A Beginner’s Guide to Blockchain Technology
In the last few months, you must have heard about blockchain technology. It would have either come up in a friendly discussion or numerous social media posts visible on your smartphone. Over the last two decades, I’ve been involved in several industries, but have never seen such rampant growth in a single sector. Blockchain, arguably due to bitcoin, has become extremely popular in mainstream media. Read below the full blog by Rahul Raisurana to understand Blockchain Technology in detail.
For a layman, the term blockchain doesn’t have much meaning, and its association is only with bitcoin and some other popular cryptocurrencies. It’s important to understand that blockchain is the underlying concept of cryptocurrencies. Without it, bitcoin or other cryptocurrencies wouldn’t even exist.
Due to this, it’s even more important to understand blockchain technology and get an idea of how it’s beneficial in the long run. In this guide, I want to talk about this technology and give you a brief idea about what it involves, how it functions, and the chances of blockchain being a part of our lives for years to come. In case you were planning to invest in cryptocurrencies, this guide would help you understand the underlying concept.
The History of Blockchain
To help you get a better idea, let me first explain how this all started. It will help you understand why blockchain’s the need of the hour, and how it aims to solve real-world problems. The concept of blockchain was prevalent in computer science, primarily in domains like data structures and cryptography.
Hash Tree or Merkle Tree, a primitive form of blockchain was patented by Ralph Merkle back in 1979. This data structure handled and verified data between different computer systems. It was important to validate data in a network of computers to make sure no modifications or alterations were made during transfer. It also ensured that the network didn’t receive false data. In simple terms, Hash Tree proved and maintained data’s integrity on the network.
In 1991, Hash Tree played a prominent role in creating a secured series of data sets or records. Each of these sets was connected to the one preceding it. Therefore, whenever the set was updated, it would have the history of the entire blockchain.
In 2008, a developer working under the disguise ‘Satoshi Nakamoto’ worked on this concept and created a distributed blockchain. It contained the entire history and data of exchanges taking place on a network. Exchanges could be verified individually and managed without any central authority. This gave rise to bitcoin. Legal at the time or not, the world of cryptocurrencies came into existence.
Functioning of the Blockchain
A lot of people still don’t know how the blockchain works. Before we dig deeper, here’s an overview of the prominent features. A blockchain’s primary function is to keep and maintain records of data exchanges. In the crypto world, these records are referred to as a ledger. Similarly, each data exchange is called a transaction. Once a transaction is verified, it’s added to the ledger. This addition is called a block.
Another prominent feature of the blockchain is to utilize a specific system to verify transactions. This system composes of a network of peer-to-peer nodes. Once transactions are verified and signed, they are added to the blockchain. Any further alterations can’t be made to the block.
In order to further understand blockchain, we should talk about ‘keys’. A cryptographic key provides you with a unique identity. There’s a Public Key and a Private Key. Together, they provide you with a digital signature. With the Public Key, others can identify you on the ledger. The Private Key allows you to digitally sign, verify and authorize any actions you want to take regarding your cryptocurrency.
In simple terms, the Public Key represents your crypto wallet address. On the other hand, the Private Key allows you to authorize any withdrawals, transfers and other important actions regarding your cryptocurrencies. Hence, it’s important to keep the Private Key safe. Hardware wallets are a good way to store your cryptocurrencies, and make sure you don’t experience any breaches.
Every transaction on the network is broadcasted to a network of nodes, which are other forms of digital entities. On verification, the transaction is added to the ledger. Every transaction in the ledger comprises of the same data, i.e, a public key, a unique ID, a digital signature and a timestamp.
Since every transaction is connected with another, every preceding transaction lets you see the progress. It’s important to note that the Public Key is only a random sequence of numbers and characters, which ensures anonymity. Hence, you’re never signing anything in your name, and no one can track the transactions back to you.
A Public Key doesn’t inform about the real-world identity of a person. In addition to this, you can easily generate as many Public Keys as you want. Every cryptocurrency wallet provides you with a different Public Key. However, someone can dig deeper to figure out your real-world identity. But such efforts and occurrences are uncommon.
Decentralization and the Future of Blockchain
If you’re a blockchain or cryptocurrency enthusiast, the first thing you’d hear is the decentralization aspect. The most appealing factor about decentralization is that it makes the blockchain impervious to corruption, tampering and censorship. Since it runs on a peer-to-peer network, ledger copies are always stored in several locations. Unless you can track down every single transaction in a ledger, you can’t possibly destroy it.
In addition to this, since independent nodes are responsible of keeping track on the ledger, trying to modify the ledger in a manipulative way will not take you far. Other functioning nodes will simply reject the transaction, and it won’t be added to the ledger. This is one of the most important reasons that people have shown trust in blockchain technology. Due to this, it has already been adopted in various industries around the world.
There’s no denying that blockchain has a long way to go. Currently, it’s still in a learning curve. However, its popularity has been increasing with every passing day. As more corporations and industries keep adopting blockchain technology, it will move into mainstream payment mechanisms. The future seems bright, and you simply can’t afford to miss out.