Blockchain – A Comprehensive Guide on the Basics of Blockchain Technology

Recording transactions and exchanges of goods and services have always been an integral practice in business operations. You can go way back to the good old barter system days and find how piles of papers were used to track dates, days, and amounts of transactions.

Today, the advent of global commerce has created a dense network of complex ledger systems. And we know when there are multiple stakeholders in participation, the data is vulnerable to misinterpretation. These issues cause severe disturbances to the business flow.

For instance, let us consider the diamond industry. A diamond traverses an immensely complex journey of mining, manufactory, legal and financial practices before it reaches its final destination in the customer's hands. This supply chain relies on various intermediary stakeholders such as government officials, lawyers, accountants, and banks. Naturally, the involvement of such complex bureaucratic authorization makes the process time-consuming. On top of this, it opens up the possibility of fraudulent activities such as diamond smuggling. It leaves the consumer to the prospect of purchasing counterfeit stones and government offices losing out on taxes.

Here, Blockchain Technology comes into the picture. This sophisticated technology has the potential to introduce transparency and security in this heavily transactional process. Let us understand how it works.

How Does Blockchain Operate?

In technological parlance, Blockchain is often called? Distributed Ledger Technology (DLT). It has disrupted the conventional ledger system with the help of decentralization and cryptographic mapping. The history of a digital asset, therefore, cannot be tampered with. In other words, each transaction is recorded permanently. This feature of Blockchain has proven instrumental in introducing a deep sense of transparency in business transactional processes.

To gather a better understanding, you can consider the functioning of a Google Doc. The Doc file on Google operates in real-time mode. As opposed to the traditional distributional system, the access to the Google Doc is shared with the respective stakeholders. This feature allows multiple people to access the doc simultaneously, discarding the need of copying files and overwriting versions.

The analogy demonstrates the nature of Blockchain operations precisely. However, the level of complexity between Google Docs and Blockchain is beyond comparison.

The Building Components of Blockchain

The three chief ideas that constitute Blockchain are blocks, nodes, and miners. We will understand them one by one.

1. Blocks

As the name explains, Blockchain comprises a chain of blocks. Simultaneous to the creation of a block, a respective nonce is generated. A nonce is a 32-bit whole number that subsequently generates a block header hash.

The hash is nothing but a 256-bit number tied to the nonce. With this, the data is consigned permanently to nonce with the help of a hash.

2. Miners

Miners create new blocks in the chain. Each block in the Blockchain constitutes a distinct nonce and hash. However, each block orients itself according to the previous block's hash. The sequential nonce helps form a cohesive chain of blocks. Naturally, the bigger the blockchains, the more complex the process of mining becomes.

3. Nodes

Nodes are the critical components of Blockchain technology. This technology is groundbreaking because of its seamless decentralization of the complex process. Just like Google Docs, The distribution of digital assets takes place across the nodes connected in the chain. Nodes are typically electronic devices.

Multiple nodes can access the blocks simultaneously. The network algorithm complies with this system. Therefore, the update and verification of each newly mined block follows a secure approval by the network.

The stakeholders access this virtual ledger using a UAIN (Unique Alphanumeric Identification Number). This system makes the Blockchain a seamlessly transparent process. Every action by each stakeholder can be monitored and reviewed.

To Sum It Up

Through this article, we gathered in-depth insights into how Blockchain operates. Let us take a brief overview:

· ? ? ? ? A blockchain is a train of blocks of data chained together with sequential hashes.

· ? ? ? ? Instead of copying, Blockchain performs the distribution of the assets (digital data).

That is to say, stakeholders receive access instead of creating numerous copies with overwrites.

· ? ? ? ? The real-time track of modification in the virtual ledger plays a key role in establishing a high degree of data transparency.

The three-tiered system of Blockchain technology ensures thorough checks and balances. Combining it with the public ledger technology, Blockchain finds application across numerous sectors. They are beneficial in monitoring fraudulent financial activities, maintaining patient records securely in the healthcare industry, and managing copyrights and patents for artists and entrepreneurs. However, this is just the tip of the iceberg.

Next up, we will go deeper and understand how cryptocurrency is disrupting the global commercial landscape. So, stay tuned and watch this space.