What is Blockchain? A Basic Guide for Beginners

“BlockChain” is mostly associated with Digital/Crypto Currency world. If you heard about Bitcoin or Other Crypto Coins, you might have definitely heard the word “BlockChain”. To state the importance of Block Chain – without Blockchain, digital currencies like Bitcoin would never exist.

If you are new to Bitcoin or digital currencies, you can read hear about the significance of Bitcoin.

Brief History and Timeline of Blockchain

BlockChain concept exists long before when crypto currencies never exit. It used to be mainly used in the fields of cryptography and data structures.

First form of blockchain is Hash tree or Merkle Hash tree. It is named after Ralph Merkle, who patented it in 1979. He demonstrated its function by verifying the data between different computer systems. That is, In a peer-to-peer network of PC’s, Verification of data is important to ensure nothing was modified during the transfer. In simple words, it will help to maintain the integrity of the data that is shared on the network.

In 1991, the Merkle tree was used to create a “secured chain of blocks”, in other words, a “series of data records”, each connected to its previous block. Each record or block, updates the History of its previous block, and maintaining the whole transaction history without missing anything, thus creating a blockchain.

In 2008, Satoshi Nakamato conceptualized the distributed blockchain. It contains secure data exchanges history with Peer-to-Peer Network Time stamp. A decentralized authority verifies each of these exchanges. Hence, Bitcoin and all other crypto currencies were emerged using this concept.

Features of blockchain

First of all, let’s see the key features of BlockChain.

Blockchain keeps a Ledger of all data exchanges— every data exchange is referred as a “transaction“. And every verified transaction is added to the ledger as a “block”.
A Distributed Systems Verifies each transaction – That is a peer-to-peer network of nodes verifies each transaction.
Once the new block/transaction is signed and verified, this is in turn added to the blockchain and cannot be altered.

Related Article: Looking to earn Free Bitcoins? Read here How?

How does blockchain work?

Similar to the username/Email and passwords that we have for any online accounts and portals, where the username/Email will be Public and Passwords will be Private. In the same way, in Digital Currency World, Wallet address is your Public Key and the Private Key is the one which lets you to authorize the transactions [Transfers, Withdraws or any other action]. Similar to your passwords, you should secure safely these private keys in order to secure your Wallet accounts.

For every digital transaction on the Ledger, the Public Key [Wallet Address] is Signed and Digital Associated with the Private Key, along with time stamp and a Unique Id.

As an Example, if “A” sending 1 BTC to “B”, then the Transaction or Block contains the information of “B” Public Key and “A” Public Key, Private Key, time stamp and a unique Id number. When the Transaction is initiated the block containing all the above said information will be broadcast to peer-to-peer network nodes. And here, all the other digital entities that acknowledge this transaction will add this to ledger.

Under this ledger, each transaction will have the same data and are connected to each other forming a chain. So if we move back one transaction or bloc in the ledger, we can see their [“A” in the above example] Previous Transaction details and so on.

Wallet Address [Public Key] is just a randomized sequence of numbers and letters, without any true identity of the person’s name or any other personal details. This helps to keep the people as anonymous. And a person can own/generate multiple Wallet address as per their requirement.

Why is decentralization so important?

To enthusiasts of blockchain, they will hear a lot about the word decentralize. Since Blockchain uses a Peer-to-peer network system, Copies of ledger are stored in various locations, and unless you figure out how to find each and every one of them (Bitcoin is evaluated to have more than 35,000 hubs in its P2P Network), you can’t decimate it. As number of independent nodes from various locations are involved and keep track of these ledgers, destroying them in an untrustworthy way is not possible as their partner nodes doesn’t accept that irregular procedure and blocks will not be updated.

This is the main reason, for many people and industries adopting blockchain technology into their business and considering it as the future of market.

There’s always a downside

There are disadvantages too with this blockchain technology. People who are unfamiliar with this technology or with less technical skills may not understand the concept and the overall process may confuse them.
Transferring & Trading of Crypto Currencies usually involves a transaction fee and at some point, one feels it costly.
Buying Crypto currencies also involves transaction fees and the process to purchase them is inconvenient.
The concept of “51% attack” also makes the users to think twice for opting the blockchain technology. That is if 51% of a peer-to-peer network accepts an invalid transaction then the transaction is automatically approved without considering the disagreement of other 49% nodes. This is unlikely to happen at this moment considering the security levels, but it’s a flaw in this technology.
However, the rising popularity of crypto currency and with lot of developers, users, and enthusiasts who truly believe blockchain technology is the future making this topic more interesting and demandable. Many want to see the technology succeed, so stay tuned to see what developments occur!

SOME CLOSING LINES

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