We are living in an era of the cyber world, where we are witnessing advancements on a daily basis. One such massive development that revolutionized our way of living is the Internet. In the present scenario, we rely on the Internet for almost all our daily tasks, including the management of our finances.
Let us now discuss the concept of Blockchain.
What is Blockchain?
A Blockchain is a sheet (or a structure of data) that represents any financial data entry (a ledger), or several such financial transactions. All the transactions are signed digitally to ensure unnecessary tampering of the original data, i.e. to maintain authenticity.
For example, Google Spreadsheet/MS Excel. This sheet is shared among a group of computers, people, where everyone possesses a copy of the concerned sheet. The sheet is accessible to every member, but no one can edit the sheet.
Let us understand how a Blockchain actually works;
Working of a Blockchain
Blockchain consists of several technologies which are mainly as
Private Key Cryptography
A connected network (distributed network) where the financial ledger is distributed
The incentive for network transactions, record management, and security.
Let us highlight them in detail.
Suppose two individuals wish to transact via the internet. Each of them has access to a public key and a private key. The combination of the public key and the private key generates the digital signature, which ensures strong ownership over the transaction.
In simple words, this is the network where the financial ledger is distributed among various clients. Along with the digital signatures, this network plays an important role in maintaining the overall security of the whole transaction process.
This is based upon the principle of Mining. Each transaction is recorded with a timestamp to ensure its authenticity.
Flow of Transaction
A node initiates a transaction and then digitally signs it using the private key.
A transaction process is initiated (flooded), with the help of a flooding protocol known as Gossip Protocol. After this, validation from more than one node is required to incorporate the transaction into the block, which is then propagated into the connected network.
All newly generated blocks become a part of the ledger, and the blocks get connected cryptographically in the form of a chain.
For every transaction, a new block is created after proper validation from the respective nodes and is recorded with a time stamp.
When the Internet was launched, the primary objective was to make it as free as possible. Decentralization was at the heart of this innovation. The father of WWW, Tim Berners Lee in a recent interview expressed his disappointment over how the web has become a commodity and is constantly abused.
Now imagine a technology that provides you decentralization and globalization in their purest form. A system that is immutable and censorship-resistant.
This is what Blockchain is. Technically, blockchain involves Distributed Ledger Technology that makes platforms secured and transparent. For anyone to change/update anything on the ledger, all the previous blocks need to be updated, which is public. As a cryptographic technology, Blockchain offers high resistance to threats while at the same time helping traceability and trackability possible.
It integrates well with almost every supply chain we know of and has become the fastest-growing technology ever.