You probably have heard about this thing called the blockchain. But if you have not had time (or have not felt like it) to learn more about what is behind the work of blockchain developers, you can do it right now.
In this article, we will take you through the definition of blockchain, how a transaction is processed in the ledger, and some of its applications.
What Is Blockchain
Blockchain is a decentralized, immutable, and shared database or ledger that keeps records of transactions and related data made in cryptocurrency. Blockchain technology does not need a central authority. Instead, it is distributed across a network of computers.
One key difference between blockchain and a regular database is how data is stored. Information is stored in blocks that are linked using cryptography. They are impossible to tamper with due to their sequentiality. That is, if someone tries to alter the content of one block, they ruin the following blocks. Each block is given a timestamp as it is added to the chain.
Currently, there are thousands of blockchains running. You can store different types of information on blockchains, but the most frequent one so far has been transaction-related data.
How Blockchain Works
To understand how blockchain works, let us first go through two key concepts: mining and hash.
Mining
It is the process of creating a new block. Miners use advanced software to solve complex mathematical problems, which result in the creation of a new block.
Hash
It is a unique number that identifies each block. It is permanently attached to the block.
Now let us see how a transaction is processed in a blockchain.
- A new transaction enters the blockchain. The person who wants to make the transaction must provide all vital information about the transaction.
- Because blockchain is a decentralized ledger, the transaction must be transmitted to the network in order to be approved. So instead of having a single department approving transactions single-handedly, the blockchain relies on a method in which all members of the network can not only see the information but also validate it.
- The verification of the transaction is done by miners. By solving highly complex equations, the miners create a new block with a hash to store the transaction information and thus add it permanently to the chain. Miners’ work is rewarded with cryptocurrency.
- The transaction is complete.
Where Is Blockchain Used
Blockchain technology has many applications. The fact that it is transparent and secure has caught the eye of many people. And as it grows in popularity, it expands to very distinct fields.
Here are some examples of where blockchain can be used:
Real estate
Blockchain helps reduce significantly the amount of paperwork to prove ownership and verify financial information.
Insurance
Blockchain transparency is a feature customers appreciate when buying insurance.
Logistics
This technology can also be useful in tracking systems. As a public ledger, it facilitates communication between customers and providers as well as data access.
Sensitive data storage
Blockchain keeps data secure and makes it easier to access. For example, the medical field can benefit from the use of blockchain to store patient data.
Final Thoughts
A blockchain is a decentralized, transparent ledger that safely records transaction data through cryptography. Unlike typical banking systems, transactions can be viewed and validated by anyone within the network. To approve the transaction, participants use a process called mining.
Besides cryptocurrency transactions, the blockchain can also be useful in varied fields, such as logistics and data storage.
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