Blockchain Technology: How This Revolutionary Technology Works

Blockchain is the combination of the words “Block” (Information about a transaction such as the sender and receiver as well as amount of transaction) & “Chain” (A combination of Blocks). It is primarily a storage of Chunks, bits or Blocks of Information that are joined together to form a Compilation of Blocks or Blockchain.

This Post Contains

History Of Blockchain.
What Is Blockchain?
What Really Makes Blockchain Technology Important.
Key Features Of Blockchain Technology.
Types Of Blockchains.

Blockchain Technology is behind Crypto currency it ensures the smooth operations and usage of Information through Smart contracts.

Not to waste too much of your time. What Is Blockchain? How does Blockchain Operate? These are questions people ask. But before I provide the Answers, let's first understand The history of Blockchain Technology.

History of Blockchain

David Chaum a Cryptographer first proposed a blockchain protocol in his 1982 Research paper “Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups”

The research was carried on further in 1991 by Stuart Haber and W. Scott Stornetta. They wanted to bring about a System where Document Timestamps could not be tampered with and were Irreversible.

These were the original Idealists behind Blockchain Technology, until Satoshi Nakamoto [The Pseudonymous Creator(s) of Bitcoin] adopted it for Bitcoin.

What is Blockchain?

Blockchain is a ledger of transactions used for storing Information in a way that makes it impossible to alter or hack the information.

In a more comprehensive way, Blockchain is a Computer system and database that keeps records of Transactions, between the Sender and the Receiver and stores the Transaction details. It is created in a way that doesn’t allow a 3rd party Interference and all parties involved have control collectively.

Blockchain assembles tiny bits (Blocks) of Information, joins(Chain) them together to Form a Blockchain in a system that secures the Information from 3rd party Interference.

Blockchain was created so as to make the Information stored Irreversible, Immutable and Unchangeable.

As each transaction is carried out, the Information about the Last transaction is added to the previous ones or The Genesis (first) Block to form the Blockchain.

If someone were to attempt to Tamper with the Information on a Blockchain. He would have to change every Information on the Block. This means that as each Block is added to the Chain, it becomes more difficult to Tamper with the Information on the Blockchain.

What Really Makes Blockchain Technology Important

Cryptography: Blockchain Uses an Algorithm method called Cryptography, which allows only the sender and the Intended Receiver of the Information to read it. Cryptography uses a line of codes that prevents 3rd parties or Intruders from accessing the Information.

For example someone uses J3-16 w6 to replace the word “World” only the Intended reader will understand that the sender is saying world from the Bible as the both of them have agreed based on the fact that J stands for John, 3 stands for Chapter 3, -16 stands for verse 16 and w6 stands for the 6th word of that verse. ( Note that this Illustration is just an explanation of what Cryptography offers. It is not Factual at all)

There have been Incidents where banks closed due to bankruptcy, and a lot of people couldn't access their money and lost their investments.

In other instances, Investment companies that offered people huge interests on their Savings and Investments. Absconded with everyone's Funds as the System failed and a lot of people lost their investments.

Blockchain offers you Privacy and Security: There are people who lost their Life Savings and Investments, due to their inability to come forward with concrete Evidence, that the money in their Bank Accounts belong to them, and they didn't make it through Illegal means.

Others were locked up behind bars for Financial crimes they did or didn't commit and lost their Investments in the process.

Blockchain offers you the opportunity to Hold your assets away from the Supervision of Government and Financial Regulation agencies, without the fear of losing your Money to Armed Robbers or Investment Institutions who would run away with your Money and other Men of the Underworld.

Also Read: Cryptocurrency Taxes 2022: A Complete Guide

Key Features Of Blockchain Technology

1. Distributed Ledger Technology: This is a database used by Bitcoin, it allows multiple records of transactions to be validated and stored in multiple places at the same time.

2. Smart Contracts: Smart contracts are a system of automating transactions. It's used to program information between the Contract creator and the recipient on the Blockchain. in such a way that the transactions are automatically executed once certain requirements are fulfilled.

Types of Blockchains

Public Blockchains

Bitcoin which is the First CryptoCurrency uses this Type of Blockchain Technology.

Public Blockchains are Decentralized in nature. They're open networks that allow anyone connected to the internet to access them and Verify Transactions (Mining) while earning rewards in the process.

Public Blockchains use the Proof of Work (PoW) and Proof of Stake (PoS) mechanisms. Anyone can access public Blockchains, and even propose modifications that will improve the smooth running of the Blockchain.

Which will then happen once all parties reach an agreement. Although Information that has been Published on the Ledger can not be Altered or Changed.

Ethereum Blockchain is another Example of Public Blockchains.

Private Blockchains

Like the name implies, Private Blockchains or Permissioned Blockchains are not open to the public and sometimes they operate within a restricted area. An example of Private Blockchains are Ripple ( XRP) or Hyperledger.

Anyone who wants to access them needs to ask for permission from the Administrators or authorities that control it.

Think of Private Blockchains as Facebook. Anyone on the Internet can't just login to Facebook without the permission of the owners of Facebook, The person has to seek their permission by opening a Facebook account of which If they approve he becomes a Facebook user.

Hybrid Blockchains

Hybrid Blockchains are a combination of features of Public and Private Blockchains, they're used when the Organizations want to decide on which Information a certain amount of people see and which ones are open to the public.

Transaction Information and other records are Private but can be accessed by verifying through Smart Contracts.

Users gain full access to the blockchain when they join, Each user's identity is protected from other users but revealed when they engage in a transaction with other users. To the Users they have Transacted with.

Sidechains

Sidechains are Blockchains that run on another Blockchain, They make it easy to use Tokens on another Blockchain apart from their native Blockchain.

This mechanism allows Interchangeability of Tokens between the Parent Blockchain and the Sidechain, for a smooth, more scalable and efficient operation.

The Liquid Network and Alpha are examples of Sidechains.

In summary Blockchain is an important Technology that you need to try and understand as it's being implemented in different fields of Human society apart from Cryptocurrency.