Increased adoption and implementation of blockchain has been witnessed in recent years. This raises the need to understand 'what is blockchain', how it works, its benefits and applications. Today, it's famous in sectors like financial services, marketing, retail, etc. Coming years are expected to showcase steeper adoption and thus, this introduction to blockchain is helpful.
So, what is blockchain? It refers to a distributed ledger or database. It is shared among the nodes of a computer network. They are quite popular for the imperative role they played in cryptocurrency systems. It helped maintain a decentralized and secure record of transactions. That said, they are not limited to just cryptocurrency uses.
These can be utilized for making data in any domain immutable. There is no path for changing a block. In this case, the only trust necessary is at the dot where a program or user enters data. This point lessens the need for trusted third parties. These third parties are generally auditors or another human that adds costs or makes mistakes.
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Another important question is how does blockchain work? This section helps in understanding its working in three segments for a clear picture.
Every transaction that occurs gets recorded as a 'block' of data. Such transactions showcase the asset's movement. It can either be tangible (a product) or even intangible (intellectual). The information of one's choice is recorded by the data block - who, when, what, how much and where. Even the condition is recorded.
Every block has a connection to the ones that came before and after it. These blocks change into a chain of data as an asset switches its place or the ownership changes hands. The blocks stamp the exact sequence and time of transactions. The blocks securely link together to avoid any alteration of a block or a block getting inserted between two current blocks.
Transactions get blocked closely in an irreversible chain called a blockchain. Every new block adds strength to the verification of the previous block. And eventually the complete one. This makes it tamper-evident and delivers the apt strength of immutability. It eliminates the possibility of any tampering by a malicious imposter by building a ledger of transactions that can be trusted.
There are a plethora of benefits of blockchain. All these perks have made it such a popular technology. Let's take a look at some of the top ones for better understanding.
Thousands of devices and computers approve the transactions on this network. Almost all the people get eliminated from the verification process. This results in less human error as well as more accurate information record. Even if a computational mistake is made by a computer on the network, it would be made only to one copy and rejected by the remaining network.
Consumers usually pay a bank for verifying a transaction to sign a document. It removes the requirement of third-party verification and associated costs. For instance, business owners get charged with a small fee for credit card payments as banks and payment-processing organizations process those transactions. Bitcoin, however, doesn't have a central authority and charges limited transaction fees.
No information is stored in a central location. Rather everything is copied and segregated throughout a network of computers. All the computers begin updating its block-chain to reflect the change after a new block is inserted to the chain. This helps it in becoming more difficult to tamper with.
Majority of its networks run as public databases and anyone with an internet connection gets to view the network's transaction history. While transaction details can be accessed, identifying information regarding the users behind those transactions cannot be accessed. Its networks such as Bitcoin are pseudonymous.
This technology's network verifies the authenticity of a transaction after it is recorded. It is incorporated into the block-chain block after being validated. Every block here comprises its own unique hash, along with the unique hash of the block prior to it. The blocks are unalterable after being confirmed by the network.
There are three types of blockchain available today. All these carry their unique features and thus, must be studied.
Block-chain applications and use cases are plenty. They span across multiple industries like financial services, advertising and healthcare. Some examples are-
With many practical use cases in today's world, block-chain has risen out to make a name for itself. A major portion can be accredited to Bitcoin and cryptocurrency. It's in vogue among investors in the nation, which is clear in this blog around- what is blockchain. It's helping make government and business operations more efficient, accurate, cheap and secure, with fewer intermediaries.
Its purpose is to share information between all the parties that have access to it.
Yes, definitely. It is considered safe to use as they're designed to be immutable as well as transparent.
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