By now you may have heard about the term “Blockchain” probably with people relating it to Bitcoins. But it is not easy to understand the science behind blockchain, the technology it employs, and how it actually works.
What Is Blockchain Technology?
This is a structure that stores records and information (known as blocks) in several databases (known as a chain) in a network that is connected through peer-to-peer nodes. This storage is called the “digital ledger”
Each transaction is authorized by the owner’s digital signature, which validates the transaction and cannot further be tampered with in the system.
How Does Blockchain Work?
Many businesses are now integrating Blockchain technology in their transactions. But how does it work?
Blockchain involves three technological combinations:
- Cryptographic keys
- Computing means
- Peer-to-peer networking with a shared ledger
Cryptographic keys consist of private and public keys. Both these keys are crucial for any successful transaction between the two parties. Each party has the keys that let them produce a valid digital identity reference (digital signatures in blockchain case). They are used for the authorization and management of any transaction.
The cryptographic keys are merged with the peer-to-peer network; individuals that work as authorities use digital signatures to reach an agreement on the transactions. When they authorize a deal, it gets validated by mathematical verification, and therefore a successful transaction.
One key feature that makes Blockchain technology successful is that it supports transactions.
The transaction takes place when two parties wish to conduct a transaction using private and public keys. The first party attaches the information about the transaction of the public key of the second party. The information is then gathered into a block.
The block consists of a digital signature, timestamp, and other relevant details that will make the transaction successful.
The block does not include the identities of both parties.
This block is transmitted across the network nodes, and when the right individual applies their private key and matches it with the block, the transaction takes place successfully.
A blockchain network consists of several systems of nodes that are connected to the network, with no interference from the third party. A node could be a computer or a small server that stores the whole information of transactions over the network. The nodes are linked together by a software protocol that controls the blockchain network.
These are nodes that perform more complicated functions towards authenticating any transaction. While all miners are nodes, vice versa is not true.
If you would wish to join the blockchain network as a miner you will have to create an account in a platform that offers access to the network and have complex skills in specific computer software and programming. After this, you may take part in validating the transactions.
Blockchain is a wide topic that requires you to invest your time and effort to understand how it works. With the world slowly shifting to cryptocurrencies, the young technology will soon be a giant in transactions and in our lives.