The blockchain is a secure system that allows users to transact among themselves (peer-to-peer) through their computers by trust. This is done without any third party or intermediaries. It uses a code that can be shared and distributed for free to any network without compromising the privacy of the users. If a Smart Contract is employed, this code will execute automatically, when certain conditions are met or not met. The code is usually written in C++. Thus, it is a ledger that contains data.
It’s similar to a database. Some users have downloaded the open source code and have developed new applications from it. Blockchain has also been defined as a ‘value-exchange protocol,’ in which user’s exchange ‘values’ electronically, and the transaction is recorded progressively. Every transaction from thereon will be recorded in real-time, permanently and will be available for all users to see. It’s also called the worldwide ledger, where users record their transactions, replicate and share them with other users.
What are the parts of a blockchain?
Each block has two significant parts:
- Header– This part contains the technical information about the block; the fingerprint (hash) of that specific data; and a reference to the previous block.
- Contents – This part contains the transactions and actions made on the data or block.
What are the types of blockchains?
There are two types of blockchains: the public and the private. You can choose what to participate in between the two.
- Public – This is a blockchain that is entirely decentralized, where any user can read or write entries. Usually, users can opt to remain anonymous. The validity of identity can be confirmed through proof-of-work and proof-of-stake.
- Private – This is a blockchain that has an owner. The other users don’t have the right to change transactions, rules, or entries. Only the owner is authorized to do so. Usually, identities are known in this type of blockchain.
- Consortium – This is a blockchain that is operated by pre-selected nodes. An example is when a group of 20 schools comes together, and each school will transact using one node. The disclosure of the transaction can be made public or not. This will depend upon the agreement of the concerned group.
What are the purposes of a blockchain?
As previously discussed, the blockchain has multiple purposes that make it a ‘revolutionary’ world ledger. A ledger is where transactions– usually financial– are recorded. For you to understand more here are its specific purposes. You can also identify these purposes as advantages.
- Acts as a World Ledger
It’s also called a world ledger, where electronic transactions are recorded and time-stamped so that all transactions by individuals are properly noted and saved. This ledger is replicated and shared with every user and is updated whenever new transactions take place. Every user (node) has a copy of all the electronic transactions that take place.
- Promotes decentralization
Transactions are decentralized because not one person owns the records. Each user has a copy and control of his records that all users can view, but only the information that is indispensable to the other transactions are shown. There are no intermediaries that can stake their claims on the blockchain. Obviously, anyone can capitalize on the blockchain and create or develop it, and then use it as a part of a new system.
- Prevents duplication
Because all digital or electronic transactions using the blockchain are transparent, it helps prevent duplication. The system can detect automatically if, for example, a user has paid twice for the same ‘value.’
- Reduces cost
The costs of transactions are greatly reduced because transactions are done directly without paying for intermediaries. Additionally, the cost of data management and storage will be reduced.
- Verifies IDs
Blockchain technology can verify a person’s identity or identification (ID) through the use of cryptography and digital signatures. Cryptography can be defined as the system of writing codes, which the user utilizes to secure his identity. Cryptography is also a specific code that transmits data that only the intended recipient can encode, understand and act on.