Blockchain Technology is the name given to a modern database management technique, which enables a large business to share information and communicate with the help of links and chains between different nodes in the network. It is a new way of handling digital transactions that have started to gain traction in recent years.

Data is kept in blocks that are connected in a chain within a blockchain database. Because the chain cannot be removed or altered without network approval, the data is consistent across time.

What is Blockchain?

A blockchain is an ever-growing ledger in a network, which keeps a track record of all transactions, changes and implementations that have taken place inside the network in a secure, ordered and immutable way. In simple terms, it is a chain of blocks like a linked list, with each node being before and after another node. All nodes or blocks have links to the next node, just like pointers in programming.

Each block records all of the recent transactions, and once completed goes into the blockchain as a permanent database. This technique is based on Cryptographic Concepts of Information Security, which will be studied later on. Each time a block gets completed, a new block is generated. Once a block of information is created in the chain, it can’t be changed or deleted. This makes the blockchain very secure and trustworthy.

A blockchain network is independent of centralized institutions, and it can work without any need for third-party middle-man such as central authorities, banks, government, etc. Transactions are verified by a network of computers. A blockchain network is based on the internet, and hence, it cannot run offline.

Key Takeaways

We can take the following important points from the above explanation, and memorize these before moving on to the next few sections −

• Blockchain represents a form of distributed database that contrasts with conventional databases in its method of information storage.
• It organizes data into blocks that are interconnected through cryptographic techniques, which will be studied later.
• A variety of information can be recorded on a blockchain, yet its primary application has been as a ledger for transactions.
• Blockchain operates in a decentralized manner, meaning that no individual or group possesses authority over it; control is shared among all users.

Elements of Blockchain

The key elements of any blockchain network include the following components given below −

Distributed Ledger

Every member of the network has the ability to reach the decentralized ledger and its unchangeable log of transactions. Through this common ledger, transactions are documented just one time, removing the need for redundant work that is common in conventional business networks.

Immutable Records

It is impossible for any participant to alter or manipulate a transaction once it has been documented on the shared ledger. In the event of an error in a transaction record, a new transaction must be created to correct the mistake, and both transactions will be transparently displayed.

Smart Contracts

To speed transactions, a set of rules that are called a smart contract is stored on the blockchain and run automatically. A smart contract defines conditions for corporate bond transfers, include terms for travel insurance to be paid and much more.

How Blockchain Work?

A blockchain consists of small sequenced programs, known as scripts, which conduct the tasks available in a database, like entering information, accessing data stored in the database, saving data and copying it elsewhere. By default, data once saved in a ledger cannot be altered. A blockchain is distributed, which means multiple copies are saved on many machines, and they must all match for it to be valid.

Transactions in a network follow a sequence of steps, which may differ depending on the type of network where they are implemented. Generally, when a transaction is initiated, the application that provides an interface for the blockchain starts a sequence of events.

Every node in the network proposes its own blocks in this way because they all choose different transactions. Each works on their own blocks, trying to find a solution to the difficulty target, using the query number used once, also called by its acronym nonce. Once a block is closed, a transaction is complete.

Although this process is a generalized sequence of steps, not all networks follow these in order, or at all. Some cryptocurrencies like Ethereum, Dogecoin, and Bitcoin are discussed in the later sections of this article.

Features of Blockchain

Blockchain technology is a major booming force for decentralized cryptocurrencies across the globe. Due to its many features, it finds use in various sectors of modern life. The following points briefly explain the features and concepts of Blockchain technology −

Decentralization

A blockchain facilitates the distribution of data across multiple network nodes—computers or devices operating blockchain software, located in different geographical areas. This architecture not only ensures redundancy, but also preserves the integrity of the data.

For instance, if an attempt is made to modify a record at one instance of the database, the other nodes will thwart this action by comparing block hashes. Consequently, no individual node within the network possesses the capability to alter information contained within the chain.

Transparency

Due to the decentralized structure of all blockchain networks, all transactions are openly accessible for viewing by downloading and examining them, or by utilizing blockchain explorers that enable real-time monitoring of transactions.

Every node maintains its own version of the chain, which is continuously updated with the addition of new blocks. Consequently, it is possible to trace the movement of a bitcoin to its destination, if desired.

Security

Blockchain technology ensures decentralized security and trust through various methods. Initially, new blocks are consistently stored in a linear and chronological manner, always being appended to the last of the blockchain. Once a block is added to the end of the blockchain, it becomes immutable, preventing any changes to previous blocks.

A modification in any data within a block alters its hash value. Since each block includes the hash of the previous block, any change would impact subsequent blocks. In the event of an attempt to modify a block, the network would reject it due to hash inconsistencies. Nevertheless, this manipulation can potentially occur in smaller blockchain networks.

Types of Blockchain Networks

There are a number of blockchain configurations, which can be explicitly classified into 4 subcategories. The following points clearly explain the different types of blockchain networks −

Public

Public blockchains are open to all participants, enabling anyone to become a member. Each individual within the blockchain possesses the same privileges to view, modify, and authenticate the blockchain.

The main purpose of public blockchains is for the trading and creation of digital currencies such as Bitcoin, Ethereum, and Litecoin.

Private

An individual entity oversees private blockchains, known as managed blockchains. The governing body dictates membership and privileges within the network.

Private blockchains exhibit partial decentralization due to their restricted access. Ripple, a digital currency exchange network catering to businesses, serves as a prime illustration of a private blockchain.

Consortium

Consortium blockchain networks are governed by a collective of organizations. These preselected entities collaborate to uphold the blockchain and establish protocols for data access. Sectors with aligned objectives and advantages in shared accountability typically favor consortium blockchain networks.

Hybrid

Hybrid blockchains integrate features from both private and public networks. Organizations have the capability to establish private, permissioned systems in conjunction with a public framework.

This arrangement enables them to manage access to particular data housed within the blockchain while maintaining the public availability of other information.

Smart contracts are employed to permit public participants to verify the completion of private transactions. For instance, hybrid blockchains can provide public access to digital currencies while ensuring that bank-owned currencies remain confidential.

Applications of Blockchain

Different sectors of industry use blockchain technology in a variety of ways. Some of these industries are mentioned below −

Energy Producing Industries

Energy companies leverage blockchain technology to establish peer-to-peer energy trading platforms, enhancing the accessibility of renewable energy. As an illustration, these applications include −

• Energy companies utilizing blockchain have developed a trading platform enabling individuals to buy and sell electricity. Homeowners equipped with solar panels can sell surplus solar energy to nearby residents through this platform. The system operates efficiently with smart meters initiating transactions, which are then recorded on the blockchain.
• Through blockchain-based crowd funding projects, users have the opportunity to sponsor and own solar panels in areas with limited energy resources. Upon the completion of solar panel installations, sponsors may also receive rental income from these communities.

Banking and Financial Organizations

Conventional financial institutions such as banks and stock exchanges leverage blockchain technology to oversee digital transactions, accounts, and market trading. One instance is the Singapore Exchange Limited, a company specializing in investment services across Asia, which utilizes blockchain to enhance interbank payment systems.

This adoption of blockchain has effectively addressed various issues, such as batch processing and manual reconciliation of a large number of financial transactions.

Entertainment Industry and Media

Media and entertainment companies utilize blockchain technology to oversee copyright information. Ensuring copyright validation is essential for ensuring artists receive fair compensation. Numerous transactions are required to document the purchase or transfer of copyright material.

Through the implementation of blockchain tactics, they have effectively enhanced efficiency and decreased expenses associated with copyright management.

Benefits (Pros) of Blockchain

The advantages (pros) of blockchain technology include the following points −

• Lower expenses by eradicating third-party verification
• Enhanced precision through the elimination of human verification
• Increased difficulty in tampering due to decentralization
• Secure, confidential, and effective transactions
• Clear and transparent technology
• Offers a banking substitute and a means to safeguard personal data for residents of nations with unstable or underdeveloped governments.

Drawbacks (Cons) of Blockchain

The drawbacks (cons) of blockchain technology include the following points −

• Limited number of transactions processed per second.
• Past involvement in illegal activities, like on the dark web.
• Uncertain and varying regulations across different jurisdictions.
• Restrictions on data storage capacity.
• Some blockchains come with a substantial technology cost.

Roadmap to Become a Blockchain Developer

The steps below include the exact steps to follow in order to get started with blockchain and become a blockchain developer. So, let’s dive into these steps one by one −

• Build a strong foundation of any programming language, syntax, object oriented programming (OOP) concepts and data structures, especially linked lists, graph and trees.
• Master at least one programming language like Python, JavaScript, or Solidity, which form the crux of blockchain development.
• Learn the core computer science subjects like Information and Network Security, Cryptography, Computer Networks and Database Management System (DBMS).
• Brush up mathematics topics like Probability, Statistics, Linear Algebra and Calculus.
• Start with Blockchain basics- Distributed Systems, Consensus Mechanisms (Proof of Work, Proof of Stake) ad Decentralized applications, called DApps.
• Explore different blockchain categories like Public, Private, Hybrid and Consortium.
• Master Smart Contracts and Solidity.
• Study cryptographic concepts like hashing, encryption, digital signatures, and key management.
• Choose a platform like Ethereum and its programming language Solidity. Practice writing, testing, and deploying smart contracts.
• Explore the Ethereum Ecosystem like Ethereum Virtual Machine (EVM). Start working on Web3 concepts in detail.
• Create projects and participate in hackathons and competitions to hone your skills in Web3 and Solidity.
• Explore more platforms apart from Ethereum, like Solana, Cordano and Polkadot and many more.
• Contribute to Open Source community and gain practical exposure in the field. Open source areas include the GSoC (Google Summer of Code) and many more.

FAQs about Blockchain

The following page answers the most frequently asked questions on Blockchain technology and cryptocurrency −

1. What are ledgers in Blockchain Networks?

Ledgers are continuously increasing data files, which log entries of all transactions of the network in which these are based.

2. What Languages are used in Blockchain Technology?

The main languages used for blockchain development are Solidity, Python, C#, Ruby, Golang and many more. It is preferred to use Solidity as a beginner.

3. Which are the Most used Cryptocurrencies in the World?

Bitcoin is the most used cryptocurrency in the world, followed by Ethereum and Dogecoin.

4. How does a Blockchain Work?

In general, many nodes within the same blockchain implementation are required to perform algorithms to evaluate, validate, and process the history of the blockchain block whenever a new blockchain transaction is added to the blockchain. The fresh block of blockchain transaction is accepted into the ledger and the new block containing data is added to the blockchain if the majority of nodes confirm the authenticity of the block’s history and signature.

Conclusion

The technology of blockchain is gaining significant recognition, largely due to the influence of Bitcoin and cryptocurrency, with numerous practical applications already being implemented and investigated. As a term frequently mentioned among investors nationwide, blockchain has the potential to enhance the accuracy, efficiency, security, and cost-effectiveness of business and government operations by reducing the need for intermediaries.

As we enter the third decade of blockchain, the focus has shifted from whether traditional companies will adopt this technology to when they will do so. Currently, we are witnessing a surge in non-fungible tokens (NFTs) and the tokenization of various assets. In the near future, we may observe an integration of multiple blockchains, tokens, and artificial intelligence into solutions for both businesses and consumers.