Blockchain is a technology, relatively not new. In the tech space or not, “Blockchain” is a technology everyone is talking about because of its potential, and how it’s greatly influencing the financial industry, as the first mainstream manifestation of its potential.
I will explain Blockchain Technology from what I learned in the first week of the Web3Ladies mentorship program.
What is Blockchain
Blockchain is a time-stamped, tamper-evident, shared digital ledger that records transactions in a public or private peer-to-peer network. It is transparent, immutable and distributed to all member nodes in the network, the ledger permanently records transactions, in a sequential chain of cryptographic hash-linked blocks.
I simplified it below.
I think of Blockchain as a digital ledger or spreadsheet (imagine the digital version of a bank ledger), that permanently records transactions and cannot be tampered with. Transparent, meaning it shows all transaction history but hides users' identities except for the wallet address. The data is shared and managed by different computers owned by different computers all over the world called Nodes, which bring about transparency and are not controlled by an organization or central authority. It is highly secured with the use of a cryptographic hash that links the blocks of data together, transaction made cannot be reversed or modified.
Properties of Blockchain
Decentralization
Blockchain is a decentralized system that operates without a central entity controlling or managing it, for example, a single central server, government or organizations in charge of the system. Every participant has equal access or right depending on the type of the Blockchain network; permission or permissionless.
Transparency
Blockchain is an open system. The technology is decentralized and shared, which makes it accessible to all participants of the network, solving the trust issues that come with the centralized system. For example, as a user, you can go on the blockchain network explorer like Etherscan or Bscan to check for the transaction history or balance of any wallet address.
Immutability
Transactions on the Blockchain cannot be modified because it uses the cryptographic hash to secure transactions. A small change in a block or transaction will trigger the system. The cryptographic hash functions have properties suitable for Blockchain technology that make it immutable.
Distributed
Blockchain uses distributed system, it uses a collection of computers connected to store its data and manage the system, these computers are called nodes, and the workloads are shared among these nodes in the blockchain network.
All these properties and more, make Blockchain an incredible technology.
Primarily, there are two types of Blockchain networks, but there are other variations;
1. Private or Permissioned Blockchain simply means you need to be given access to join and participate in the network. This type is used, mainly by large enterprises, it is a blockchain network where privacy is highly valued, and data is shared among the permitted participants only, for example, only the participants involved in a particular transaction can know about it, while other users on the network do not know about it. On this type of network, transactions takes a short period to verify transactions, it is easy to scale and usually considered a centralized blockchain because of the small number of participants requires one or more entities to control and manage the system. Because of the smaller nodes, it is vulnerable. An example is the Hyperledger Fabric blockchain.
2. Public Blockchain or Permissionless Blockchain is a network that is open to all, anyone with the internet can join and access data on the Blockchain. It is considered to be truly decentralized, transparent and more secure because it has many nodes, so no point of failure, transactions cannot be modified once it's been validated on the blockchain, they are easily accessed, has open-source code, and can be easily improved. It is not easy to scale because of the size of the network, it used to consume a lot of energy because of the proof-of-work consensus mechanism, Examples are; Bitcoin, BNB Chain, Ethereum etc.
Blockchain Technology is helpful for both individuals and enterprises, directly or indirectly. Adoption is going on in different industries as the use cases are in Supply chain, Management, Finance, Real estate, Health system, Identification & data management, etc.
I hope this article helps.