What Is Blockchain? How Does It Work?
“Technology is the best when it brings people together.”
If you have been working in the field of investing, banking or cryptocurrency over the past 10 years, then probably you would be familiar with the term “Blockchain”. It is a record-keeping technology working behind the growing Bitcoin network.
What Exactly Is a Blockchain Technology?
In simple, blockchain is defined as a system of recording information, making it difficult or impossible to modify, hack or cheat the system. It is becoming the most popular way to buy, sell and trade crypto.
Blockchain is a typical database that stores data in the form of blocks that are chained together. The newly arriving data is stored in a fresh block. Once the block is filled, it is chained to the previous block. This makes the data to be chained together in chronological order.
It is so shocking to know that in the case of Bitcoins, blockchain is used in a decentralized way so that any single person or a group can’t take control over it. Instead, all the users retain the control collectively.
Since decentralized blockchain is immutable, the data entered is unchangeable. This means that the transactions are recorded permanently and visible to anyone.
This type of decentralized database that is managed by multiple users is known as “Distributed Ledger Technology” (DLT).
How does Blockchain work?
Every transaction that takes place through blockchain technology comprises four steps:
1. A record is made for each transaction
Once a transaction is executed, a record is created that contains certain details of the transaction. It is authenticated using a digital signature of each.
2. Each transaction is checked to assure its validity
A verification process takes place that is completed by computers connected to the network, each of which independently checks to confirm that the trade is permissible. Being a decentralized process, every node involved in the network should agree before the process can be finished.
3. After the verification process, each transaction is added to a block that gets hashed
Each block has a unique code known as “hash value”, which both uniquely identifies it and calls out its position within the blockchain. The hash checks for the integrity of the data to verify that the data hasn’t been modified since it was recorded in the block.
4. Finally, the block is added to the end of the blockchain
Once the blockchain creation and verification process are completed, it results in a successful transaction. When a block is completed, another block follows in about 13 seconds(approximately).
Here is a detailed video that explains about the working process of blockchain technology:
Why Is It So Popular?
Suppose that you need to make an online transaction to transfer money to your friends or family. You will log in to online banking and transfer the required amount to the other person using his/her account number.
Once the transaction is done, the transaction records will be updated by your bank. Such transactions could be tampered quickly. To avoid such third party interventions, blockchain comes into the picture.
Since the transaction records are passed to third parties like bankers or brokers, it increases time and cost. Blockchain can save both time and money by avoiding this long process and providing faster movement of transaction.
Due to the absence of third parties in a blockchain transaction, there will be minimal chances of third party fraudulent activities.
This emerging blockchain technology which was initially outlined in 1991 by Stuart Haber and W. Scott Stornetta, has brought tons of benefits:
- Enhanced security
- Instant traceability
- Fast and efficient
- Full transparency
- Decentralized process
- Reduces costs
- Improved accuracy
Wanna learn more about Blockchain technology? Go ahead and try GUVI’s Blockchain course that helps you to know everything about Blockchain technology.
GUVI | Blockchain course
GUVI’s Blockchain course is designed to understand and master the concepts in Data Distribution, Synchronization, and Integrity with case studies and exciting quizzes.
Click here to know more about GUVI.
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