What is blockchain technology and how does it works?

What is blockchain technology? If you are still unsure of what this technology is and need a concise, clear answer. This blog is for you. Prepare yourself to explore the remarkable world of blockchain technology.

I. What is blockchain technology?

Blockchain technology definition

Blockchain has emerged as a prominent technological advancement in the past decade, captivating the attention of many. However, amidst the discussions, there is a lack of clarity regarding blockchain’s true nature and functioning. Despite its perceived complexity, the fundamental concept behind blockchain is relatively straightforward, holding the immense potential to revolutionize various industries.

At its core, blockchain is a secure technology that facilitates information sharing. Data is stored in a database, while transactions are recorded in an account book ledger. What sets blockchain apart is its distributed nature, wherein the power to update the blockchain is distributed among the participants or nodes of a computer network, whether public or private. This form of technology, distributed ledger technology (DLT), incentivizes nodes with digital tokens or currency to perform updates.

Blockchain technology definition

By enabling the permanent and transparent recording of data and transactions, blockchain allows for exchanging anything tangible or intangible. A blockchain possesses three key attributes.

• Firstly, it requires cryptographic security to access or add data to the database, necessitating a public key (representing the address in the database) and a private key (a personal key authenticated by the network).
• Secondly, blockchain operates solely in the digital realm, serving as a digital log or transaction database.
• Lastly, a blockchain is shared across a public or private network. The Bitcoin blockchain is a prominent example of a public network accessible to anyone, allowing them to open a Bitcoin wallet or become a node. In contrast, private blockchains cater more specifically to sectors such as banking and fintech, where it is crucial to identify participants, control data access, and possess private keys. Additional types of blockchains include consortium and hybrid blockchains, which combine features of public and private blockchains.

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II. Importance of Blockchain Technology

The significance of blockchain can be understood by examining its key features, which make it an attractive solution in various scenarios.

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III. How blockchain technology works

Gaining a deeper understanding of how blockchain and other Distributed Ledger Technologies (DLTs) function can be achieved through a more comprehensive exploration.

Information accessed or modified on a blockchain is stored in a “block” alongside other transaction records. These transactions are encrypted using unalterable and distinct hashes, such as those generated by the SHA-256 algorithm. Rather than replacing old blocks, new data blocks are appended to existing ones, enabling continuous monitoring of any changes. As all transactions are encrypted, the records become immutable, meaning any modifications to the ledger can be detected by the network and rejected.

These encrypted data blocks are permanently interconnected, forming a chain, with transactions being recorded in sequential order indefinitely. This sequential recording establishes an audit trail that provides visibility into past versions of the blockchain.

How blockchain technology works

When new data is introduced to the network, a consensus among the majority of nodes is required to verify and confirm the authenticity of the data. This verification process is often based on permissions or economic incentives, known as consensus mechanisms. Once consensus is achieved, a new block is created and added to the chain. All nodes in the network are then updated to reflect the current state of the blockchain ledger.

In a public blockchain network, the first node to successfully prove the authenticity of a transaction receives an economic reward, a process commonly referred to as “mining.”

Conclusion

Blockchain technology development has revolutionized various industries. As companies become aware of the important role advantages of blockchain, they will invest more resources, money, and time into the technology. It’s time to let TECHVIFY unlock the potential of blockchain to help you stay ahead of the technology game.