A blockchain is a growing list of records, called blocks, that are linked together using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data (generally represented as a Merkle tree). The timestamp proves that the transaction data existed when the block was published in order to get into its hash. As blocks each contain information about the block previous to it, they form a chain, with each additional block reinforcing the ones before it. Therefore, blockchains are resistant to modification of their data because once recorded, the data in any given block cannot be altered retroactively without altering all subsequent blocks.
Blockchain seems complicated, and it definitely can be, but its core concept is really quite simple. A blockchain is a type of database. To be able to understand blockchain, it helps to first understand what a database actually is.
A database is a collection of information that is stored electronically on a computer system. Information, or data, in databases is typically structured in table format to allow for easier searching and filtering for specific information.
One key difference between a typical database and a blockchain is the way the data is structured. A blockchain collects information together in groups, also known as blocks, that hold sets of information. Blocks have certain storage capacities and, when filled, are chained onto the previously filled block, forming a chain of data known as the “blockchain.” All new information that follows that freshly added block is compiled into a newly formed block that will then also be added to the chain once filled.
A database structures its data into tables whereas a blockchain, like its name implies, structures its data into chunks (blocks) that are chained together. This makes it so that all blockchains are databases but not all databases are blockchains. This system also inherently makes an irreversible timeline of data when implemented in a decentralized nature. When a block is filled it is set in stone and becomes a part of this timeline. Each block in the chain is given an exact timestamp when it is added to the chain.
A blockchain can be seen as consisting of several layers:
- Infrastructure (hardware)
- Networking (node discovery, information propagation and verification)
- Consensus (proof of work, proof of stake)
- Data (blocks, transactions)
- Application (smart contracts/decentralized applications, if applicable)
Blockchain technology can be integrated into multiple areas. The primary use of blockchains is as a distributed ledger for cryptocurrencies such as bitcoin; there were also a few other operational products which had matured from proof of concept by late 2016. As of 2016, some businesses have been testing the technology and conducting low-level implementation to gauge blockchain’s effects on organizational efficiency in their back office.
Features of Blockchain:
Blockchain is Decentralized as well as an open ledger. Ledger is the record of the transactions done and because it is visible to everyone, therefore is called an open ledger. No individual or any organisation is in charge of the transactions. Each and every connection in the blockchain network has a same copy of the ledger.
Data stored in blockchain is immutable and cannot be changed easily as explained above. Also, the data is added to the block after it is approved by everyone in the network and thus allowing secure transactions. Those who validate the transactions and add them in block are called miners.
Blockchain provide a peer-to-peer network. This characteristic of blockchain allows the transactions to involve only two parties, the sender and the receiver. Thus, it removes the requirement of ‘third party authorisation’ because everyone in the network is themselves able to authorise the transactions.
There are some exciting blockchain features but among them “Immutability” is undoubtedly one of the key features of blockchain technology. But why is this technology uncorrupted? Let’s start with a connecting blockchain with immutability.
Immutability means something that can’t be changed or altered. This is one of the top blockchain features that help to ensure that the technology will remain as it is a permanent, unalterable network.
User Control: With decentralization, users now have control over their properties. They don’t have to rely on any third party to maintain their assets. All of them can do it simultaneously by themselves.
Less Failure: Everything in the blockchain is fully organized, and as it doesn’t depend on human calculations it’s highly fault-tolerant. So, accidental failures of this system are not a usual output.
Less Prone to Breakdown: As decentralized is one of the key features of blockchain technology, it can survive any malicious attack. This is because attacking the system is more expensive for hackers and not an easy solution. So, it’s less likely to breakdown.
Zero Scams: As the system runs on algorithms, there is no chance for people to scam you out of anything. No one can utilize blockchain for their personal gains.
No Third-Party: Decentralized nature of the technology makes it a system that doesn’t rely on third-party companies; No third-party, no added risk.
Authentic Nature: This nature of the system makes it a unique kind of system for every kind of person. And hackers will have a hard time cracking it.
Transparency: The decentralized nature of technology creates a transparent profile of every participant. Every change on the blockchain is viewable and makes it more concrete.