Blog

What Is Blockchain Technology and How Does It Work?

Blockchain is a database but it is different from traditional databases. The blockchain technology provides storing data by cryptography. Which means that nouns of stored data cannot be deleted or edited by anyone. Blockchain technology is also known as a decentralized distributed ledger technology, which means that there is no central ledger and all the data is distributed among the computers on the blockchain network.

 

How does it work?

Blockchain consists of blocks. Each block has a specific capacity of storing data. When the block capacity is occupied it is closed and becomes a block which is connected to the previous one. Each block has its own ‘Hash’’ which is like a specific name for the block, and when a block is closed it also stores its previous block’s Hash. so the chain is made by creating connected blocks. Once a block is created, its data will stay forever and it cannot be changed. By this main point, the possibility of hacker’s attacks comes to zero.

 

Parts of blockchain

1.block: A block stores specific data. The type of data depends on the type of its blockchain. For example, bitcoin blockchain’s blocks contain bitcoin transactions. Each block has its own hash and contains the previous block hash.

2.Hash: Each block has a code called Hash. Hash is like your fingerprint for a block so no one can change it and it’s unique.

3.node: Any computer which is on a blockchain network is called node.

 

What are the applications of the blockchain technology?

Blockchain technology was first stated by Stuart Haber and W. Scott Stornetta in 1991. In 2008 Satoshi Nakomoto, bitcoin’s creator pseudonymous, started Bitcoin on the bitcoin blockchain and it was the first use of this new technology. Today cryptocurrency is the most important and most popular use of blockchain. There are also other cryptocurrencies based on their own blockchain such as Ethereum blockchain.

But cryptocurrency is not the only use of this technology. As mentioned before it is a decentralized distributed ledger which can be used in many ways even in electronic elections since the possibility of deception is low. These are some of the blockchain applications:

1.cryptocurrecncy: blockchain provided decentralized money which doesn’t need third party like banks and provides faster transactions without needing financial support.

2.non-fingible tokens: known as NFT, such as paintings. you can buy them on their marketplace.

3.suply chain: the origin of the supplies can be traced on blockchain.

4.healthcare: blockchain makes it possible to record patients’ health reports in a secured private way.

5.decentralized banking: there are many banks planning to use this technology to provide better services.

6.video game: you may have heard about earn-to-play games.

 

Blockchain’s Pros and cons

Pros:

1.tranparency:

All the transactions are transparent to everyone on the network. And there is a history of transactions.

2.the lower costs:

As there is no third party so the fee and commission reduces.

3.decentralization:

It is the most important feature as mentioned before it makes changes and hacks closely impossible.

4.fast and 24 hour services: As all the transactions happen on the network and there is no need to hold a meeting or transfer money from banks, during 24 hours a day, users can experience the fast transaction.

Cons:

1.Enviormental concerns:

Mining bitcoin for example causes lots of energy consumption and which leads to creating tons of heat, this use of energy also costs a lot. Some mining companies has changed their use of energy to clean ones like solar energy. Some other experts believe that in comparison to the traditional banking system, blockchain will cost less if it is replaced or more expanded.

3.illigal activities:

Despite the security in transactions, blockchain can be used for illegal purposes for example Silk Road was a dark web which used bitcoin in trading drugs. This website was  closed by the FBI. Although some others believe that using cryptocurrency which is based on blockchain in illegal activities is Just as possible as using money and it doesn’t provide an easier way.

 

summary

To sum it up, it can be said that blockchain is going to be an inevitable part of the future. The sooner we get familiarized with it, the better we will act in future. Blockchain has provided better trading despites all its weaknesses. It is time to start blockchain and cryptocurrency as they are growing.

Copyrights © 2021 ZareTech.