Blockchain technology. Do we really need an introduction? No. But does everyone understand it completely? In its truest essence? No.
Well, dive right in!
So, in the simplest of words. Blockchain Technology is a technology that is invented to permit digital cash exchange. Its prime essence is to make an electronic cash system that does not depend on third-party interference.
It’s a peer-to-peer, electronic network where two individuals can transfer (send or receive) money without depending on a mediator.
A block contains data on transactions and behaves as a digital ledger. Many such logs or blocks are connected, or ‘chained together’; therefore, the name “Blockchain” technology.
Ownership of Blockchain Technology
Now, if all these wonderful people are involved in its conception, then who owns Blockchain Technology? No one and everyone at the same time. Really! It’s not a Schrödinger’s puzzle if you think about it.
It’s an intangible technology like the internet. No one owns it, but everyone can use it, run and own their blocks.
The Working of Blockchain Technology
So, what’s a Block? And is the working very complex?
Ah, right questions.
Blockchain Technology is where virtual ledgers are known as Blocks. These blocks record transactions.
Meanwhile, users generate these blocks in the blockchain network with specific transaction details. They later publish it on the open network where everyone can see it.
Thus, the role of a miner… Miners confirm the unverified blocks. They mine the data and verify the data. After verification, the money gets transferred to the recipient’s account.
Furthermore, Miners are responsible to add blocks, validate data within and ensure they get connected to the Blockchain.
In addition to their responsibilities, Miners receive rewards for the work of adding blocks and solving the problem/ validating the block present in the network. In Ethereum, a Miner receives 2 Ether.
Furthermore, the blocks of the Blockchains are secure by encryption. The encryptions are known as Hashes. Hashes are a string of numbers that is a compressed version of the digital data contained within. It’s a one-way encryption method; making it impossible to reverse the process.
Bitcoin uses the SHA-256 Hashing System. Cardano uses blake2b-256, and Ethereum implements a Keccak hash function.
Consequently, the ‘Hash’ generated now poses a mathematical problem and has to be solved by the miner. This is how miners validate the transaction in the network. This method of validating the transactions is called the Proof of Work method.
Finally, Miners, post validating the transaction, pass it to the recipient. The recipient receives it and decodes the encryption using their Private Key, Hash Output, and the message they received in their address.
Meanwhile, Ethereum, Avalanche, Polkadot, and many other upcoming Blockchains are focusing on running their network with the Proof of Stake method.
Blockchain technology allows a novel system of cash exchange without the interference of government or centralized third parties. This ledger is open, validated by miners, and secured by cryptographic codes.
As of 2022, the 3rd generation of Blockchain Technology is running on the web. With advancements such as Web3, NFT Marketplaces, and the Proof of Stake method. Blockchain has many uses as a service tool.