Blockchain is possibly the next big tech thing happening to the world
Blog: NASSCOM Official Blog
Blockchain is an up and coming technology and has great potential in the Financial world. Cryptocurrencies such as Bitcoin and Ethereum have been all over the news and have a great hype amongst the general public.
This can all be the result of its minute availability and great media coverage. This new technology is ready to revolutionize IT in ways yet to foresee.
What is Blockchain Technology? How does it work?
Blockchain is based on Distributed Ledger Technology(DLT), which keeps track of the history of any digital asset. Through DLT, the log of that digital asset is then Unalterable and transparent. This is achieved through the use of decentralization and cryptographic hashing. Blockchain is built around a peer-to-peer(P2P) system that can easily be shared among various users to create an unalterable record of transactions. Each change is time-stamped and linked to the previous change. Every time a set of transaction appeared, that data is added which later becomes another block in the chain. Blockchain can only be updated if all the participant users in the chain agree to it, and once new data is entered it can never be erased, although can be appended. It is a write-once, append-many technology, making it a verifiable and auditable record of every transaction.
Blockchain could easily be understood and divided into three main pillars: blocks, nodes, and miners.
The data in the block.
- Firstly, there’s the data present in the block that is very useful.
- Secondly, it contains a 32-bit whole number termed as Nonce. This “Nonce” is randomly generated during the creation of a block by the system. The purpose of the generation is to determine the block header hash, which can then be linked to other blocks in the chain.
- Hash is a 256-bit number stitched to the Nonce. Hash generally starts with a lot of zeros in front hence the number formed is relatively very small.
Whenever the Initial block of the chain is created, Nonce, a 32-bit data, generates a cryptographic hash.
The data in the block and the nonce is tied forever and are unchangeable unless and until it is mined in future. During the generation of the first block of the chain, Nonce generates a highly cryptographic hash. The purpose of this hash is that it binds itself with the block and is forever tied to the nonce unless mined.
Miners are those individuals, who generate new blocks in the chain through the process called Mining. These miners play a very important role in the blockchain ecosystem, as without them any transaction won’t be possible. Every block is provided with a unique Nonce and hash. This is just the first firewall of blockchain. To make it more secure, another layer of security is added which contains the references to the hash of previous chains. As the complexity of the chain increases, the security increases exponentially. But the cost of security is a pad with the high amount of processing required to retrieve the data from these blocks, hence making Mining a very complex and costly process. To be able to solve such complex math problems, Miners are provided with a proper mining tool for finding a nonce to generate an accepted hash.
Now Nonce is of only 32-bits but hash is of 256-bits hence there will be roughly around 4-billion potential nonce-hash combinations that must be mined before the right one is generated. The particular combination fit for the block is called “golden Nonce” and is then clubbed with the block and added to the chain. Rolling out any changes to any prior block in the chain requires re-mining the rest with the change. This is the reason it’s incredibly hard to manipulate the blockchain.
At the point, when a block is effectively mined, the change is acknowledged by all the nodes in the network and the miner is compensated monetarily.
The basis of Blockchain Technology is decentralization. Nodes are just any device that maintains the copy of the blockchain and keeps the network functioning. As blockchains are transparent, every action in it can be easily checked and can be viewed by all in the network. Each participant is provided with their unique alphanumeric identification number that reflects their transactions.
Public Vs Private Blockchain
As Blockchains are based on Peer-to-peer networks, in parallel to distributed timestamping servers, Public blockchain can be managed and autonomously to exchange information between parties. All the users, in some way, are administrators. Private blockchain refers to a system where companies create and centrally transactions happening on their networks, used inter- or intra-company with partners. One such example of the private blockchain is the use of blockchain in the food supply chain to track the produce from the farm to your shelf.
How Secure is Blockchain
A system can never be 100% safe as there are always loopholes that can be exploited by others in their interest. But one thing that can surely be said about the blockchain is that it is the most secure system present to date. As it would require nearly 100 times computing power as all google’s serving farms put together to exploit.
Blockchain in various sectors
Due to its highly secure nature and the chain system it follows to bind every block with others, it has been of great use in many Industrial applications.
Right from financial institutions to food stores to shipping industries, Blockchain has proved its mettle in every field.