proof of work problems. Mining isn’t as simple as it seems. It might quite be challenging to alter or change the block as each block has its own distinct nonce and hash but also the hash of the previous block in the chain is referenced to it. Miners utilize special programming software to tackle complex mathematical algorithm to uncover a nonce that generates an acceptable hash.
If a miner produces a block by generating a “golden nonce” that is accepted by an electronic consensus of nodes then the miner is financially rewarded. It is extremely difficult to change it or manipulate the blockchain network. Making a change in a block requires a whole lot of computing power and time.
Nodes are basically an infrastructure of blockchain technology. Suppose a block is a spreadsheet on Excel, then nodes are any electronic devices or servers such as computers or laptops that store these spreadsheets. Technically, all nodes on a blockchain are linked to each other as there is a continuous change of data between them. In this way, all nodes have updated and latest data regarding the transaction. Each node contains its own copy of the Blockchain and constantly checks the validity of each transaction. If a large number of nodes approves that a transaction is legal, then it is inscribed into a block. Each activity in the ledger can be easily viewed and checked on a blockchain. Each member has been allotted their own unique identification number that shows their activity and tracks their transactions.
Blockchain has endless applications and uses in almost every industry. Some of them are:
- Blockchain technology can be applied to track fraud and ensure data privacy and security in the financial industry.
- It can share the patient’s medical records between healthcare professionals in a secure manner.
- It can help trace intellectual property in the business.
- It offers the fastest, most flexible, and most decentralized method of digital voting.