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The Basics of Blockchain

What is Blockchain

The blockchain serves as a decentralized, irreversible database designed to make it easier to track assets and record transactions in the network of a business. When considering assets, it can be either tangibles like property, money, or intangibles including copyrights, and intellectual properties.

The concept was first introduced by Santoshi Nakamoto in 2008. In a blockchain, the networks of peers to peers are utilized along with cryptography. Basically, “Private Key Cryptography”, “Peer to Peer Networks”, and Program or “Blockchain protocol” are the three concepts that together make up the blockchain.

Cryptocurrencies are the main application behind the blockchain technology. Similar to how a cell in a spreadsheet holds data, the blockchain gathers transaction information. But the way the data is organized and accessed in a blockchain is fundamentally different from how it is in a conventional database or spreadsheet.

In a blockchain, each transaction that takes place has been recorded as a “block” of data as it occurs. The blocks that come before and after each other are connected. Due to the interconnected nature of this specific chain, minimizing the risk and boosting the effectiveness for all parties.

The blockchain or the distributed ledger and its unchangeable record of transactions are available to all network users. Once a transaction has been added to the shared ledger, no participant is allowed to change it or interrupt it.

The specialty of blockchains is that the blocks that come before and after each other are connected. Each subsequent block reinforces the prior block’s verification, and by extension, the blockchain as a whole.

Due to that in this unbreakable chain, all transactions are blocked one after the other. By doing this, all network users may create a trusted ledger of transactions and eliminate the possibility of intervention from fraudulent users.

Importance of blockchain

Information has become more vital to business. It is most effective if the information is received quickly and in an accurate manner. Blockchain is the best technology for providing information as it offers real-time data that can be shared and is completely transparent information.  

Blockchain prevents the chance of interference from an unlawful party and creates a ledger of transactions that the network members can rely on. Only the network members who have been specifically allowed access will have access to confidential blockchain records.

Each of the members of the network must agree whether the data is accurate, and all confirmed transactions are immutable because they are permanently recorded. With that, using blockchain allows to be sure that the data received is correct and timely.

Also, nobody is able to eliminate a transaction, not even the system administrators. Another importance of the blockchain is time-consuming record reconciliation transactions are eliminated using a distributed ledger that is shared across network participants.

Additionally, a set of instructions known as a “smart contract” can be placed on a blockchain and carried out automatically to speed up transactions.

Types of blockchain technologies

Mainly, there are four types of blockchain technologies visible.

Public blockchain

This is accessible to everyone, thus nobody owns it. Anyone with access to the internet and a computer with decent hardware can join this open blockchain.

Transactions that happen in a public blockchain are private but open to everyone. The Bitcoin public blockchain was one of the first to be released and made open to the general public. The consensus is open to everyone, and anyone may join.

It became possible for anyone with an internet connection to conduct transactions independently. Potential drawbacks include the need for a lot of computational power, a lack of privacy for transactions, and inadequate security.

Private blockchain

A blockchain that operates under limited conditions is the ideal way to define a private blockchain.  A private blockchain network is a decentralized peer-to-peer network. Even though it is, these blockchains are less decentralized than the public blockchain, which is safer because only a small number of nodes can take part in the transaction.

The network is governed by a single entity, which also decides who is permitted to participate, runs the system of consensus, and looks after the shared ledger.

With that private blockchain, only a selected group of people are allowed to join a network within a business or organization. A few examples of private blockchains are Hyperledger Sawtooth, Corda

Consortium Blockchain

Consortium blockchain, or federated blockchain, uses a unique strategy to address the organization’s needs. With regard to how it meets the needs of the company, this strategy is novel.

In this structure, the blockchain is managed by several different companies. In addition to initiating or receiving transactions, this blockchain also validates transactions. In a consortium blockchain, public and private information are mixed to some extent.

The predetermined nodes regulate the consensus processes in a consortium blockchain. Furthermore, it maintains a decentralized aspect despite being closed to the general public.  Multiple organizations have the ability to control consortium blockchain.

As a result, no single force is driving this outcome. Energy Web Foundation and IBM Food Trust are a few examples of consortium blockchains. A validator node is capable of performing two tasks, including validating transactions and also starting or accepting transactions.

It is provided by the consortium to guarantee correct operation, and while the member node can only receive transactions, it can also start them.

Hybrid Blockchain

Using both a private and public blockchain, a hybrid blockchain is created. It offers applications for businesses that prefer to use the best of both the private and public blockchain systems rather than deploying either one.

This blockchain is the one to choose if anyone wants to acquire all the benefits of both private and public blockchains with few drawbacks. With the hybrid blockchain, users can choose what data is kept public and private.

The system is extremely flexible, decentralized, and regulated. Dragonchain and XinFin’s Hybrid blockchain are a few examples of hybrid blockchains.

Benefits of blockchain

The blockchain network utilizes numerous computers and other devices to approve transactions. This eliminates practically every individual throughout the process of verification, resulting in reduced human error and a more accurate record of data.

This eliminates practically every individual throughout the process of verification, resulting in reduced human error and a more accurate record of data. This eliminates practically all people from the verification process, resulting in reduced human error and a more accurate record of data.

The majority of blockchains are completely open-source software. This means that anyone may read its code, increasing the transaction’s openness. It is more secure to conduct transactions while using blockchain.

After a transaction has been recorded, the blockchain network must validate it as genuine and after that, only the transaction is added to the blockchain block.

Each block that is created on the blockchain has its own distinctive hash as well as the hash corresponding to the block preceding it. As a result, once the network verifies the blocks, they cannot be changed.

Drawbacks of the blockchain

The major drawback of the blockchain is the cost of the technology. Despite blockchain being capable of saving customers money on transaction costs, the technology is not completely free.

Furthermore, there is additional storage of data limitations. Although confidentiality within the blockchain network secures users against hackers and ensures privacy, it makes it possible for unlawful transactions and activities on the distributed ledger system.

Applications of blockchains

Recently, most of the industries have moved forward with blockchains.  This technology is significantly used in supply chains, the healthcare sector, financial services, and transportation sectors.

By using the blockchains the companies can do money transfers, develop smart contracts, and implement security for personal identity, as well as in the Internet of Things. Supply chain and logistics tracking are one of the major applications of blockchain technology.

The blockchain concept can be utilized to make the data available for the providers of raw materials to the end consumers while enhancing the supply chains. Healthcare process optimization is yet another widely used application.

Blockchain can store and securely communicate medical data and records, as well as shorten the time it takes to pay patients’ health insurance claims. Additionally, facilitating anti-money laundering monitoring technology is another significant application of blockchain.

Every transaction on the blockchain is recorded and stored in a secure manner, making it easier for authorities to find the money’s original source. A contemporary voting method might be facilitated by blockchain.

Blockchain voting has the ability to end election fraud and increase voter turnout, and it was demonstrated during the West Virginia midterm elections in November 2018.

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