What is Blockchain? A beginner Guide

A technology that is based on decentralized and cryptographic hashing to record the origin of digital data is known as Blockchain. It is also referred as Distributed Ledger Technology.

Like any other database, blockchain also stores data electronically in digital format. But the difference is that both systems structure data in different ways. Like in blockchain data is stored in encrypted blocks which have certain storage capacities, when it gets filled then it connects with the previous filled block and makes a chain of data known as Blockchain.

Note:

Decentralized meaning in blockchains that data is now immutable, which means that the data entered is irreversible and it is visible to everyone so we also don’t need any third-party to record all data.

How does it work?

This technology work with the help of 3 Steps:

• Block
• Node
• Mining

Block

In any blockchain, there are many blocks that help to store data. Each Block consists of 3 parts Nonce, hash and data.

When any block is created, then nonce is used to generate generates a block header hash with the help of a randomly generated 32 bits number.

Hash is a 256-bit number united with a nonce.

Data is something that is stored in a block.

So, when any block is generated(which also randomly generate nonce) it stores data and nonce generate a hash which will be tied with this block. Then this block will get connected with the previous one to form a chain of data.

Mining

The process of creating a new block is called Mining.

When a new block is found it also has nonce and hash which are unique for each block. So to create any new block, the miner also has to find a unique nonce and hash to create a block.

It is a very complex process as nonce has 32 bits and the hash is 256. So miner has to find a unique pair among the approx. billions of possible pairs.

That’s why this process requires very complex mathematical calculations.

Once the data of transactions entered then it can’t be cannot be altered, deleted, or destroyed. This is because the miner has to re-mines the block and it’s not only that block that stores data but also all blocks that come after it. That’s why it is next to impossible to manipulate data that are stored with help of blockchain.

Nodes

The concept of decentralization in blockchain comes with the help of nodes that connect with the chain. It maintains the copy of the blockchain without disturbing the process.

As every node has a copy of the blockchain, so when any new block comes with data then it must be verified by the network to get approval.

This is why people trust this technology as it can be easily checked and viewed.

Uses of Blockchain

Many people think blockchain can only be used in cryptocurrencies, but it also has many other uses apart from cryptocurrencies like in banking, healthcare, property records and many more.

Let’s discuss some of them:

1. Banking

As we know banks only operate during working time, so if there is any transaction that needs to be verified before hitting then the transaction is only complete after verification during a working time which may take 1–2 days. On the other hand, blockchain can work 24*7 so that verification can complete within minutes of any transaction if we integrate with our banking system. Apart from it during the stock market, the settlement and clearing process takes time and money is frozen during that time but with help of blockchain, it also gets settled in very less time.

2. Healthcare

In the healthcare sector, blockchain can be used to securely store the data related to the health of the patient. Once the data of a patient is stored with help of blockchain then it is secure and can’t be changed by any other person.

The privacy issue of data is also solved as data can only be encoded with private keys so that only certain people can see the health-related data.

3. Property- record

If you have ever seen any property related recorder’s office, you come to know that the method of recording property-related data is time taking and inefficient. In today scenario government deploy a person to manually write all data related to property in a database. In the case of a dispute, claims to the property need to be verified with this database.

This system is not just expensive and time-consuming. It is also prone to error as it was manually written by a human. Blockchain can solve this problem by scanning files and tracking down physical files in a nearby recording office.

If any property data is once saved and recorded at the blockchain, owners can accept as true that their data is accurate and permanently recorded.

So with the help of blockchain, no one can claim the property of others and the risks of fraud become very less.

Advantages vs Disadvantages

Every technology has its pros and cons.

Pros:

The process of recording and storing data is secure, transparent and without any privacy issues.

Because of decentralization, it is next to impossible to manipulate the data.

Improved the accuracy of data as human error is eliminated.

Cons:

As data once stored can’t be changed, sometimes this can cause a problem.

It has a scalability issue, as more and more nodes are joining makes it slow to operate.

Data storage has its limitation.

Disclaimer: The original version of this story was published on another platform. Link to original version:

https://vinayguptasia233.medium.com/what-is-blockchain-a-beginner-guide-ba25d9be18e9