A blockchain is a distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. A blockchain is normally managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. Once validated and recorded, the data in any given block cannot be altered without the alteration of all subsequent blocks, which requires collusion of the network majority.
Blockchain is going to be a disruptive technology in the coming years. To know the concept of Blockchain , we need to get some understanding and basic concepts about, SHA2 , hash, distributed network etc.
Hash. Hash is nothing but a digital fingerprint of information created with SHA2 algorithm. As name mention, each and every character, word or sentence will have a unique hash code. So if I put “My name is Girish”, it spit out a unique hash code and it will be always unique. Now forget about the above sentence and if you have a huge article written, again there will be unique hash for it. It is very interesting that even if it is a single character or a huge library of information, hash code will be of same length. Hash is a digital fingerprint, it is unique for every combination of characters.
Block. Block is collection of data, “My name is Girish” is the data in our earlier example. In BLOCK, data along with a unique signing key together will generate a hash which will be unique for this combination. It essentially means if any one changes data then hash will change. As mentioned above , here I added an additional G in the end, now hash also get changed and mark it as unsigned or un-certified or invalid. Now to get the certified or signed hash, the option is to remove that additional “G” from the box or replace “114290” which is the earlier signing key and guess a new signing key which will certify this data with a new hash.
Mining. Now I programmatically tried from 1 till I get a signed hash, and the magic number was 31615 in this case. In a simple term, this is known as mining. We will get into this in detail soon. Block is collection of data along with a signing key, combination of data and signing key creates a unique hash.
Blockchain. Blockchain is a continuous chain of blocks and, interestingly it points to a block previous to it. Consider this as an array of data & sign key combination. Ideally it is a chain of blocks which are certified or valid. Assume any one of the block in this chain got altered, the chain after it also get invalidated. This is how the integrity of a Blockchain is maintained without a third party or a trustee.
Let us see the complications involved if someone try to validate any single block in this entire chain. To achieve this one has to go and fix entire chain by guessing the right signing key, which is such a big resource intense activity which is practically impossible. That is why we say data written to a Blockchain is immutable.
Distributed Blockchain.
In the above example , the entire Blockchain from the node where it got a fraud entry become invalid, but as we discussed these nodes can be signed with a new key and make it valid again. Even though it is resource intense, it can be done on a relatively smaller chain.
Distributed Blockchain is as good as having the entire chain of blocks distributed to everyone in the network. This help to make things a bit for difficult to corrupt the system. Now we have copies of certified blocks with thousands or millions of people in the network. Blockchain system can now easily validate and identify which of the chains are faked or corrupted and so ignore it. Rule of majority works here.
Now we know the basic concept of Blockchain, we will see the practical implementation of Blockchain which is bitcoin. Many people confuse bitcoin with Blockchain and vise versa. Blockchain is a concept and Bitcoin is a practical application build on top of Blockchain concept. There are many other applications which are being build which may revolutionize banking & financial industry.
There are more to be discussed about bitcoin implementation on how is the opening balance and closing balance maintained etc. We will discuss those in another tutorial.
Hope this helps you to understand the Blockchain technology better.
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