The purpose of this article is to provide the reader with a very simple explanation of blockchain technology, to make it easier for them to understand the characteristics and applications of this technology.
We can effectively call the 21st century the era of technology, since more and more members of society are embracing new technologies openly, resulting in a growing demand for modernized lifestyles.
As a result of the technological advancements in our daily lives, we are now able to communicate easily with devices and control them through our voices. This allows us to do everything we need in our daily lives with greater ease.
Among the most important technological advances of the past decade has been the development of blockchain technology. Blockchain is a technology that works in tandem with other technologies, including augmented reality and the internet of things, to enhance the user’s experience.
Even though blockchain technology is an innovative technology, it can have a significant impact on how different industries operate as well as make any industry more efficient and competitive. The bitcoin cryptocurrency was the first modern application of blockchain technology to be released into the world.
Bitcoin is not a currency nor a cryptocurrency, but rather a technology that facilitates the transfer of value between parties, and it has nothing to do with the blockchain technology that supports it.
Many people around the world believe that Bitcoin and blockchain are identical, but this is not true. Cryptocurrencies are merely one application of blockchain technology. Blockchain technology can surpass Bitcoin and cryptocurrencies in several areas.
What is blockchain in simple words?
The blockchain network is composed of a collection of computers that keep track of transactions involving bitcoins and other cryptocurrencies.
Although blockchain can be viewed in many ways, a simple explanation is that it keeps track of financial transactions, including ensuring security, transparency, as well as decentralization, as well as storing records in blocks without requiring centralized control.
Blockchains provide a method for storing information that can be easily accessed by anyone with access to the network. Once a piece of information has been stored in a blockchain, it is very difficult to change or modify it.
Blockchain maintains a record of each transaction using encryption and digital signatures and ensures the security of data by proof of authenticity using cryptography.
Blockchain technology relies on a mechanism known as consensus to create agreement on a variety of topics. Data stored within the blockchain is digitally recorded, and members of the network can see the shared history of that data.
In eliminating the need for an intermediary or third party, fraudulent activities or duplication of transactions are eliminated, since a third party is no longer required.
If you would like to gain a better understanding of blockchain technology, you may find this example helpful. Imagine that you want to transfer funds to a friend in another country or area.
Several methods can be used to process the transaction, such as through a bank or by using one of the more popular payment applications, such as PayPal or Paytm. In this case, a third party will process the transaction for you and may charge you an additional fee.
The likelihood of a hacker disrupting the bank’s network, or a payment processor, and stealing your hard-earned money is very minimal, so one should not be overly confident about this method’s security.
It is therefore detrimental to the interests of both the user and the customer to charge fees while providing less than 100% security, and banks are not losing any money during this period. Blockchain has the potential to revolutionize how organizations operate, and it does so by addressing both of these concerns.
Blockchain technology makes transferring money much more convenient and secure since it streamlines the process and increases security.
Due to the facBecausechnology does not require a third party for the processing of a transaction, you are the only entity involved in the transaction. This eliminates the need for additional fees in the form of transaction fees.
Also, as a blockchain database is decentralized, it can be located anywhere, which means that it can store anything and everything in it, regardless of where it is located.
Since information is stored on multiple servers and is not stored all at one time, hackers and attackers cannot manipulate or destroy it.
How does blockchain work?
As the name implies, a blockchain is simply a chain of blocks that contain data and information. Although it may have existed even before Bitcoin was developed, it was not until 2009, that Satoshi Nakamoto created the bitcoin network and cryptocurrency to put it into practice.
It is believed that Satoshi Nakamoto created the blockchain technology as the basis for Bitcoin, but how did this technology function?
It is believed that the blockchain itself contains a hash of the previous block, but what exactly is a hash? I will describe what a hash is in the simplest manner possible.
There are many types of hashes, but a hash is based on the information contained within a block, so it will be altered if any changes are made to the information. Furthermore, the hash keys used to connect blocks maintain the anonymity of the Blockchain.
It is the responsibility of nodes that validate Bitcoin transactions that make this process possible. These nodes are known as miners in the Bitcoin blockchain network, and their responsibilities include processing transactions on the blockchain network.
Mining a blockchain is the process of processing and validating transactions through a process known as proof-of-work, where every single block must contain the hash of the previous block, and once the hash has been validated, the transaction can be completed.
If a hacker alters the hash attached to each block, he can identify an opening in the network because the modified hash does not match the original hash. This method of hash modification ensures the immutability of the blockchain since any change is evident across the entire network.
You can get a brief overview of how blockchain technology can facilitate transactions by following these steps:
- To begin with, a blockchain network makes use of public and private keys to create digital keys in a highly secure and reliable manner.
- Now that the authentication process has been completed and the keys referred to above have been successfully used to achieve authorization, the authorization process can begin.
- Blockchain technology allows network members to carry out a mathematical validation process based on their contributions and reach a consensus based on these contributions through a mathematically based validation process
- The sender then transmits the information about the transaction over the network using his private key. Next, a data block is created that contains the information of the transaction, such as the digital signature, the timestamp, and the public key of the receiver.
- A copy of this block, as well as its specifications, is transmitted over the network and the verification process begins with the block transmitted over the network
- For this transaction to be processed, network miners must solve its mathematical puzzle. Each miner is responsible for providing a portion of their computational power to this network.
- Those miners who successfully solve the previous puzzle will receive a reward in the form of bitcoins for completing the transaction. These mathematical problems are commonly referred to as proof-of-work problems in blockchain literature.
- When a majority of nodes reach an agreement on a common solution on the blockchain, it is known as a time stamp and it is attached to any block that contains data or messages.
- As soon as a new block is added to the chain, all the nodes in the network are informed of the updated copies of the blockchain.
Several unique features have made blockchain a hot topic among technology activists, including:
Even though blockchain technology is diverse, all of them are decentralized in nature, meaning that they are not controlled by a single entity.
A distributed ledger is accessible by everyone, but it cannot be altered by the users. This gives the blockchain the ability to be secure and transparent, while still providing its users with the flexibility to customize anything about it.
The peer-to-peer nature of blockchain eliminates the need for intermediaries to facilitate peer-to-peer interactions and communication between network members. The Protocol P2P also allows blockchain to exploit peer-to-peer interaction.
By the protocol, members can share duplicate copies of transactions and validate them using consensus mechanisms to ensure their accuracy.
So in this way, you can complete transactions within seconds without paying exorbitant fees to middlemen or encountering interruptions in your work that you find inconvenient.
Immutability can be better understood using the example of sending an email. This feature refers to the fact that any data added to a blockchain cannot be modified after it has been created.
When you send an email, you cannot retrieve it once it has been sent. You must ask the person receiving that email to delete it from their inbox. Blockchain immutability also functions the same way as email immutability.
Since blockchain is a decentralized system, you are unable to modify data once it has been processed. If you wish to alter data within a block, you must alter the entire blockchain, because every block contains the hash of the previous block. Therefore, changing one hash will affect the hashes of all the previous blocks.
A blockchain is also a very complex system that requires a great deal of computing power to be updated; therefore, they are invulnerable to unwanted change or cyber-attacks because of its immutability.
As blockchains are immutable, any manipulations can be detected, so even a small change in any block can be viewed in real-time. Blockchains are highly protected against possible tampering as they can detect changes at every level.
According to the previous paragraph, each hash function is assigned to a unique block. It acts as a fingerprint for the block, and changes in its data will alter its hash function.
To change anything, an attacker must change the hashes after the selected block, since each block is linked to the next. This is a very difficult task since each block contains its hash.
Types of blockchain
In the years following the introduction of blockchain technology, different types of blockchains have been developed; however, all blockchains are classified as either public blockchains or private blockchains.
To understand the differences between the two forms of the blockchain, it would be helpful to begin by discussing some of the similarities.
Both public and private blockchains are built on the concept of peer-to-peer networks that are dispersed.
In addition to central computers distributing the blockchains, all participants have access to the ledgers.
For these two types of blockchains, copies of the ledger are stored on both networks. The ledger is updated in response to global consensus between the stakeholders.
Generally, blockchain networks with their ledgers are considered safe if they can be accessed and mutated by the members, preventing malicious actors from attacking them
Due to the similarities between these two types of blockchains, it is important to inspect each of them closely, as well as their differences.
Anyone with an internet connection can access and view public blockchains. ‘Public blockchains’, as their name suggests, are permissionless ledgers that anyone can view.
Everyone will have access to a comprehensive historical record of every transaction recorded on this blockchain in addition to detailed information about each transaction.
Blockchains are typically rewarded for processing transactions and maintaining immutability by their members. Bitcoin is one example of such a blockchain.
With a public blockchain, you can exchange information in an open-access, transparent, and openly auditable way, while they have several weaknesses as well.
On the one hand, they allow users around the world to share information, but on the other hand, they may threaten their very existence if the rules governing them are not strictly applied.
Private blockchains are different from those that are public in the sense that they are shared among a small group of users and stakeholders, but they can only be controlled by the owners of the blockchain.
Furthermore, blockchain rules can also be established according to criteria such as the number of members, the access level, permissions to access, etc., which can be specified by the blockchain developer.
A private blockchain is commonly used by companies and organizations, which means that the level of trust required between private blockchain participants is much higher than among public blockchain participants since private blockchains can be configured independently or integrated with other blockchains.
Popular applications of blockchain technology
While blockchain technology has dominated much of the attention when it comes to digital currencies like Bitcoin, it is not the only way in which this technology can be utilized.
A great deal of attention has been placed on the unique characteristics of blockchain technology by business leaders, industries, and value creators across the globe, all of whom are striving to utilize this technology to create breakthroughs in their fields that will add tremendous value.
Applications of Blockchain
While blockchain technologies were originally designed to store transaction data and assign network resource management to users, they are now finding use in a variety of other sectors as well.
Blockchain is a magic stick that can transform any industry based on its ability to be applied on a practical scale. Here, the power of blockchain will be further examined to find out how this technology can solve the problems of various industries on the ground.
Smart contracts in blockchain in simple words
Communication is key to the success of business processes. Businesses must communicate with one another to exchange goods and services. To this communication, formal contracts are signed by businesses before they begin working together.
It is important to understand that commercial contracts are generally simply a series of words on a page, which are easy to falsify. They are also prone to errors, which can compromise trust between the parties and increase the risks of joint business ventures in the future. Blockchain technology, with its smart contracts, offers a great way of eliminating this problem.
A smart contract automatically complies with certain conditions when certain criteria in its provisions are met, and the contract may be modified during the execution phase. Smart contracts are similar to their paper counterparts, with the main differences being their digital nature and the fact that they are self-executing.
Throughout Ethereum’s ecosystem, smart contracts have been developed, which are now freely available to everyone worldwide. Smart contracts have unique capabilities that can be applied to a wide range of industries, including finance, health insurance, registration documents, crowdfunding, and many more.
For example, in the healthcare sector, smart contracts can be used to manage the supply of medicines.
It is possible to manage the supply chain for medicines using smart contracts, for instance, within the healthcare industry.
Smart contracts can be used to manage the delivery of medications from pharmaceutical companies to pharmacies, as well as all information related to the medications, such as their names and amounts, from the outset of the supply chain to the end.
Since the smart contract is unique in its ability to encrypt data as well as ensure the authenticity of the drugs, it is only possible to implement it under certain conditions which allow no one to alter the data within. Therefore, the smart contract reflects all information regarding changes to the supply chain.
Despite the nuDespiteures taken to ensure election security, it is still possible for malicious elements to manipulate and manipulate election results. Abuse of manual processing, as well as party trust, still plays a significant role in the security of successful elections around the world.
Even though security flaws and possible frauds are eliminated, manual errors are still most likely to occur. In these cases, it would be more beneficial to automate the voting process through the use of smart contracts that eliminate human error
The use of smart contracts has enabled fraud to be reduced considerably, as well as maintaining the confidentiality of voters and ensuring that fair elections are conducted. They have significantly increased public transparency and security as well as ensured voter privacy.
Imagine, for instance, how convenient it is to make easy financial transactions today through your payment app by logging into your account, you can easily enter your identity information and password, and you will be able to carry out your transaction easily.
Although this system offers many benefits, there is a drawback, namely that anyone with a username and password can access their account to withdraw funds, regardless of their identity. This means a cyber attacker could steal your entire property to the tune of a considerable amount, leaving you with no reason to maintain it.
In today’s world, it is imperative that we may manage a person’s identity and identification information electronically. Blockchain technology is one such technology that can be utilized to help identify users’ identities and digitize their documents.
With Blockchain technology, users can create their own unique identities, allowing them to carry out online transactions securely. In addition to this, end-to-end authentication can facilitate the connection between public and private institutions.
Protection of intellectual property rights in blockchain
As digital content can easily be reproduced and distributed over the Internet, there is no geographical limit to the amount of valuable content that can be downloaded, reproduced, or republished for free by virtually anyone in any country.
To protect the rights of digital content owners, copyright laws are adopted, however, they are unlikely to be strictly enforced under the current legal framework. Furthermore, laws that are valid in the United States may not be valid elsewhere in the world.
Therefore, despite intellectual property laws, the owners of artworks and content creators can easily lose control of their data and suffer heavy losses. With the help of blockchain technology, all the intellectual property rights of work can be defined in the form of a smart contract, and in this way, in addition to benefiting from the automation capability, the online method of work can be improved and the risk of its republishing reduced.
Blockchain technology provides content creators and owners with the ability to place their imprint on their works by registering their intellectual property online, ensuring their immutability.
As a result of blockchain’s immutability, no entry can be modified or changed without the agreement of its members, meaning that the work’s owner has the absolute right to reproduce or republish it in any way, including for a commercial market.
Blockchain technology has many hidden potentials beyond those described above. While many industries have already adopted and are utilizing the technology, others are still considering how to make the most efficient use of it.
There is no doubt that blockchain is one of the most cutting-edge technologies in the world of technology, but it has a bright future. Although it is still in its early stages of development, its initial applications, such as digital currencies, make it very appealing to many people.
Every day, new applications of this technology are being discovered and tested. When this technology is adopted and applied globally, it will have a profound impact on business, education, and society as a whole.