The 21st century is the new era of technology, where technology is evolving day by day and to solve this centralized problems a new Blockchain technology has been introduced, so what is Blockchain technology?
Back in the year 2009 when the first time Bitcoin introduced by Satoshi Nakamoto, his intention was not to solve this centralized financial problems but to set up a protocol which could do more than that.
Blockchain technology was the solution of that and earlier the first use case developed on this technology is the digital CryptoCurrency Bitcoin.
Bitcoin was the vision that in future every people on the network could transfer digital asset without having the g third-party intervention.
But this time the Blockchain industry is evolving and expanding its use cases to the real use of life.
Hence, if you are a techno lover or have ever interested in Cryptocurrency or knew about current financial systems.
Then in this, What is Blockchain technology guide I will help you to explain what is Blockchain technology and why this is the future of technology step by step.
We have Written multiple guides on the project working on this blockchain technology, which you may like the most.
What is Blockchain Technology?
The idea behind the evolution of blockchain technology is to replace the current centralized system and increase the security of the network.
Satoshi Nakamoto the creator of Bitcoin has written one protocol on which a Cryptocurrency called Bitcoin has been built.
Currently, we are doing payment transactions using a centralized financial system like Banks, where they have private ledger which contains the records of all your transactions.
In some cases, they can seize your payment or in another case, if anybody hacks to their central server can steal all money or your personal information.
That means you are on risk and dependent on the third party like banks or financial systems to maintain your fiat asset.
On the other side, we have seen the transforming face of money where earlier face of money was just the exchange of goods later become gold and copper coins.
As time changed, it turned to a paper currency like Dollar, Euro than a plastic currency like Credit and Debit card.
So Satoshi Nakamoto thought the future is with a digital currency on which no one will have any control.
Hence he created a protocol on which first digital Currency Bitcoin was built and that protocol is known as Blockchain Technology.
This is a brief history of what is blockchain technology and why this has been introduced, now will focus on how this actually works.
How Blockchain Technology Works?
The earlier focus of Blockchain was to solve the banking financial issues but later on, it has been identified to solve many major problems.
Blockchain technology is to create a complete decentralized system where no one will have any control over the network.
If you use this Blockchain network than how the security or validation of transactions will be verified in the network as it has no central authority to validate.
In legacy banking system bank verifies your transactions, so who will do this job in Blockchain network?
Do not worry will explain everything steps by step.
Let say, any banking financial system has started using the blockchain network and any person on the network initiated transactions.
Every transaction in the network will be unconfirmed until it got validated by Miner or validator.
You are thinking, Who are miner or Validator? Then wait will explain later.
First, talk about the basics of Blockchain, what does this really mean?
In general term, Block is like a container and chain is the series of blocks. Every transaction initiated in the network will be a part of one block.
Hence, Block will be like a container and Transactions are like small boxes, where small boxes are fit into the container.
On the blockchain network, each block has three data to record.
- Hash (Own unique code or identity name of the block)
- Transaction Data (All the transactions details such as amount, sender, recipient address)
- Hash of the previous block.
How many transactions could be confined in the block is depend on block size, let say Bitcoin which has a block size of 1 MB however Bitcoin cash has 8MB.
Means, Bitcoin cash has more capacity to hold transactions in the block. Every block contains the hash (Unique identity) of the previous block.
This explains how the actual chain in the network created. where every block is connected with the previous block and this is called blockchain.
The First block in the blockchain network is known as the Genesis block because it has no address to map with the previous block.
Now, who are Miners and what they do? Learn more here in detail about Cryptocurrency mining.
Miners are the person who uses their computers to try to solve mathematical problems associated with each block.
To confirm any transaction or to validate any block first miner has to solve a mathematical problem generated in the network.
Here the mathematical problem will be a cryptography code which has a unique address to match.
So using mining devices like GPU, ASIC, CPU every person on the network tries to guess or solve that puzzle automatically.
Whoever is able to do that is eligible to mine block or verify that block. So he will take all the unconfirmed transactions into the same block.
And ask all another miner on the same network that he has successfully mined and verified transactions if more than 51% approve that block.
It will be considered that block is successfully mined and will be added to the blockchain public ledger.
Here verification of the transaction means to check whether transaction initiated account is legit or not or it has sufficient fund to send or not.
Blockchain has its own public registry which is visible to everyone. The way the bank manage its own ledger to maintain transaction detail.
In the same way Blockchain network has its own public ledger which has detail about every transaction happened from the first date.
Hence every block which confirmed by the miner will be added in this ledger and this creates transparency in the system.
Every transaction will be visible in the blockchain network as anonymous transactions.
Yes as an anonymous because if you are the sender or recipient that you won’t have any identity except your wallet address.
The address will be an alphanumeric code hence the only owner of that address will know that this transaction is initiated by him not all others.
It will look like as below. Where the consecutive number of alphanumeric character displays.
Address Like – 3pdnysn7aknd5kank4askn356ad68
In the result, the person who has successfully mined will get all the transaction fees of the block and block reward.
While talking about Bitcoin, it has an average time to clear block is 10 minute however other like Litecoin and Bitcoin Cash has lower than that.
Which result bigger in block size and in result more transactions per block and more transactions per second in the network.
Bitcoin is the first decentralized project also known as the mother of blockchain or cryptocurrency but due to lower block size and minimum transaction per second.
More than 2000+ other blockchain decentralized cryptocurrency came into the picture and out of the few are emerging and have millions of transaction speed per second.
Check our exclusive detailed guide on each of those projects.
All above blockchain network have done multiple ties up with government and financial institute and seems to be the future of Blockchain technology.
Till this point, I would consider that you got an idea what is Blockchain technology and how this works?
Now coming to the security and integrity of the Blockchain network.
Is Blockchain Technology Secure?
I would consider that you already got an idea of how this blockchain technology works which itself explains that it does not depend on a central server like other company Facebook or Google does.
In the central server, if anyone got access to that server will have all control over the network but this is not the case with blockchain technology.
First, it has no central server, instead, it will have miner or node connected on that blockchain network to validate the transaction.
Validation of transaction will be done through consensus mechanism way, where each node on the network using computational power try to confirm transactions.
Even after confirmation, it will ask to get approved by almost 51% of the current node or miner on the network which takes time hence Bitcoin has 10-minute block to verify.
On blockchain network, anyone like you and me can install mining software and start validating that transaction.
Means millions of nodes are on the Blockchain network and you will need 51% of the total node to get this approve block.
If anyone wants to hack the block then he will need access to almost 51% of the complete network node which is close to impossible.
Yes even after this he will be able to hack only a single block, not whole blockchain network.
That proves its security in the network while talking about IBM, they have built their blockchain world wire on Stellar (XLM) blockchain network.
IBM is using blockchain technology, which itself explains how much secure is this platform.
No transaction in blockchain will be considered as confirmed unless it got verified by the miner, here mining would be done in different ways.
- Proof of Work (POW)
- Proof of Stack (POS)
- Delegate Proof of Stack (DPOS)
Proof of work (POW), is where all node on network competing with each other to mine the block by solving the mathematical problem.
The only one which has a high power computer will win the race.
So the mining pool came into the picture where multiple miners come together to generate more hash power.
In some cases, it creating monopoly find below the current share of block mined by mining pool get the report from Blockchain.com.
Proof of work requires more energy consumption and not an adequate reward to miner so Proof of stack comes into the picture.
Proof of Stack mechanism is where random selection of miner will happen depending on the amount of taken they have stacked.
This gives chance to every person in the network to mine the block and no mining pool will come into the picture.
In a similar way, different blockchain network uses a different mechanism to mine the block and ensure the security of the network.
What is the Future of Blockchain Technology?
This time the world is heading toward scalability and decentralized platform.
Here scalability means the ability of a network to handle per second transactions and decentralization means a well secure network on which no third party has any control over it.
The solution for both problems is with Blockchain technology.
Currently, every industry is almost migrated to new technology but the banking industry is still running on the old network and system.
They are using a VISA card which has the capacity to handle 1500 transactions per second and using old 1974 build SWIFT network for the cross border payment system.
They have their old network servers on which everything is built upon and many more vulnerable old systems.
But using blockchain technology we have seen wide adoption in banking industries and financial institutions.
Banks like American Express, Standard, and money transfer companies like Money Gram, Western Union have started using Ripple (XRP) blockchain network.
IBM has to build a Blockchain world wire network on Stellar (XLM) Blockchain Network to provide financial system access to remote areas and to existing banking institutions.
South Korean government is building a decentralized blockchain based voting system and many more operations on ICON (ICX) blockchain network.
Companies like BMW has tied up with VeChain (VET) based blockchain network to eliminate counterfeit of branded products and many more.
Cardano (ADA) is another blockchain based solution solving the problem of interoperability among different blockchain network.
EOS has the capacity to process millions of transactions per seconds and allowing the smart contract to built upon it.
Tron (TRX) is another major blockchain network which has now acquired BitTorrent and CoinPlay and allowing the decentralized application to built upon it.
This all above proves how blockchain technology is evolving in the 21st century, from my point of view it is transforming era of technology.
For further setting up strong points on Blockchain technology let me highlight the use case of Blockchain network.
What is the Use of Blockchain Technology?
So far we discussed how banking institutions have actively started using blockchain network but it is not limited to financial institutions.
It has been used by many more companies to solve their biggest centralized and counterfeit problems.
Let discuss few of them.
Currently, every person is questioning the electronic voting system we are dependent on an independent central government body organization like election commission.
People are concern about the right counting of the votes which could alter any time in the system.
The blockchain-based solution will create transparency where every vote will be in public ledger, the user can see whom they have voted.
Yes in Blockchain public ledger user will be anonymous as it will be an alphanumeric code.
But each user will have the private key which he can match with and verify that his vote went to a right party.
South Korea is building such a blockchain based election voting system with ICON (ICX) blockchain solution providing company.
Food chain Supply Network
Currently, Products produced in manufacturing plant went in the supply chain.
Where each individual is maintaining his own buy and sell the record in their central system.
But nowhere we have any common system who could trace where this product has started and through which process it has gone through.
VeChain (VET) has created a blockchain network which allows tracing every single record of the product, where exactly this moving in the supply chain.
Every single movement in the supply chain will be tracked by scanning a bar code on the product.
This will push the current status of product to decentralized blockchain network, which is not allowed to alter information and in transparent and public ledger.
Anyone using DApps will able to find the originality of the product and will reduce counterfeit.
BMW and many more other companies have tied up with VeChain to solve this problem and they have started using it in the pilot project.
This time to transfer money, banks are using SWIFT network which charging around 1-3% in transaction fees and slow processing times.
The solution for that is with Ripple, Stellar and many more blockchain network using that they provide transaction clearance time of 2-3 seconds only and transaction fees of less than 0.01$
This is what been started with Americal Express bank, IBM, Santander, Money Gram, Western Union, etc.,
Above three are the tiny few use cases, we have explained but multiple governments are working on the creation of such regularities to use this blockchain network and their CryptoCurrencies.
It has vast possibilities and power to solve the biggest problem of the current world. I found this as the future of new generation technology.
How to Invest in Blockchain Technology?
If you are an investor and looking to invest in this Blockchain technology than I already created a detailed guide on how to invest in Blockchain, check that guide for detail overview.
In some cases to use a Blockchain network, you would need a digit asset which works on that network which we call cryptocurrencies. You can invest in that Cryptocurrencies.
If you already knew that what is Cryptocurrency than check our guide on how to buy Cryptocurrencies using Binance.
But we all know this is the transforming face where different blockchain network is competing with each other, so chose wisely which one you should need to invest.
Few countries government are putting the ban or not allowed to trade such cryptocurrencies, hence still this is on risk to invest.
For our reader, I have also prepared a detailed guide for the top 7 Best Altcoins which price is less than 1$/Coin and worth investing projects.
If you want to look for the major project than check Best Cryptocurrency to invest which has a list of coin price more than 100$/Coin.
I am not a financial advisor, what I can bring is the highlights that how the world is moving toward blockchain technology and why you should look to them as well.
Conclusion on What is Blockchain technology?
This world is boundless, everyone is looking better than the first one and if we talk about technology it is more aggressive than what you think.
The blockchain is the solution for all existing centralized problems, put aside your investment strategy, think this as a problem-solving product.
You will definitely get a reason why this is going to be the future of technology.
The way it has been accepted by the country government, tech giant companies and financial institutions, it proves the future growth path of Blockchain technology.
Still, the future of Cryptocurrencies based on this blockchain technology is uncertain but yes technology will remain forever.
Well, I am quite optimistic with Blockchain technology what do you think about this let me know in the comment box and share with every blockchain technology information seeker.