UNDERSTANDING BLOCKCHAIN

okonkwochike (25)in #blockchain • 5 years ago

When I talk about understanding the blockchain technology, it means an in-depth view and a critical analogy about the blockchain.

Price Waterhouse Coopers (PWC) defined blockchain as a ‘distributed, decentralized transaction ledger’. Blockchain is also immutable, resilient and secure. A couple of other big brands has come up with their own way to describe and define the innovative technology.

Blockchain was invented by a person (or group of people) using the name Satoshi Nakamoto in 2008 to serve as the public transaction ledger of the cryptocurrency bitcoin. In my view, the blockchain is distributed, decentralized and public digital ledger which is used to record transactions across computers so that its data cannot be altered, without the alteration of all subsequent blocks because the blockchain made up of chain of blocks which have been signed. This allows the participants to verify and audit transactions independently and relatively inexpensively. The blockchain is about the three T’s — trust, truth and transparency. And that’s what the blockchain will enable us to get better visibility on — knowing what has happened, when something happened and how truthful it is or how it happened. A blockchain database is managed using a peer-to-peer network thereby eliminating third-party and a distributed timestamping server.

How Blockchain Works

Blockchain, as the name implies, consists of chain of blocks linked together and enables distributed public ledgers that hold immutable data in a secure and encrypted way and ensure that transactions can never be altered. Bitcoin and other cryptocurrencies like Ethereum, Litecoin are the most popular examples of blockchain usage. However, four major things must happen for a block to be added to the blockchain:

The first step is that a transaction must occur. Let say you make a purchase of something for Jumia and you click on checkout and you purchased a product that was not the exact product you wanted and you need to make a change.
The next step is that the transaction must be verified. After making that purchase, your transaction must be verified. On blockchain, however, it is done by a network of computers. These networks often consist of thousands (or in the case of Bitcoin, about 5 million) computers spread across the world. After making your purchase from Jumia, the network of computers rushes to check that your transaction happened in the way you said it did. That is, they confirm the details of the purchase, including the transaction’s time, dollar amount, and participants.
That transaction must be stored in a block. After your transaction has been verified as accurate, it gets the green light from the network of computers. Then the transaction’s amount, your digital signature, and Jumia’s digital signature are all stored in a block and the transaction will likely join hundreds, or thousands, of others like it.
That block must be given a hash. So once all of a block’s transactions have been verified, it must be given a unique, identifying code called a hash. The block is also given the hash of the most recent block added to the blockchain. Once hashed, the block can be added to the blockchain.

Any time a new block is added to the blockchain, it becomes publicly available for anyone to view — even you. If you take a look at Bitcoin’s blockchain, you will see that you have access to transaction data, along with information about when (“Time”), where (“Height”), and by who (“Relayed By”) the block was added to the blockchain.

Type of Blockchain

Currently, there are at least four types of blockchain networks.

Public blockchains
Private blockchains
Consortium blockchains
Hybrid blockchains

Pros and Cons of the Blockchain

The blockchain’s potential as a decentralized form of record-keeping is almost without limit. From greater user privacy and heightened security to lower processing fees and fewer errors.

Pros

Blockchain data is often stored in thousands of devices on a distributed network, the system and the data are highly resistant to technical failures and malicious attacks.
Improved accuracy by removing human involvement in verification.
The blockchain eliminates the risk of trusting an organization and also reduces the overall costs and transactions fees by cutting off intermediaries and third parties.
Decentralization makes it immutable, resilient and secure.
Transactions are secure, private and efficient. The blockchain is a transparent technology.

Cons

When data has been added to the blockchain it is very difficult to modify it.
Significant technology cost associated with setting up a blockchain platform.
Lack of blockchain developers. Low transactions per second.
History of use in illicit activities.
Blockchain ledgers can grow very large over time and it requires large storage.

NOTE : Despite the cons of the blockchain, it has more unique advantages, and it is definitely here to stay. The journey to mainstream adoption is far, but a couple of firms and industries are getting on board on blockchain. The next few years will likely see businesses and governments experimenting with new applications to find out where blockchain technology adds the most value.

Use cases

The blockchain promises to fundamentally and technically change the way we live and run businesses in a different sectors and government. Companies in financial services, healthcare, energy and other industries are beginning to adopt blockchain either to carry out a service of to run their entire platform — the blochchain promises to improve efficiency in numerous processes, plus create new business opportunities. It can often be difficult to understand the transformative impact the blockchain can have on our lives, which is why I have decided to compile a couple of potential blockchain use cases.

The blockchain threatens to disrupt the financial services, government services, healthcare and real estate. Some other promising applications, or use cases, of blockchain technology is Voting system, Intellectual Property, Insurance, Supply Chain Management, Identity Management, Charity (NGO’s), Internet of Things to mention by a few.

Blockchain and Cryptocurrency

Blockchain is the technology that enables the existence of cryptocurrency and cryptocurrency refers to a digital coin that runs on a blockchain.... Bitcoin is the name of the first ever cryptocurrency, some people believe it is a digital currency for which blockchain technology was invented. The blockchain behind bitcoin is a public ledger of every transaction that has taken place and It is immutable. Advocates of the technology say this makes bitcoin transactions secure and safer than current systems. A cryptocurrency is a medium of exchange, such as the US dollar and the British pounds, but is digital and uses encryption techniques to control the creation of monetary units and to verify the transfer of funds. The top 10 Cryptocurrencies by market capitalization as at when this article was written is listed below: