What Is Blockchain Technology?
With so much information publicly available to users on the internet, having blockchain explained to a beginner is quite easy. There are tons of websites that offer information on Bitcoin, including IBM, which have even gone a step further to feature a blockchain tutorial on their blockchain website. Blockchain is a term that is often used in relation to Bitcoin, but in the real sense, even though Bitcoin is practically inseparable from it, blockchain technology is an entity and resource on its own.
Blockchain technology facilitates consensus on a common digital history between untrusted parties. This is based on providing a common digital history that is very critical to the integrity of digital transactions that are theoretically susceptible to alteration or duplication. This way, blockchain technology is a way of distributing digital information without the disadvantage of the information falling victim to duplication.
In the 2016, “Blockchain Revolution” publication authored by Don & Alex Tapsott, blockchain technology is defined as “an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
How Does Blockchain Work?
The best way to visualize the dynamics of the blockchain framework is to think of it as more of a distributed database – picture a table in a distributed database that is duplicated and shared thousands of times across a network of computers. The key point here is the network, that is, if it is designed to regularly update the table then it operates in the same way a blockchain does. Information existing within a blockchain, therefore, resembles a shared and continually and consistently consolidated database.
The main difference between a regular database and a blockchain is the fact that while databases only allow one user to access a particular record at any time, blockchain technology allows more than one user to have access to the same information at the same time.
Furthermore, the blockchain database is not centralized or stored at specific locations and this is one of the first guarantees that it is truly public and can be easily verified. Due to the absence of a centralized version of the information in a blockchain, hackers and other malicious individuals cannot access the information or corrupt it since it is hosted by millions of computers at the same time. Anyone with an internet connection can access the data without any restrictions.
What Makes up a Blockchain?
The blockchain consists of a network of computing nodes that work together to create a powerful second-level network which, in a way, exhibits similarities to the internet but adds a whole lot more possibilities to it. Each and every node acts as an ‘administrator’ on the blockchain and voluntarily agrees to be part of the network and participate in associated activities.
Another major difference between blockchain and other distributed networks such as Wikipedia’s is the fact that all transactions are broadcasted and each node in the chain is tasked with creating their own version of network events. This registers as a great milestone in the registration and distribution of information that eliminated the need for a ‘trusted’ party to facilitate digital relationships.
While blockchain technology is a revolutionary innovation from the creator(s) of Bitcoin, the underlying components of the game changing technology had been in existence for quite some time. Blockchain is built from three vital types of technology: private key cryptography, P2P networks through the internet and the program that governs protocol governing incentives.
Why Use Blockchain?
a) Durability and Robustness
Storing identical blocks of information across the blockchain network makes it robust enough not to succumb to single points of failure. This also means that no single entity has control over the network and the information it contains. To prove this point, we can refer to what to date has been the greatest beneficiary of blockchain technology – Bitcoin. The decentralized digital currency has been using the technology since its inception and it has faced nearly zero disruption since then
b) Transparent and Incorruptible
The beauty of blockchain is that it is harmonized and exists in a state of consensus that is automatically self-updated every ten minutes. A perfect analogy would be to consider it to be a self-auditing ecosystem that has a digital value. The goal here is to achieve two important properties; the first being transparency, which is after all, embedded within a blockchain network itself. The second property is immunity to corruption or alteration.
How Digital Trust Is Defined in Blockchain
Trust in the digital world usually boils down to identity authentication or verification and authorization. Blockchain technology goes further to change this all up by using private key cryptography as a powerful ownership tool that is further used to satisfy authentication requirements. Basically, ownership is defined by one’s possession of a private key instead of the usual authentication requirement that more often than not, never make users disclose more personal information than necessary for an exchange, which in turn exposes them to hackers.
Next is authorization which requires a distributed, peer-to-peer network to begin with since, as we all know, distribute networks are less susceptible to the risk of centralized failure or corruption as copies of the same information are present in all the nodes of the network. The blockchain protocol is applied here to implement various aspects of the network’s recordkeeping and security policies which should also be in line with the application the blockchain is being used for.
What Is the Blockchain Used For?
Currently, the strongest applications of blockchain are in finance – Bitcoin and other cryptocurrencies being the most successful beneficiaries at the moment. However, other key applications are leaving Beta stages and should be soon presented for mainstream use all over the world. These key areas of application include governance, crowdfunding, the sharing economy, file storage, prediction markets, protection of intellectual property, stock trading, land title registration and even identity management.