The Blockchain Technology is one of the most recent ‘IT’ things of the industry driven by money and Information Technology. Having read the ‘adjective’ type definition of the technology, let us read the one that defines it in the terms of ‘work it does’. The Blockchain is an “incorruptible digital ledger” to record the economic transactions that can be programmed. They can be programmed to record everything of value and not just financial transactions.
The Blockchain technology has allowed the digital information to be distributed but NOT COPIED. Owing to this, the technology has created a new type of internet backbone. The technology was devised for the highly popular cryptocurrency known as Bitcoin but is being researched upon by the tech community to find other potential uses in diverse applications.
Let us understand the things in a better manner via an example which is explained in the following section.
- Suppose that someone has requested a transaction of some kind over the internet from someone.
- Now, in the Blockchain Technology, this transaction will be broadcasted over a Peer-to-Peer network which will comprise of different computers known as NODES.
- The main duty of this network is to VALIDATE the transaction and the people involved by using some set pattern of ALGORITHMS that are verified.
- Now, these verified algorithms might include the contracts, records, cryptocurrencies and other information as well. Before we move ahead and find more about The Blockchain, please note that the cryptocurrency will not have any intrinsic value, and is not redeemable in some other form such as gold etc. It will not have any physical form and exists in the network only. Further, the supply of the cryptocurrency is not governed by any bank and the complete network is decentralized.
- Now, let us resume our discussion on the transaction. Once the network has verified the transaction; it is combined with other transactions and a new block of data for the ledger or the Blockchain in created.
- This newly created ‘BLOCK’ is added to the already existing chain called the ‘BLOCKCHAIN’. This ledger is permanent and unalterable. The transaction is then termed as complete.
This was a very simple and elementary scenario to understand the term blockchain and its functioning. However, one might think that it is ‘NOT-THAT-MUCH-BIG’ or crucial as it seems when we read or find about the level of interest involved in the same; which is why the next section will explain the benefits, impacts, and characteristics of the technology that makes it so crucial. Further, the term ‘Bitcoin Blockchain’ will also be dealt with.
What makes Blockchain Technology so BIG??
- The blockchain is highly durable and as an inherent robustness; just like the internet.
- You can see it, get involved in it; but never ever change it; or HACK IT.
- It is highly distributed which means that the need for a centralized TRUSTED PARTY is eliminated. As all the members in the peer to peer network have the information regarding the ledger, the transaction is done, the people involved in it and have no personal interest in dealing with ‘BAD ACTIVITIES’ such as bribing and false updates; the system itself is immune to any dirty work.
- Further, in order to make the whole system immune to hacking; the people involved are incentivized. They are asked to keep a record of the activities being done and verify that the data across all the network members are same; these are called miners. They use immense computational power and electricity and do the ‘dirty-work’. There are a number of miners that compete for the final verification by solving a puzzle. The one solving that puzzle in the first position will get one bitcoin.
Having read the benefits of the technology, let us move on to the ‘Bitcoin Blockchain’.
- Understand that the term Bitcoin (B capital) stands for the ledger or protocol of the cryptocurrency and ‘bitcoin’ (small B) stands for the currency.
- Now Bitcoin Blockchain is the term that defines the ledger of bitcoin which we will explain with the help of an example:
- Suppose one person wants to send one bitcoin to some other person. He initiates the transaction by sending the token across the Bitcoin Blockchain that runs on thousands of computers globally.
- The transaction is verified by the MINERS and the block of the transaction is attached to the already existing chain by solving the MATH PUZZLE.
- The work of MINERS is checked by others in the network and added to the Bitcoin Blockchain after verification.