Blockchain

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21 Aug, 2024

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A blockchain is an advanced database mechanism that stores data in blocks linked together in a chain. It is used to create an immutable ledger for recording several business transactions, which include monitoring user accounts, payments, and tracking orders. It provides a decentralized and distributed data network that anyone from any location can access.

No single entity can modify or delete the data stored in this network without consensus from the web. As a result, the data is transparent, and the general public can rely on it. Furthermore, no single individual owns or administers this data, and no single entity or authority can interrupt the network's operations.

Blockchain Meaning

A blockchain is an advanced database technology that stores data digitally in blocks linked with a chain.
Various industries use this technology to store their business transaction data. Banking, finance, healthcare, crypto, and Web3 spaces are among the most common industries using this technology to store data.
An entity cannot modify the data recorded on this network with the network's consensus, making it hard for a single entity to tamper with it. Furthermore, a single entity cannot interrupt this network's operations.

Blockchain Explained

A blockchain is an advanced data storage system that stores information in blocks joined together with a chain. Anyone can access the data from any location, and this technology offers transparency. There are several types of blockchains, and they come with different protocols and features.

The various types of blockchains are as follows:

Public network: This allows anyone to join and participate in the activities. Businesses primarily use them. However, they have weak security and little to no confidentiality for transactions.
Private network: This network is not accessible to the general masses. An entity controls the network, permitting individuals to join and participate in the activities.
Permissioned network: Businesses that set up a private network usually set up this network. This network restricts individuals from participating in the activities. Individuals must obtain permission or an invitation from the governing entity to perform a specific action.
Consortium network: In this network, several organizations share the responsibilities of maintaining a blockchain. The organizations determine who can record the transactions or access the data.

What is Blockchain? Explained in Video

Examples

Let us understand the concept with the following examples:

Example #1

Suppose ABC Travels is a travel website that offers customers several services like booking flight tickets, hotels, stays, concert and movie tickets, etc. When customers sign in to and create their accounts on this website, they enroll in a loyalty program. This loyalty program offers customers tokens based on their activities on the website. Customers who travel frequently and make their bookings through this website get more tokens. Customers can redeem these tokens in future purchases from the website, providing significant monetary discounts. This is an example of blockchain.

Example #2

Blockchain technology significantly in recent years due to the attention it garnered from the masses. It promises great potential in several industries like banking, finance, healthcare, and cybersecurity. The rising digitalization worldwide and the introduction of remote work, which led to increased use of mobile devices, contributed to businesses adopting this technology at an accelerated pace.

However, the US Government has started putting restrictions on the crypto space. They want the crypto and Web3 space to grow elsewhere. At the same time, Asia, Europe, the Middle East, and other places are trying to attract more crypto and Web3 startups as they come with economic benefits. This is another example of blockchain.

Benefits

The benefits of blockchain are as follows:

This technology supports immutability, so replacing or erasing previously recorded data is impossible. As a result, tampering with the data in this network is impossible. Furthermore, no individual can manipulate the saved data.
This network's data is decentralized, meaning anyone can access the data from any location. Additionally, it provides transparency so that the general public can trust the authenticity of this network.
It is free from any censorship, which means that no single authority can stop the operations of this network.
One of the most significant benefits of blockchain is that it has a history of records and ownership of records, which means that one can easily trace the data changes.

Disadvantages

The disadvantages of blockchain are as follows:

It has a high implementation cost. It is more expensive, and businesses would require proper planning and execution to implement this technology.
Altering the data on this network is not permissible, meaning rectifying any mistake is complex and time-consuming.
It is significantly slower than a traditional database.
This technology's anonymity often leads to illegal activities on this network. Individuals can carry out unlawful trading activities due to the network's confidentiality.

Blockchain vs Cryptocurrency

The differences between blockchain and cryptocurrency are as follows:

Blockchain	Cryptocurrency
It is a technology that stores data on decentralized networks.	This is a type of currency that is used as a medium of exchange.
This system does not have any monetary worth.	It has a monetary value and can be expressed in conventional currencies.
It has various uses besides cryptocurrencies, like recording retail, supply chain, healthcare, and banking transaction data.	This digital currency can be used to purchase goods and services. They can also be used for investment.
This is a decentralized technology that is distributed all over the world.	It can only be accessed through a digital wallet.
It is transparent, and anyone can access the data stored on this network.	They offer anonymity, where the transaction's source and destination can be visible to the public, but the individuals responsible for those transactions remain hidden.

Blockchain vs Database

The differences between blockchain and database are as follows:

Blockchain	Database
It stores data in structures known as blocks that are linked together with a chain.	It is a ledger that an individual administers.
This technology is decentralized as there is no admin involved.	This is centralized as an admin operates it.
Anyone can access it without any permission.	It is not accessible without the admin's permission.
It has a records history and ownership of the digital records.	Their records have no previous history or ownership records.
They are completely confidential.	They are not entirely confidential.
The system contains only the option to enter new data. The data, once uploaded, cannot be altered. Only new data can be added to the blocks.	It contains the option to read, update, create, and delete the data.
It is a robust technology.	This is not a fully robust technology.
This is not a recursive technology which means that going back to repeat a task on any record is not possible.	It is a recursive technology. It means it is possible to back and repeat a task on a specific record.

Frequently Asked Questions (FAQs)

1. Can blockchain be hacked?

Blockchain technology has many inbuilt features, making it difficult for hackers to corrupt the system. However, hackers can still access the database and take control. Generally, hackers steal currencies and blockchain assets from sources like cryptocurrency exchanges and wallets. Furthermore, they can manipulate blockchain transactions. While this technology cannot be hacked, hackers can corrupt adjacent processes.

2. When was blockchain invented?

A group of unknown people invented this technology in 2008 under the pseudonym Satoshi Nakamoto. In 1982, David Chaum, a cryptographer, proposed a technology like this in his dissertation "Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups." In 1991, Stuart Haber and W. Scott Stometta conducted further work on a secure chain of blocks. Finally, in 1992, Dave Bayer, along with Haber and Stometta, added more improvements to the technology and increased its efficiency by permitting it to collect several documents into one block.

3. What is the initial application for which blockchain was designed?

This technology was initially designed to support the Bitcoin application in 2008. It was created as a public transaction ledger for this cryptocurrency. It served as the foundation for Bitcoins as this cryptocurrency runs on this technology and is its first use case.