The trend of bitcoin took the world by storm, and a pool of investments in it headed faster than ever. But not all knew what exactly they were investing in.
Hence, the purpose of this blockchain guide.
A simple explanation of an otherwise detailed concept. The concept of Blockchain technology. Here I will talk about the meaning, the need, How does it work, What problems does it solve and what lies ahead for this technology.
Let us dwell deeper into the roots of such a revolutionizing technology.
THE HISTORY OF BLOCKCHAIN
The mystery of the minds behind is hidden to the world but the team of people is known to be “Satoshi Nakamoto”.
During the Financial crisis in 2008, this group understood the threats to the current centralized system. The involvement of a third party ( E.g., Banks) for even a minimal transaction was terror.
These third parties have all the information as well as the power to lock your bank accounts if they wish to, This seemed scary and hence the team decided to develop a decentralized financial system called bitcoin. Bitcoin is a popular cryptocurrency. The concept of bitcoin involved a technology called the Blockchain.
Now the history of the technology is established the next most natural question comes to mind.
WHAT IS BLOCKCHAIN?
The force that changed the paradigm of financial systems and established trust in the financial systems, blockchain is in simple words nothing but, a system of recording information in a method where it becomes nearly impossible to breach, via hacking, cheating, or even a mere alteration of the system.
Once something is added into this technology, it is impossible to change it or even erase it, making this a trustworthy database.
Also known as the digital ledger, Blockchain technology is a digital form of a ledger, which is copied and then shared across the whole of computer systems on the Blockchain. With every transaction, all the blocks are updated with the record of the transaction. This decentralized nature of the technology where multiple participants are involved and manage the database is called the Distributed Ledger Technology.
In case any hacker has changed a block in the chain, it would be clear it has been corrupted. And, if a hacker was to hack into this technology, he/she would have to change every block there is in the chain, making it a near-impossible task.
How does it work?
A blockchain is a chain of blocks that store information.
Every block contains some amount of data, the hash of both the block as well as the previous block, this data is then stored in a block depending on the type nature of a blockchain.
Hash is like a fingerprint, the content is always unique. A block has a hash. Once a block is made, the hash of the block is calculated. Anything that changes in a block naturally leads to the change in the hash.
Once there is a change the block just like a fingerprint is no longer the same, in the block the hash changes hence the block has elements of the previous block as well. This creates a chain of blocks and due to this, the secure nature of blockchain takes form.
Let us take an example to simplify this further.
Let's say we have 3 blocks to deal with. As mentioned earlier all these blocks hash and the hash of the previous block.
Block 1 is the first block and hence it doesn’t point to any other block, hence it is named as the Genesis block, whereas Block 3 Point to Block 2, and Block 2 points to Block 1.
In case we make a change to Block 2, The hash also changes in the block, making the following blocks invalid as they no longer store the hash which was relevant earlier. But computers are fast nowadays, they can calculate various hashes at once, making it a not so strong method to save from tampering.
Now enters the Proof-of-work. The mechanism is responsible to slow down the calculation and creation of new blocks. For example, in Bitcoin, it takes around 10 minutes to calculate this mechanism, and add a new block to the chain. Making calculating all proof-of-work in each block harder. This ensures the security of the work.
This technology, which is considered of the best inventions in the financial systems so far, has proved its worth by the problems it has solved and by the innovations that have made our lives easier. Bitcoin, Litecoin, etc being a safer option compared to digital money, has gotten the participants involved with every transaction. If one does spend the money, the ledgers of all the blocks are updated which eliminates the need to verify if the money has been spent more than once or not. Additionally, they need for a third party is eliminated directly, as there is no middle-men involvement, hence the information is safe and the transactions do not carry the hefty amount of fees as much as traditional means.
So, now that we know the importance of technology, the idea of its implementation across industry seems to be the next step.
The Future of Blockchain
According to a research study by TechRepublic, “Almost by the year 2026, the business value added by blockchain will grow to just over $360 billion, then by 2030 grow to more than $3.1 trillion”.
One of the more prominent aspects of blockchain is its future applications in cybersecurity. Data security has become an important aspect for all businesses. Blockchain technology has the potential to prevent data security issues and data tampering.
Conglomerates like Google, Deloitte, and Goldman Sachs invest in projects pertaining to Blockchain. Businesses such as Spotify use this technology to manage Copyrights, IBM uses it to track build a took for tracking of its retails chains as well as shipping companies.
The entertainment industry is looking forward to implementing this technology with the direct system of payment to the artists eliminating the middlemen involved. Even the International payment might change its course in due time. These transactions could potentially become faster and cheaper with the promise of secure payments. Various companies are looking into the possibilities of taking advantage of this technology and implement it across their functions. This has led to a massive demand for skills in various industries.
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