Why is there so much buzz about Block chain Technology lately? What possibly can be a high-speed and impressively enhanced system, that eliminates human error to improve the trust in keeping records and doing financial transactions? All your answers are integrated here! Take 5 minutes out of your schedule and learn about what is block chain technology and how does it work. So let us get going.
What is block chain technology?
By definition, block chain is a collective, absolute record book or a ledger that soothes and simplifies the process of recording transactions and track all the assets in a business network.
So, what makes it renowned in IT recently?
The system is designed in such a way that the data on the block chain cannot be altered. Because of this, it makes it the authentic choice for the companies.
Block chain technology, also known as the distributed ledger technology in a simple sense is the analogy of the Google Doc. The document is distributed to the members rather than a copy. Thus, creating a decentralized distribution chain, which gives access to everyone at the same time. All the changes are done in real-time, thus making the system transparent.
How does block chain technology work?
Instantly, after getting the concept of what is block chain technology, the next question that pops in mind is, how does it work?
The block chain is the combination of three core fragments:
In order to understand the complete picture of Block chain application, let us have a deep understanding of the three concepts.
Every chain in the block chain is fundamentally made up of numerous blocks. A block is a data structure that is used for keeping the set of transactions. A block itself is divided into three basic elements:
- Data: the information in the block
- A nonce: A whole 32-bit number is called a nonce.
- A hash: it is a 256-bit number. These are fixed length, starting with a huge number of zeros, thus making it impossible to crack the block chain. This is developed based on the information present in the block header
In the beginning, when the first block of a chain is made, the nonce creates a cryptographic hash. Then the data in the block is measured assigned and is tied to the nonce and hash until mined. In order to understand this in-depth, you must have knowledge about cryptography and hash function.
The process of creating the new block chains is called mining. In the process of block chain, every block has an exclusive nonce and a hash. That is referred to as the previous hash in the chain. It makes mining difficult, mainly on large chains. Miners use specialized software to find a nonce, which generates an accepted hash. Since the length of the nonce is only 32-bits and a hash is 256-bits, so there are almost four billion possible nonce-hash combinations.
These must be mined before finding the right one. When this happens, the miners are said to have found the “golden nonce”, and ultimately their block is to the chain. If a change is done on the blocks, it requires altering all the blocks that are connected. When a block is successfully mined, the alteration is recognized by all the nodes on the network and the miner is rewarded monetarily.
Decentralization is a prominent feature in block chain technology. That means no one computer or company owns the chain. Instead of owing, there is a distributed ledger through the nodes connected to the chain. A node is an electronic device, that preserves and sustains the copies of the block chain and thereby keeps the network working. Each node in the network has its copy of the block chain. If a new block chain is to be added, then the network must approve it algorithmically.
Each member is given a unique alphanumeric ID, which shows their transactions. Also, every action done on the ledger can be easily viewed, checked, and verified.
The process of transaction
The distinguishing feature of block chain technology is its method of confirmation and authorization of transactions. For instance, two parties want to perform a transaction with their allotted private and public keys. The first person will attach the transaction information to the public key of the second person. This information is saved on the block.
The block holds the relevant information like a digital signature, a timestamp, but not the information of the individuals involved in the transactions. This block is transmitted across the network on all the nodes. Then the right individual uses his private key and matches it with the block. Thus, making the transaction a success.
Benefits of block chain technology:
There are tons of advantages with Block chain application. Furthermore, this technology has resolved the biggest issue involved in the network, which is trust. Block chain application gives ease to organizations to solve the transaction-related problems at hand. Below are the five notable benefits for the companies using block chain technology:
1. Improved transparency
One of the biggest challenges that modern-era companies are facing is transparency. The organizations look for more stringent rules and regulations to make their system 100% transparent, but they fail to do so. This decentralized system improves the system’s overall transparency. Even governments are using this technology for processes or even conduct voting.
2. Improved security
Block chain technology uses highly advanced security as compared to any other platform. Every transaction that is recorded needs to be agreed upon by the consensus method. Also, each transaction is encrypted and has a proper linking to the old transaction through the method of hashing. The fact that every node on the network holds a separate copy of all the transactions ever performed. So, if any intruder wishes to make changes in the transaction, he won’t be able to continue, because all the nodes on the network will reject the changes. Besides, the block chain networks are also indisputable because data that are once written cannot be reverted by any means.
3. Lower costs
Currently, businesses are spending billions of dollars on the improvement of their systems. That is what block chain application offers, with the reduced costs that amount can be invested to do something new. Through the use of this technology, firms can cut costs that are associated with the third party. Also, there is less interaction needed when it comes to the validation of the transaction.
4. Easy traceability
For the manufacturing companies, the block chain helps to focus on creating a supply chain that works well for both the retailers and the suppliers. Whereas in the old method of the supply chain, it is very hard to trace items. With the help of the block chain, the block chain becomes more transparent and clearer.
5. Enhanced in speed and high inefficiency
The most wanted and highly appreciated benefit offered by block chain technology is improved speed and efficiency. Because of the ability to solving time-consuming processes quickly, it also alleviates the overall percentage of human error.
Block chain technology is a huge revolution in the digital money-making field. Making lives easier and simple and on top of all safer than ever. To do the transactions and share personal information, block chain technology creates a perpetual and unsuasible record for every transaction made. This article has provided a wide range of sustainable answers on what is block chain technology and how does it work. Your comprehensive understanding of this subject is vital. It is forecasted that by 2022, business built on block chain application will be worth $10 billion. So, do not waste your time and start learning this exciting technology today!
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