Definition of Blockchain
While blockchain appears to be complicated, and it can be, its core concept is actually easy. Blockchain is shared, immutable ledger which store information in a way that makes it nearly impossible to alter or modify. We can consider blockchain as a digital ledger which records the number of transactions that are replicated and distributed across the entire network of computer system. Blockchain is similar to a traditional database but in blockchain the data is stored on the network of personal computers rather than centralized database.
Importance of blockchain
Knowledge is the lifeblood of business. The quicker and more reliable it is sent, the better. Since it offers instant, decentralized, and fully transparent information stored on an immutable database that can only be accessed by permissioned network participants, blockchain is perfect for delivering that information. Orders, transfers, accounts, production, and much more can all be tracked using a blockchain network.
Key Elements of Blockchain
1. DLT (Distributed Ledger Technology)
DLT stands for distributed ledger technology which is a system of storing the transactions of assets and the details are stored in various locations at the same time. Unlike traditional databases, DLT don’t have any centralized functionality.
Using cryptography, DLT allows for the secure and accurate storage of all information. The same thing can be done with “keys” and cryptographic signatures. When information is saved, it becomes an immutable database that is subject to the network’s
2. Immutable records.
Once the transaction has been committed no users can modify the details of the transactions. If the recorded transaction has an error there should be a latest transaction should be added to alter the error. So you cannot manipulate data that’s already in the blockchain.
The term “immutable” refers to something that can never be adjusted or changed. When a blockchain exchange has received sufficient approval, some cryptography ensures that it can never be replaced or turned around. This distinguishes blockchain from standard records or data sets in which data can be freely altered and erased.
3. Smart contracts
A smart contract is a self-executing, self-enforcing protocol that stores and enforces contractual clauses via blockchain and is governed by its explicit terms and conditions. In Smart contracts, when all the parties meet the terms of agreements, the smart contract code is executed by itself and it is been verified by consensus mechanism. Smart contracts eliminate the requirements of mediator. Smart contracts are decentralized, autonomous, and transparent. When deployed, they are often permanent and unmodifiable.
As blockchain is decentralized, there is no need for users to rely on a third party to keep their funds secure. The network is protected by a decentralized peer-to-peer network of miners known as Proof of Work, which eliminates the need to trust any middlemen. The Blockchain code is fully open source.
These machines examine the entire database to ensure that transactions have not been altered with and that balances have not been tampered with.
It is practically unhackable for the reasons mentioned above. When bitcoin is stolen, it is almost always due to a weakness in the applications developed on top of the blockchain, such as wallets, crypto currency exchanges, and so on, rather than the blockchain itself.
Core Components of Blockchain Architecture:
Here is the list of blockchain architecture core components:
- Node — A node is a device that is connected to peer to peer network. They spread the transactions and blocks all over the place.
- Transaction — A Blockchain transaction is nothing more than a public database of all Blockchain transactions that have ever taken place.
- Block — A block is the current section of a blockchain that contains the most recent data. When a block is finished, it is added to the blockchain as a permanent archive, resulting in the creation of a new block.
- Chain — When number of blocks is connected in a specific order, it is called a chain.
- Miners — Nodes that verify blocks before allowing something to be added to the blockchain structure.
- Consensus (consensus protocol) — In essence, the consensus protocol ensures that any new block added to the Blockchain is only version of that all nodes in the Blockchain agree on. As a result, a consensus algorithm seeks to find a shared agreement that
benefits the entire network.
Type of Blockchain Networks:
1. Public Blockchain Network
A public blockchain can be used to build a completely open blockchain, similar to Bitcoin that allows anyone and anyone to join and contribute to the network. Anyone can enter and participate in the blockchain network’s core operations in a public blockchain. The ongoing operations on the public blockchain network can be read, written, and audited by anyone, which helps a public blockchain preserve its self-governed existence.
2. Private Blockchain Network
A permissioned blockchain is a private blockchain. There are certain restrictions on the people who can access the network. The network is controlled by one or more individuals, which necessitates dependence on third-parties for transactions. Only involved parties will have the knowledge of the transactions in a private blockchain and others will not be able to access it.
3. Consortium Network
Consortium network is also known as federated blockchain. A consortium blockchain is a blockchain technology in which several entities control the network rather than just one. It’s a neither a permissioned network nor a public one but closer to private type of distributed ledger. Consortium blockchain is a hybrid model of public blockchain and private blockchain.
Blockchain for industries:
- Supply chain
- Media and advertising
- Oil and gas
- Financial services
- Travel and transportation
How Does Blockchain Technology Work?
Everyone have witnessed that the businesses around the globe is adopting the blockchain technology. But how does blockchain technology works? Here is the explanation.
Blockchain is a combination of three cutting-edge technologies.
- Cryptographic keys
- A peer-to-peer network
- A means of computing, to store the transactions and records of the network
Two keys are used in cryptography: a private key and a public key. These keys aid in the efficient completion of transactions between two parties. These two keys are unique to each individual and are used to create a protected digital identity reference.
The most critical feature of Blockchain technology is the protected identification. This identity is known as a “digital signature” in the crypto currency world, and it is used to authorize and monitor transactions. The peer-to-peer network is combined with the digital signature; a large number of people acting as authorities use the digital signature to reach a consensus on transactions and other issues. When they approve a contract, it is checked mathematically, resulting in a successful protected transaction between the two networked parties. To summaries, Blockchain users use cryptography keys to conduct various forms of digital transactions over a peer-to-peer network.
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