If we go with the literal meaning of blockchain, then it means a chain which comprises of several blocks. But if you are familiar with the world of cryptocurrency such as bitcoin, then you can easily recognize or know what exactly it is.
In simple words, blockchain is the sequence of records or data which are cannot be edited, modified, or hacked. It is not managed by a single computer or person, rather it is managed by a group of computers or individuals.
The complete records of transaction, balance, payment history are maintained & these records are secured and linked to each other with the help of cryptographic principles.
How Does Blockchain Work
Whenever any data is added, or any other new transaction is made it automatically gets updated in the blockchain. Blockchain is the sequence of records which are arranged in the manner that they neither can be modified nor it can be hacked.
To add a new block or record to the blockchain, the 4 step procedure is must follow. This includes:
- The transaction is must: As at the single time, several transactions run together. So you must take care well that the transaction is made successfully. You must check that all the information is correctly updated and all the important information is updated.
- The transaction must be verified: After the purchase is made through, make sure that the transaction or the payment for the purchase is verified. You need to check every minor and major detail of the purchase or the transaction like amount paid, receiver’s name, and time of the transaction or the payment.
- The transaction must be stored: Just after you verify the transaction or the payment you made, the complete information is added to the list which is known as Blockchain.
- Block must be given a hash: Hash is the term used for the code which is given to the person who made the transaction after the verification of the transaction. Make sure that the hash or the unique code is assigned for your transaction or the payment as well.
Just after completing all these steps, your transaction or the payment will be added to the blockchain. Once it is added to the sequence of the records, then you can easily access the complete information about your transaction or the payment and even of other records that were added to the blockchain.
Pillars of Blockchain
If Blockchain would not have followed the different methods from the traditional methods of banking or making the payments, then it would have been the same.
But, it stood different from all other traditional methods, third parties, or banks and it is still the unique one. This uniqueness in the blockchain is established with the help of its 3 pillars. These are as follows:
- Decentralization: There are several benefits of using the decentralized entity for making transactions and payments. Some of them are as follows:
- The information is not limited to any single organization, individual, or computer. Any user can view it, but cannot make any changes to it.
- There is no involvement of any third party, you can directly pay, receive, or make the transaction directly on your own.
- You can use your digital cash in the way you want and whenever you want. You need not go through anyone.
The most important aspect which makes it more unique and safeguarded is that all of its information is not stored in one place, which makes it difficult for hackers to hack it. Hence, it is the most secure form of keeping your money.
- Transparency: One of the best features of the blockchain is that it is the most transparent financial system to date. It helps you to discover or see each transaction, but at the same time, it will not reveal their identity to you. As we know well, that the transactions are made through private keys and public keys. So the public key name is reflected in the series and the amount which is transacted. In this manner, transparency and privacy both are maintained well at the same time.
- Dependability: We all want to keep our balance & data safe and secure. The records or the data of the blockchain can neither be amended or nor it can be damaged. This feature adds value to this type of currency.
Types of Blockchain
Presently there are 4 types of blockchain networks that are in use. These are:
- Public Blockchains.
- Private Blockchains.
- Hybrid Blockchains.
- Consortium Blockchains.
Uses of Blockchain
Blockchain can be used for making payments or transactions on a broad spectrum. The blockchains are mainly used to maintain the record of digital currency, especially bitcoin. There are many more uses of blockchain. Let’s have a look at them, these are:
- For maintaining the transcript of all the cryptocurrency transactions.
- These are used to execute transactions or automated deals.
- Nowadays, banks and other third-party financial service providers are interested in this and trying to implement it.
Pros and Cons of Blockchains
In this world everything has its advantages and disadvantages, the same is the case with blockchains as well.
Pros of Blockchain:
- Improvised accuracy.
- Zero or minimum transaction fee.
- Destroying or making changes in the records is not possible.
- Transparency is maintained.
- The transactions can be made more efficiently, privately, and securely.
Cons of Blockchain:
- It is banned in some countries.
- It seems to be associated with illegal activities.
- The number of transactions that are made successfully per second is less in number.