Blockchain technology is increasingly becoming part of the public discussion in trends and tools that will continue to have an impact on various industries. From money to identity, it presents ways for databases to be fully decentralized and significant system adoption throughout other applications.
What is Blockchain
Blockchain(1) is a growing list of records, called blocks, that are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data (generally represented as a Merkle tree).
A blockchain is a public ledger of information collected through a network that sits on top of the internet. It is how this information is recorded that gives blockchain its groundbreaking potential.
It also ensures the integrity of a cryptocurrency by encrypting, validating, and permanently recording transactions. It shares certain similarities with a bank’s ledger, but open and accessible to everyone who utilizes the cryptocurrency is supports.
When Did Blockchain Start And Who Invented Blockchain?
There have been several key moments along the way in the evolution of this world-changing technology which have helped to shape blockchain. In this article, we shall drift into the amazing history behind this hacker-proof technology to give you a more rounded idea of what it is all about.
Many people who have interest in blockchain probably know that the first Bitcoin software was openly released to the public sometime in 2010 (it was actually at the beginning of 2009), but the seeds of blockchain go way back further than that.
In fact, as far back as around the 1940s during the Second World War which was at its bloodiest peak. Alan Turing, a studious British mathematician with a passion for decoding info and who is known to be a whiz at cryptography which essentially is blockchain, was asked to decipher the Enigma Machine, a machine the Nazi’s were using to communicate during the war.
Alan decoded it and handed the Allies a massive advantage. However, the American’s decoded the Purple Code, a Japanese ciphering machine. The fact that the Americans were able to do this meant that cryptography became a key discipline for governments.
Later, in the 1970s, a band of men and women realized that cryptography was making communication much freer and so set about to make it more accessible.
They did not know that they were putting down the first fundamentals for blockchain. Sometimes later in that decade, Martin Hellman and Whitfield Diffie put together an algorithm called the Diffie-Hellman algorithm which split encrypted keys into a pair of a private key and a public key.
The purpose of these keys was to encrypt a message with a public key but in order to be able to decrypt the message a private key was required. This was achieved together with Ralph Merkle, a U.S. computer scientist who created an algorithm puzzled called the Merkle Trees.
Hellman and Diffie are recognized as the founders of the public key cryptography which was essential to the creation of blockchain. After that, more advancements were made until W. Scott Stornetta and Stuart Haber described their work on a cryptographically secured chain of blocks in 1991, the very first of its type.
After a year, they added Merkle Trees to their conception, which boosted its security, performance and efficiency. This now enabled them to collect multiple documents on a single block and it even further succeeded when things exploded with the launch of Bitcoin in 2009. Since then, till now ,it has been in existence.
How Does The Technology Work?
A blockchain usually contains information about transactions , each transaction is designed to generate a hash (a string of numbers and letters). Then, the transactions are entered or inputted in the order in which they occurred . The hash does not only depend on the present transactions but also on the previous transactions done and even a small change in a transaction creates a new hash.
The nodes inspect the hash to make sure that a transaction has not been changed and if the majority of the nodes approve a transaction, then it is written into a block that refers to the previous block and together, they form the blockchain and these blockchain updates themselves every 10 minutes.
Advantages of Blockchain
There is stability
All confirmed blocks are very unlikely to be reversed, meaning that once data has been registered into the blockchain, it is extremely difficult to remove or change it. This is why blockchain is a great technology for storing financial records or any other data where an audit trail is required because every change is tracked and permanently recorded on a distributed and public ledger.
For instance, a business could use blockchain technology to prevent fraudulent behavior from its employees. In this scene, it could provide a secure and stable record of all financial transactions that take place within the company. This would make it harder for an employee to hide suspicious transactions.
It operates a trustless system
In all traditional payment systems, transactions are not only dependent on the two parties involved, but also depend on an intermediary such as a bank, credit card company, or payment provider. When using blockchain, this is no longer necessary because the distributed network of nodes verify the transactions through a process known as mining. For this purpose , Blockchain is often referred to as a trustless system.
Thus, a blockchain system negates the risk of trusting a single organization and also reduces the overall costs and transactions fees by cutting out intermediaries and third parties.
( Also Read: Top 14 Benefits of Blockchain Technology )
Disadvantages of Blockchain
There are a few potential attacks that can be performed against blockchain networks and 51% attacks are among the most discussed. Such attack may happen if one entity manages to control more than 50% of the network hashing power, which would allow them to disrupt the network by intentionally excluding or modifying the ordering of transactions.
Despite its being theoretically possible, there was never a successful 50% attack on the Bitcoin blockchain. As the network grew larger, the security increased, and it is quite unlikely that miners will invest large amounts of money and resources to attack Bitcoin as they are better rewarded for acting honestly.
Modification of Data
Another bad side of blockchain systems is that once data has been added to the blockchain it is very difficult to modify it. While being stable is one of blockchain’s advantages, it is not always good. The change of blockchain data or code is usually very demanding and often requires a hard fork, where one chain is abandoned, and a new one is taken up.
Every blockchain address has a corresponding private key. While this address can be shared, the private key should be kept secret. A user needs their private key to access their funds, meaning that they act as their own bank. If they lose their private key, the money is effectively lost, and there is nothing they can do about it.
Blockchain can be highly inefficient at times. The fact that mining is highly competitive and there is just one winner every ten minutes makes the work of every other miner is wasted. As miners continually try to increase their computational power, so they have a greater chance of finding a valid block hash, the resources used by the Bitcoin network has increased significantly in the last few years, and it currently consumes more energy than many countries, such as Ireland, and Nigeria.
A Blockchain ledger can grow to be very large over time. The Bitcoin blockchain currently requires around 200 GB of storage. This current growth in blockchain size appears to be outdoing the growth in hard drives and the network risks losing nodes if the ledger becomes too large for individuals to download and store.
What Are The Key Attributes Of A Blockchain?
It cannot be corrupted:
There are a lot of exciting blockchain attributes but among them, immutability is undoubtedly one of the best key attributes of blockchain technology. Once a transaction block gets added on the ledger, no one can just go back and change it. Therefore, any user on the network won’t be able to edit, delete or update it.
It operates a decentralized technology:
The network is decentralized means it does not have any governing authority or a single person looking after the framework, but a group of nodes maintains the network making it decentralized. It puts users in a straightforward position because the system does not require any governing authority, we can directly access it from the web and store our assets there.
It uses enhanced security:
As it discards the need for central authority, no can just simply change any characteristics of the network for their benefit. The use of encryption ensures another layer of security for the system but how come it offers so much security compared to already existing techs? Well, it is extremely secure because it offers a special disguise known as Cryptography. In addition to decentralization, cryptography lays another layer of protection for users. Cryptography is a complex mathematical algorithm that acts as a firewall for attacks.
The use of distributed ledgers:
Most times, a public ledger will provide every information about a transaction and the participant. Everything is out in the open, nowhere to hide even though the case for private or federated blockchain is a bit different.
In those cases, many people can see what really goes on in the ledger. This is because the ledger on the network is maintained by all other users on the system. This makes sure the computational power is distributed across the computers to ensure a better outcome. This is why it has been considered one of the blockchain essential features as the resultant effect will always be a higher efficient ledger system that can take on the traditional ones.
( Also Read: Most Popular Blockchain Platforms )
What is a Node in Blockchain Technology?
A complete node is basically a device (like a computer) that contains a full copy of the transaction history of the blockchain. 7 nodes either servers/computers, all connected to each other, runs a blockchain together. The definition of nodes according to the context it is used.
When we talk about computer or telecommunication networks, nodes may offer distinct purposes, acting either as a redistribution point or as a communication endpoint. Most times, a node consists of a physical network device, but there are some specific cases where virtual nodes are used.
In other words, network node is a point where a message can be created, received, or transmitted. All Nodes and Master nodes are an increasingly discussed subject in blockchain lately. And rightfully so, because nodes are a critical component of a blockchain’s infrastructure. Without these nodes, a blockchain’s data would not be accessible. You could say that nodes are the blockchain.
Blockchain Use Cases & Examples
It has been used for quality and assurance purposes as companies throughout the world are suffering from the problem of lost packages in transit and counterfeiting of products. It is used in trainings and payments as companies use it to handle online payments using platforms like PayPal and credit cards. It is also used in human resource teams as they handle recruitment, sourcing new talent, promoting and growing a company.
Blockchain Vs. Bitcoin
One of the important differences between bitcoin and blockchain is the adaptability. When we examine bitcoin, we look at something that is rigid and concentrates on cross-border transactions. While the blockchain first started out slowly as a ledger of the bitcoin currency, but it began to improve and slowly started catering to other industries as well. It has made regular improvement in technology and now blockchain is the hottest thing running in the market right now.
Bitcoin is a cryptocurrency used to reduce the transaction charges and transaction time of cross-border transactions. The blockchain functions as a distributed ledger that enables peer-to-peer transaction in one of the safest environments so all transactions done through blockchain are made public so that it can be transparent. Bitcoin is a little closed system and it is built heavily on anonymity.
Even when we can locate the transactions in the ledger, bitcoin vs blockchain are recorded in numeric codes that people will not understand and that is why it is unable to move forward. On the other hand, blockchain has been and is still working with various industries and it complies with the rules and norms of the companies like anti-money laundering and knowing your customer to name a few. It shows all the transactions clearly and the public has full access to the ledger thus companies trust more on the blockchain.
Frequently Asked Questions
Q. Is Blockchain the future?
A. Based on an article published on Forbes.com, with time the trust factor in the capabilities of blockchain is expected to rise. The evident genuine impact of a distributed ledger is still under speculation, but after taking a look at the spurt of applications already crowding the markets, it is only a little while before blockchain penetrates every industry sector.
This universality of this technology can be compared to all things digital, which Gartner predicted in 2017, and in less than two years, that prediction turned into a formidable reality.
In the near future, critical data will reside on distributed data stores which has combining on-premise, cloud, and remote facilities and this blockchain will emerge as a savior for transactional integrity.
As the digital transformation of all global businesses over the world continues, blockchain will gradually and naturally evolve as the best transactional platform across the globe. How Blockchain will be Powering Our Future is an Infographic already predicted fromVisualCapitalist.
Q. Is Blockchain Legitimate?
A. This technology was created to ensure the legitimacy of every bitcoin transaction by tracking them in a distributed public ledger therefore, it is very legitimate as legitimacy breeds legitimacy.
Q. Who owns Blockchain Technology?
A. It has been discovered that in 1992, Bayer, Haber and Stornetta incorporated Merkle trees to the design, which improved blockchain efficiency by allowing several document certificates to be collected into one block. The first blockchain was conceptualized by a person or a group of people known as Satoshi Nakamoto in 2008.
Q. Is Blockchain Wallet Safe?
A. The blockchain wallet is totally safe to use. It is a cryptocurrency wallet that allows users to manage cryptocurrencies (such as Bitcoin, Ether, etc.) So, it is safe to implement.
Q. Can blockchain be hacked?
A. When you try to hack blockchain , it means “the person is trying to control more than 51% of the total computing power of the whole blockchain network.” The hacker is attempting to read and reverse the transactions hidden in the blockchain network. But, the nature of blockchain makes this type of hacking difficult and not impossible so it is possible but difficult.
Q. Why can a transaction not simply be reversed on a blockchain?
A. On blockchain, there is the inability to cancel or reverse your transaction. As unfortunate as it seems to be , cryptocurrency transactions on the Bitcoin, Ethereum, and Bitcoin Cash networks are “DESIGNED” to be irreversible.
Q. Why does blockchain need a distributed ledger?
A. There are a lot of reasons such as it gives control of all its information and transactions to the users and promotes transparency. They can be used to minimise transaction time to minutes and are processed 24/7 saving businesses billions.
Conclusively, it can be said blockchain technology is very useful in our society. It is the safer way to record activity and keep data fresh, while maintaining a record of its history.
Other Useful Resources:
The Best Applications for Blockchain in Banking
How to Use Blockchain Technology in Cyber Security
Top 10 Benefits of Blockchain Technology in Cloud Computing in 2020
How Blockchain Technology Is Shaping a New Future for Digital Marketing
3 Ways Blockchain Technology Will Revolutionize Supply Chain