What is blockchain technology?
A blockchain is a database that stores data electronically in digital formats. Blockchain is mainly used in cryptocurrency systems such as Bitcoin, Dogecoin, Monero, etc. Nowadays Central Board of Secondary Education (CBSE) is also using blockchain technology. Blockchain technology is very much secured and is used for maintaining a secure and decentralized record of transactions.
The blockchain collects and stores data in a set of blocks. Blocks have a certain capacity and when filled, are closed and linked to the previously filled block, forming a chain called the blockchain.
All new information that follows that freshly added block is compiled into a newly formed block that will then also be added to the chain once filled.
What is the difference between a normal database and a blockchain database?
A normal database stores its data into tables but a blockchain stores its data into blocks as its name implies. When a block is filled, it is set in stone and becomes a part of the chain. Each block in the chain has an exact timestamp when it is added to the chain. Blockchain technology uses cryptography to link the blocks. Blockchains are used in cryptocurrencies so that no single person or group has control rather than all users collectively retain control over it.
How does blockchain technology work?
Blockchain technology is made in a way that allows digital information to be recorded and distributed, but not be edited. A blockchain is a foundation for immutable ledgers, or records of transactions that cannot be edited or deleted. That's why blockchain is also known as a distributed ledger technology (DLT).
Blockchain was first proposed by the unknown persons behind the online cash currency bitcoin, under the pseudonym of Satoshi Nakamoto in 1991. The blockchain concept predated its first widespread application in use: Bitcoin, in 2009. Nowadays the use of blockchains has exploded via the creation of various cryptocurrencies, decentralized finance(Defi) applications, and non-fungible tokens(NFTs).
Blockchain Decentralization
Let's take an example that a food company owns a huge server with 20,000 computers used to maintain their database holding all of its client's account and materials information. This company owns a building that contains all of these computers under one roof and has full control of each of these computers and all of the information contained within them. What if it provides a single point of failure? What if its internet connection is down? What if the electricity at that location goes out? What if anyone edits or deletes everything with a single click? What if the data is corrupted?
Here the blockchain allows the data held in that database to be spread out among several network nodes at various locations. This not only creates resistance but also maintains the fidelity of the data stored. If somebody tries to alter a record at one instance of the database, the other nodes would not be altered and thus would prevent the person from doing so. If one user tampers with Bitcoin’s record of transactions, all other nodes would cross-reference each other and easily pinpoint the node with the incorrect information. This system helps to establish an exact and transparent order of events. This way, no single node within the network can alter information held within it. Because of this, the information and history (such as of transactions of a cryptocurrency) are irreversible. Such a record could be a list of transactions (such as with a cryptocurrency), but it also is possible for a blockchain to hold a variety of other information like legal contracts, state identifications, or a company’s product inventory.
Is blockchain technology transparent and secure?
Because of the decentralized nature of cryptocurrency blockchain, all transactions can be transparently viewed by either having a personal node or using blockchain explorers that allow anyone to see transactions occurring live. Each node has its own copy of the chain that gets updated as fresh blocks are confirmed and added. This means that if you wanted to, you could track Bitcoin wherever it goes. The records stored in the Bitcoin blockchain (as well as most others) are encrypted. This means that only the owner of a record can decrypt it to reveal their identity (using a public-private key pair). As a result, users of blockchains can remain anonymous while preserving transparency.
As we know blockchain technology uses decentralized security. To begin with, new blocks are always stored linearly and chronologically. That is, they are always added to the “end” of the blockchain. After a block has been added to the end of the blockchain, it is extremely difficult to go back and alter the contents of the block unless a majority of the network has reached a consensus to do so. That’s because each block contains its own hash, along with the hash of the block before it, as well as the previously mentioned time stamp. Hash codes are created by a mathematical function that turns digital information into a string of numbers and letters. If that information is edited in any way, then the hash code changes as well. That's how Blockchain technology works and it's a very secured technology till date.