What is Blockchain Technology?

What is Blockchain Technology?

By roman patel

Blockchain technology us

Blockchain technology is a decentralized, distributed digital ledger that records transactions on multiple computers in a secure and transparent way. It was originally developed as the underlying technology for the digital currency, Bitcoin, but has since been adapted for various other uses.

One of the key features of blockchain technology is that it creates a tamper-proof, immutable record of transactions. Each block in the blockchain contains a hash of the previous block, creating a chain of blocks that cannot be altered without also altering all subsequent blocks. This makes it highly resistant to fraud and hacking.

Blockchain technology has numerous potential applications beyond cryptocurrency, including

supply chain management, digital identity verification, voting systems, and more. It has the potential to improve transparency, reduce fraud and corruption, and increase efficiency in many different industries. However, the technology is still in its early stages and there are many challenges to be addressed before it can reach its full potential.

Blockchain technology is neither a company nor an application, rather it is an ultra-advanced way of recording and sharing data in the most secure way. A blockchain in the simplest way can be defined as a list of digital records which are called blocks and are chained together. A blockchain is like a distributed ledger which is shared with all computers ( which is generally called here as Nodes) with an internet connection. Every computer connected to the blockchain will have the access to add more information, provided other nodes of the same chain has authenticated the data. Once a data is authenticated and updated in the chain, that can never be disputed, deleted, edited or altered without the knowledge and permission of those who made that record, as well as the wider community.

One can exemplify a blockchain at the grass root level with a Google Doc. One can share a Google Doc with many persons and with the permission of the owner, whoever it is shared with can edit it. A shared Google Doc (or Google Sheet) gives access to multiple parties at the same time hence all can edit it at the same time and it is visible to all. A Google Doc or Sheet becomes distributed when sharing involves a number of people.

A blockchain is more or less like a shared Google Doc which is shared with millions of computers on the internet. This is a decentralised, distributed and highly encrypted ledger which securely records information across a peer to peer network. Though the invention of this technology was done to keep a digital currency safe from hackers but the potentials of its reaches are undoubtedly beyond the imagination of its inventors. A blockchain ledger can be used to store many valuable data like the land titles, banking, identities, hospital records, voting and many more uses. This technology is still new but impacts and uses are immense.

Types of Blockchain

There are four types of blockchains. All of them are created differently on the basis of ‘consensus’. The literal meaning of consensus is getting a ‘public agreement’ and the case of a blockchain also there is no difference. The different kinds of blockchains are created depending on the process of obtaining consensus or an approval from the other nodes or the computers connected to that blockchain for updating data in the same.

There are four main methods of finding consensus in a blockchain. They are ‘The Practical Byzantine Fault Tolerance Algorithm’ (PBFT), ‘The Proof-of-Work Algorithm'(PoW), ‘The Proof-of-Stake Algorithm’ (PoS), and ‘The Delegated Proof-of-Stake Algorithm’ (DPoS).

Here are the basic four types of blockchains which the above mentioned algorithm has produced.

1) Public Blockchain

A public blockchain is an ‘open to all’ blockchain. This type of blockchain is based on Proof of Work (PoW) consensus algorithms. Such blockchains are considered as ‘permissionless’ hence anyone can participate in these blockchains without permission. Once a node is connected to a chain, they can add blocks(information), validate transactions happening in the chain, thus participating in the consensus process. Every transaction happens here is a public transaction hence one can claim those transactions to be transparent. One may assume that since public blockchain is open source, the data saved here is not secured or true. On the contrary, your data is highly secured using cryptography and consensus protocol. A public blockchain is a decentralised ledger where anyone from any corner of the world can audit, transact or add blocks only if other nodes in the chain authenticate the same. The first ever cryptocurrency, Bitcoin is working with the same kind of blockchain which is open to all. One can download the data and a transaction of bitcoin can be done.

The other examples of public blockchain are – Ethereum, Monero, Dash, Litecoin, Dodgecoin etc

2) Consortium Blockchain

As the name suggests, a Consortium Blockchain is owned by a group of people or a corporation by whom the consensus process is controlled. This kind of blockchain is generally used in business. Consortium Blockchains are ‘permissioned blockchain’ where the right to read can be given to the public or only to the members of the chain. Such types of chains are considered to be better secured as the consensus process is controlled by a selected number of nodes. Let’s say there are there are 20 financial institutions in a blockchain and each of which operates a node. If any of the members wants to add an information or a transaction, 15 must sign that new block to make it valid. Unlike a public blockchain, anyone with an internet connection cannot get the access to this blockchain until and unless the consortium permits the admission. Banks are the best example of a consortium blockchain.

3) Private Blockchain

Private Blockchain

A Private Blockchain is a centralised chain where the chief control of the chain is in the hand of a single entity. The read permission may be given to the public or may not be given but any change in the chain is permissible only to the creator of the chain. A private blockchain owner can easily change the rules of a blockchain, revert transactions, modify balances etc. Since such blockchains are centralised one can take such chain at the highest secured and of course, a faster transaction can be done as the consensus has to be given by the single entity who owns the chain.

4)Semi-private blockchain

Semi-private blockchains are run by a single company where access to that chain is given to the person or a company if he fulfils the criteria mentioned by the owner of the blockchain. Such type of blockchains are neither entirely decentralised nor a private one. Such blockchains can be managed just like a company manages its website. This type of blockchain is mostly used by business to business cases or government applications. Examples of semi-private blockchains could include ones for government entities for record-keeping, land titles, public records, etc.

Here is a table to better understand the transaction over the the different kinds of blockchain.

https://financebuddha.com/blog/guide-blockchain-technology/

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