The blockchain is a revolutionary technology that was developed by a person or group of people called Satoshi Nakamoto. Although the technology was originally devised for Cryptocurrency, Bitcoin, it has gained more areas of potential users, thanks to the technology community.
Blockchain technology provides a way for different parties to reach an agreement without the need for a third party on a common digital history. Given that Cryptocurrencies and transactions exist only in theory, a common digital history helps to ensure there is no faking and/or duplication.
Blockchain involves the storage of digital information (“block”) in a public database (“chain”):
1. Information about the transactions which contains details such as dates and time.
2. Information about the participants in a given transaction. These are details such your name and the business you are transacting with. However, instead of the actual name, blockchain uses a unique “digital signature”.
3. Information that separates one block from the others. Each block has a unique code known as “hash” that defines it from the other blocks.
Given that a block can store data of up to 1 MB, it does not store only a single transaction. Each block can record a few thousand transactions based on the size of transactions.
How Blockchain Works
Blockchain allows for the storage of information in a shared and continually reconciled database. Blockchain database is decentralized meaning that information is not stored in one single location. Given that there is no version of this data available in a centralized location, it’s not possible to corrupt it. The information is accessible to anyone on the internet as it is simultaneously hosted in many computers.
A block is added to the blockchain whenever it stores new data. However, for a block to before the addition, the following conditions must be met.
1. A transaction must take place. For instance, you must purchase a product or service first.
2. The transaction must be verified. After performing a transaction, verification is a must before it is added to the blockchain. Whereas centralized websites such as Wikipedia rely on other people to vet new information, a network of computers is used in the verification of data with blockchain. After a transaction, the computers check to confirm whether it has taken place as you have said it did. They consider details such as the participants, dollar amount, and transaction’s time.
3. The transaction must be contained in a block. After the verification of your transaction, the details are stored in a block.
4. The block must have a hash. The hash is a unique identifying code given to each block. A block will only be added on the blockchain after it has been hashed. The block can then be viewed publicly by anyone.
Application Of Blockchain Technology
1. Smart Contracts
Blockchain has made the coding of simple contracts to be executable upon meeting some conditions. Although Ethereum, an open-source blockchain project, is in its early stages, it has boosted the use of the technology.
2. Sharing Economy
Blockchain enables peer-to-peer payments eliminating the need for intermediaries in sharing economies.
Due to the transparency associated with blockchain technology, it could be used in elections. The use of smart contracts could enable the automation of the entire process.
The other areas where blockchain could be used include identity management, neighborhood microgrids, protection of intellectual property, prediction markets, file storage, and supply chain auditing among others.