What is Blockchain?
Blockchain is a shared database or ledger across network nodes. A blockchain serves as an electronic database for storing data in digital form. The most well-known use of blockchain technology is for preserving a secure and decentralized record of transactions in cryptocurrency systems like Bitcoin.
The innovation of a blockchain is to foster confidence without the necessity for a reliable third party by ensuring the fidelity and security of a record of data.
A blockchain collects data in groupings called blocks, which individually include data sets.
Blocks have specified storage capabilities. When they’re full, they’re sealed and joined to the previous block to form the blockchain data chain.
Every subsequent piece of information that follows that newly added block is combined into a new block, which is then added to the chain when it is complete.
A blockchain organizes its data into parts (blocks) and kept together. When decentralized, this data structure produces an irreversible data chronology by design.
A completed block, is sealed and placed to the timeline. Finally, each block is assigned an accurate timestamp and added to the chain.
How Does a Blockchain Function?
The sole purpose of Blockchain is to record and distribute digital information, but never alter. A blockchain supports immutable ledgers, or transaction records that can’t be modified, erased, or destroyed. Also know as Distributed ledger technology (DLT).
The blockchain concept was first suggested as a research project in 1991, and it predated its first widespread use in use: Bitcoin, in 2009. Since then, the use of blockchains has grown exponentially, the development of multiple cryptocurrencies, decentralized finance (DeFi) applications, non-fungible tokens (NFTs), and smart contracts.
Imagine a corporation with a 10,000-computer server farm that stores client account information. This corporation owns a warehouse that houses all of these computers and controls all of their data. This creates a single failure point.
What if the power fails? What if it loses Internet? Suppose it burns down. What if someone deletes everything with one keystroke? Data is corrupted or lost.
A blockchain allows database data to be shared across multiple network nodes. This creates redundancy and maintains the data’s fidelity—if someone tries to update a record at one instance of the database, the other nodes won’t be changed, preventing them from doing so.
If a user tampers with Bitcoin’s transaction record, all other nodes can cross-reference and find the culprit. This system establishes a clear timeline. No network node may change data this way.
Information and history (like cryptocurrency transactions) are irreversible. A blockchain can hold a list of transactions (such with a cryptocurrency), legal contracts, state IDs, or a company’s stock inventory.
Due to the decentralized structure of the Bitcoin blockchain, all transactions can be transparently observed by using blockchain explorers that allow anyone to examine transactions in real time or by owning a personal node.
Furthermore, as new blocks are added and confirmed, each node’s copy of the chain is updated. This implies that you might follow Bitcoin wherever it went if desired.
As an illustration, exchanges have previously been hacked, and anyone who had Bitcoin stored there lost everything. The stolen Bitcoins are identifiable, despite the hacker’s complete anonymity. It would be known if any of the Bitcoins taken in some of these hacks were transferred or used elsewhere.
The data kept on the Bitcoin blockchain is encrypted. This implies that only the record’s owner can decode the file and expose their identity. As a result, blockchain users can maintain their anonymity while maintaining transparency.
Is Blockchain Safe?
Blockchain technology allows decentralized security and trust in several ways. To start, new blocks are always chronologically and linearly stored. In other words, they are constantly added to the blockchain’s “end.”
It is very difficult to change the content of a block once it has been added to the blockchain, unless most of the network has agreed to do so.
This is because each block has its hash, the hash of the block that came before it and the date mentioned above. A mathematical function that converts digital information into a string of numbers and letters produces hash codes. The hash code also changes, if that data is altered.
Imagine a hacker who also manages a node on a blockchain network wants to change a blockchain and take everyone else’s cryptocurrency. If they changed their copy, it wouldn’t match the copies made by everyone else.
When everyone compares their copies, they will notice that this one copy stands out, and the hacker’s version of the chain will be rejected as fraudulent.
For such a hack to be successful, the hacker would need to simultaneously control and change at least 51% of the blockchain copies, making their new copy the majority copy and, thus, the agreed-upon chain.
The requirement to rewrite every block because their timestamps and hash codes had changed would make such an attack extremely expensive and resource-intensive.
The expense to pull off such a feat would probably be impossible due to the size of many cryptocurrency networks and how quickly they are developing. This would be very expensive as well as useless.
As network participants would observe such significant changes to the blockchain, doing such a thing would not go unnoticed. The network’s users would then abruptly switch to an unaffected chain version.
As a result, the token version attacked would lose value, rendering the attack useless, because the malicious party would be in control of a worthless asset.
The same would happen if the malicious party targeted Bitcoin’s most recent fork. As a result, participating in the network is much more economically advantageous than assaulting it.