The Blockchain is a distributed public digital ledger that stores information that is very difficult to tamper with.
What's meant by it being distributed?
It means that the data on the blockchain and the tasks of maintaining it are not done by a single entity but rather by a network of computers located in various locations, spanning countries.
By doing this, each computer in the network stores a copy of the blockchain where transactions are recorded to prevent a single point of failure. Additionally, all copies are updated simultaneously.
What's meant by it being public?
It means that the information on it can be accessed and viewed by anyone who wants to check it.
Now that that's out of the way, let's move on.
As the name suggests, blocks in a blockchain are linked and consist of three fundamental elements:
1. The data being stored in it - For example, information about a transaction, the sender, the receiver, the amount transferred, and the time.
2. The hash of the block - likened to the digital fingerprint of the block.
3. The hash of the previous block - included in the block, linking them together in chronological order, similar to page numbers in a book.
An exception to this is the genesis block, which is the very first block in a blockchain.
How does it work?
You can liken a blockchain to a spreadsheet (although it's more complex than that). Information is collected and entered into a block (similar to how information is entered into a cell in a spreadsheet). Once the block is full, its hash is calculated by a special mathematical function. This function calculates the data of the block to generate a unique fixed-length string of characters (the hash).
The block is then validated (checked for errors or tampering) by a consensus mechanism (read more about them here) and added to the blockchain. After it has been added and recorded, it becomes nearly impossible to alter it.
This process repeats for subsequent blocks.
Benefits of the Blockchain
• Transparency:
Blockchain, likened to a public ledger, ensures that every participant has a clear view of the recorded data. This real-time visibility minimizes the risk of fraudulent activities, as any alterations are promptly evident to all involved parties.
• Immutability:
Once info is in the blockchain, it's almost unchangeable, like engraving in stone. This builds trust in the stored data.
• Traceability:
The blockchain acts as an advanced tracking system, crucial for identifying and resolving issues, especially in supply chain management.
• Decentralization:
Unlike centralized control, blockchain spreads power across the network, avoiding a single point of failure and creating a more resilient system.
Some Big Tech Company services are dependent on centralized servers; any downtime or issues with these servers can affect the availability of all their services. In contrast, blockchain technology operates on a decentralized network spread across various nodes. This decentralized structure minimizes the risk of a single point of failure, ensuring that even if one node experiences downtime, the overall blockchain network can continue functioning.
Limitations of the Blockchain
• Scalability:
Blockchain faces challenges in scalability, meaning its ability to handle a large volume of transactions efficiently. As more users join the network, transaction speeds may decrease, and fees can rise. This limitation hinders the widespread adoption of blockchain for high-frequency transactions.
• Energy Consumption:
Some blockchain networks, especially those like Bitcoin, need a lot of energy for transaction validation, raising environmental concerns.
• Interoperability:
Different blockchain networks operate independently, limiting smooth communication between them. This means assets or data can't flow seamlessly across different blockchains.
• Security Challenges:
Despite its security reputation, blockchain ecosystems aren't immune to vulnerabilities. Smart contracts, 51% attacks, and other exploits pose risks needing ongoing attention.
So that explains the blockchain.
Vocab of the Day
• Consensus Mechanism: The process by which nodes on a blockchain agree on a single version of the truth or validate transactions. Examples include Proof of Work (PoW) and Proof of Stake (PoS)
• Immutable: Once data is added to the blockchain, it is almost impossible to change or tamper with. It's like an unalterable record.
• Node: A computer that participates in the blockchain network, verifying and validating transactions.
And that's it for today. Thanks for reading. Have a blessed weekend, and don't forget to touch grass 🌱.
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