The Basics of Blockchain Technology Explained

In this era of information, everything is highly dependent on data. Data is so crucial in business and government decision-making that it is often considered the oil of the 21st century.

Due to this rapid use of data in business operations, it is essential that all the data is stored in a highly efficient, safe, and secure way. This is where blockchain technology comes in. As the name suggests, a blockchain is a chain of different blocks, and a piece of data is stored in each and every block. This makes the data stored in the blockchain securely protected from any kind of manipulation.

As the data stored on the blockchain cannot be tampered with, the term “immutable” is associated with blockchain technology. The immutability of data means that the data stored on the blockchain is unalterable and cannot be tampered with or manipulated.

The word blockchain is derived from the working of blockchain technology itself. As the name suggests, blockchain is a combination of different blocks, where each block contains data that is transmitted over the internet.

This means that the data in blockchain technology is scattered in various blocks which are connected in a chain known as the blockchain.

And since each block contains a specific set of data, this means that the data is distributed over a chain, which makes the term “distributed ledger” important in blockchain technology.

But before jumping into the technicalities of blockchain, it is essential to understand the critical concepts needed to learn about blockchain technology.

Let’s look at the major concepts for understanding blockchain technology.

Key Concepts Needed to Understand Blockchain Technology

     

      • Nodes

    Nodes are the individual computers that are connected in the blockchain network.

       

        • Distributed Ledger

      Whenever you hear about blockchain technology, you will often hear the term “distributed ledger.”

      A distributed ledger is an electronic, digitized record of information such as financial transactions, digital assets, or any other data. This scattered form of data across different blocks of a blockchain is known as a “distributed ledger.” It is a decentralized system that operates across a network of computers and nodes that are linked together by a consensus mechanism. 

      Each node in the network stores and verifies its own copy of the distributed ledger, which provides a riskless foundation for sharing data across the entire network without any interference from any single party.

      All participants in the ledger have access to all shared assets to view the real-time data. It also gives them better control over their data privacy while maintaining security.

      This means that distributed ledgers provide an efficient way to bring trust and transparency into online transactions.

         

          • Immutable Records

        Another important term in understanding blockchain technology is “immutable record.” No one can change the existing information stored on the shared ledger once it is recorded. Any subsequent changes made in the record will be visible to all the stakeholders, making record tampering ineffective. This distinction of blockchain technology makes the nodes immutable.

           

            • Smart Contracts

          Smart contracts are automated contracts that are automatically initiated once pre-decided terms and conditions are met. All the stakeholders will agree on specific terms, and once those terms are achieved, the smart contracts will be started automatically.

          This should clear up any questions about the key concepts of blockchain technology. But there are many types of blockchain. Let’s look at all of them one by one.

          Blockchain has different types, which vary from case to case:

          Types of Blockchain:

          Public Blockchain

          This is a permissionless system in which anyone globally can become a node and conduct transactions. Public blockchains can be accessed from anywhere worldwide, so the ledger becomes a distributed ledger in the case of the public blockchain.

          Public blockchains can be used in the following ways:

             

              • For voting purposes: Every voter can join the blockchain to cast their vote.

              • Crowdfunding: Public blockchains can be used to gather funds from the general public. Both private entities and politicians can use a public blockchain to collect donations for various purposes.

            Private Blockchains

            Private blockchains, or as they are also known, permissioned blockchains or business blockchains, can only be accessed by nodes that have the authority to do it.

            This restricted network of nodes traces each other’s activity in real-time and can check for any data manipulation.

            The system administrator or organization controlling the whole process is in charge of allowing nodes to connect with the system.

            Notable and common uses of private blockchain include:

               

                • Verifying and tracking assets over the internet.

                • Internal voting systems where only specific people are allowed to vote.

              Hybrid Blockchain

              As the name suggests, a hybrid blockchain combines public and private blockchains. In this blockchain network, combinations of private and public blockchains are incorporated so that some nodes in the system have more access to the data than others.

              Organizations that use hybrid blockchain systems make a public-based blockchain to which everyone can contribute. Similarly, they make a private blockchain in parallel which is only accessible to verified nodes.

              Consortium Blockchain

              While a consortium blockchain works like a private blockchain, its only difference from the private blockchain is that it is controlled not by a single node but by a group of nodes in any organization.

              In consortium blockchain, the data is being collaborated from various sources, and multiple people are contributing to the system simultaneously.

              Now that you have a basic understanding of the technical terms used in blockchain technology and the types of blockchains, here is a technical definition of blockchain.

              Blockchain technology is a revolutionary, distributed ledger system widely known for its immutability, transparency, and decentralization properties. It is an electronic ledger system that continually records and verifies transactions efficiently and securely. By utilizing multiple replicas as “blocks,” blockchain technology ensures that data is accurate and unalterable through cryptographic mechanisms.

              The immutable nature of the technology allows it to store data so that it cannot be modified or tampered with, making it an excellent tool for enhancing trust between parties and ensuring the integrity of records. Additionally, its decentralized architecture helps remove server or third-party centralization, making it open to everyone on the network.

              Due to its transparency and ability to provide secure, end-to-end verification, blockchain technology has become increasingly popular as a form of digital currency transacting worldwide. But it is important to note that blockchain technology can also be centralized, so not all blockchain processes work on decentralized systems.

              Areas Where Blockchain Technology can be Used

              Blockchain technology is the future of many industries, as it offers a range of benefits for users. By ensuring complete security and transparency, blockchain can make transactions more securely and efficiently than ever before. Here are some quick examples of the use of blockchain in daily life.

              Healthcare

              Blockchain technology can be used to create a secure, decentralized database of medical records. This would allow patients to control their own data and give them the ability to share it with doctors and other healthcare providers as they see fit. Furthermore, blockchain could also be used for managing the data related to health insurance in a better way.

              Education

              Blockchain technology is also bringing meaningful changes in the education sector. Free educational resources like books, podcasts, video content, and research papers on public networks for all the students out there can be secured on the blockchain. Educational content stored under blockchain is highly secure and cannot be tampered with.

              Banking

              Blockchain technology is widely used to create a secure, decentralized system for managing banking transactions.

              This allows banks to reduce costs and increase security by eliminating the need for intermediaries. In addition, blockchain could be used to create a system for peer-to-peer lending, allowing individuals to borrow and lend money without going through a bank. All the peers involved in the process are well aware of the finances involved in the process.

              Real Estate

              Blockchain technology is also employed in creating a secure system for maintaining real estate. Real estate is one of the businesses which is most affected by fraudulent actors. People sell ghost plots to others in a series of scams. But with blockchain in action, buyers and sellers can transact directly with each other without the need for a third party, such as a real estate agent or broker.

              Buyers can also verify the authenticity of plot owners on the blockchain, thus enabling them to track ownership of real estate properties using the technology.

              Supply Chain Management

              Blockchain technology is also making its grounds to create a seamless supply chain management system. Now businesses can track goods as they move through the supply chain. This allows businesses to know exactly where their products are at all times and ensure that they are being delivered as promised. Furthermore, blockchain can be used to verify the authenticity of products and ensure that they are not counterfeit.

              How Does Blockchain Work?

              Blockchain is an innovative technology that enables secure and transparent peer-to-peer digital transactions. It creates a digital ledger containing information regarding each transaction within the network, with all participants using a shared version of the record.

              The ledger comprises blocks, each containing a cryptographic hash, time stamp, and transaction data. These blocks are linked together in chronological order via cryptographic principles to form an immutable chain.

              Every participant in the blockchain verifies each entry before it is added to the ledger, thus ensuring the information’s accuracy and security. As such, blockchain technology can give organizations significant trustworthiness and greater internal transparency when engaging in digital transactions.

              Here is a quick infographic to explain the working of blockchain technology.

              What Are the Benefits of Using Blockchain?

              Establishes greater trust levels

              In the case of blockchain technology, you know about the nodes with which you are pairing to share the data. So, you know whose computer is present in your network. Eventually, you will be able to trust the information being stored and transmitted in the specific blockchain since you trust every other person present in the chain, which can change the data. And for more precautionary measures, you can also track the activity of each and every node to make the process even more transparent.

              Higher Security

              As all the transactions are immutable (unchangeable), this makes blockchain highly secure. Every new transaction made into the system is traceable, and all other nodes can check for any data manipulation in the system.

              Even a system administrator cannot delete a transaction, making blockchain a highly secure technology.

              Blockchain is a consensus-based system. All the stakeholders in one system are in agreement, and the data is synchronized on every computer. The computer acts as a node in the case of blockchain. No one can change the data on the blockchain without letting other nodes know. And any change in the system is trackable to other nodes, which alerts other people about any possible tampering (manipulation) in the system.

              Greater Efficiency

              Smart contracts are a basic of blockchain technology. As these contracts are initiated automatically whenever the terms and conditions are met, this results in more efficiency in the whole process. Smart contracts are also helpful for reducing paperwork and eliminating red tape from the system.

              How Secure is Blockchain Technology?

              Blockchain technology is quickly emerging from its infancy and making considerable strides toward becoming the future technological backbone of business transactions. Adoption continues to grow exponentially, and the security implications are beginning to be understood more clearly.

              While there are certain areas in which blockchain technology can become more secure, its existing power as a method of securely storing data and mitigating various risks still stands strong.

              How can Businesses Use Blockchain to Their Advantage?

              Blockchain technology offers businesses the potential to increase their efficiency, transparency, and security. By using blockchain as part of their operations, they can reduce costs associated with manual record keeping and payment processing while also increasing safety by eliminating instances of double-spending or fraud.

              Businesses can use blockchain to create digital assets such as virtual currency, tokenized assets, or loyalty points systems, which can be easily tracked and exchanged on a secure platform.

              Furthermore, blockchain makes it easier for businesses to store and share data securely, providing an additional layer of protection against potential cyber threats. The possibilities afforded through the use of blockchain show that it is becoming an increasingly valuable asset for businesses trying to stay competitive in the marketplace.

              How can Governments Incorporate Blockchain Technology?

              Governments are always looking for innovative solutions to the problems they face. Blockchain technology is emerging as a potential tool they can use to improve their operations, making them more effective and efficient.

              For example, blockchain can be used to facilitate easier tracking of financial transactions, eliminating the possibility of double spending or overspending. It also provides enhanced security against malicious attacks and fraudulent activities by utilizing advanced encryption techniques.

              Additionally, it allows seamless collaboration and asset sharing between departments in different countries without worrying about sensitive information being compromised or leaked. Government agencies worldwide should take advantage of blockchain’s potential to provide better service to citizens and have better control over their operations.

              We at soleqs have made the blockchain solutions easy for your business. With the growing need of blockchain solutions in modern day business, it is important that  businesses do feasibility assessment for their blockchain architecture. So Soleqs helps businesses and governments to do the feasibility of their blockchain projects to determine the likelihood of its success.

              ‘Soleqs blockchain feasibility assessment has the following features.

                 

                  • Determining the viability of your project

                  • Assess risks and propose solutions

                  • Doing SWOT assessment

                  • Deciding whether the project fits your company needs

                Soleqs also do business case study for your blockchain project, thus establishing the whole purpose of your blockchain applications.

                It’s time to make your blockchain projects a reality.

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                Bariki Mshomi

                Bariki Mshomi

                20+ years of IT experience, during which he have achieved expertise as a Data Integration Architect, Solutions Architecture, Data Architecture, ETL Architecture, and Developer, Data warehousing Modeler Database Technologies, including Oracle, SQL Server, DB2, IMS, VSAM, Teradata, Hive Data Movement using Informatica, SSIS, PDI Pentaho, PL/SQL, and SQL/PL Business Intelligence Reporting using Business Objects and Microstrategy Clients Including Highmark Health, Ramsey County MN, Century Link, Country Financial, Digi-Key, Toro, Medica, Blue Cross Blue Shield of MN, Ingenix, Cardinal Health, Data Recognition, Target, Allianz, eFunds, Fair Isaac, GE Capital Fleet, and Carlson Marketing Group

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