Technology never stands still, it is constantly evolving. Every now and then, however, it takes a giant leap forward. Blockchain is one such leap.
Blockchain is a distributed platform of trust. It is the first technology to bypass the need for a central authority or body, in a secure, transparent manner. The result of this breakthrough is a level of efficiency and trust previously inconceivable in the digital world.
An intricate blend of cryptography, P2P Networks and Proof-of-Work functions are the lifeblood of these truly remarkable systems. Yet understanding what Blockchain Technology is and how it works can be a tedious task even for the more technologically inclined.
What is Blockchain Technology?
A blockchain is an organized way of structuring and storing data online. Blockchain’s primary breakthrough is that it allows information online to be distributed, but not copied, unlocking the doors to a whole new world of possibilities in the digital age.
Why is blockchain a big deal?
Blockchains are essentially databases that are replicated over peer-to-peer (P2P) networks. Spreadsheets that anyone can access and make use of while having the responsibility and incentive to maintain them.
One should note, however, that blockchains are programmable systems which can be tweaked to suit different needs. Here we’ll be discussing the traditional blockchain, as conjured up by Satoshi Nakamoto — but we’ll also go over the different classifications of blockchains.
Blockchains have many features and functions that make them distinctly unique and revolutionary. Some of the more prominent ones include:
- Organizing data, information, or content in a way that is verifiable, up-to-date, reliable, and accurate;
- Distributing information that is secure by making everyone privy to it, so that no one can make unwanted changes or single-handedly destroy information;
- Making data tamper-proof while also being widely accessible, on-demand and giving us the ability to continually update it;
- The ability to store sensitive data online e.g. financial transactions;
- The need for consensus between participating parties when updating or adding information;
- Consolidating data into a chain of events, ensuring the data is stored chronologically so that transactions are irreversible;
- Possibility for freedom from centralized authorities and elimination of third parties; and
- Immutability, increased efficiency, improved security, transparency, and enhanced productivity.
Classification of Different Blockchain Types
Public — this is an open platform that anyone around the globe with internet access can participate in. A public blockchain can be fully decentralized.
A good example of this is the Bitcoin protocol, which is the first functional blockchain ever created. Data found in this type of blockchain system is public and can be read, added to, and confirmed by anyone.
The user costs on public networks tend to be slightly higher than on private ones due to more validations being needed to ensure data integrity. They can also be a bit more sophisticated, since more security checks and verification mechanisms tend to be put in place to prevent fraudulent practices.
Private — with private blockchains, network creators have control of settings and can restrict access to users. This means that the central authority has the power to change the rules, reverse transactions, and make decisions or enact principal actions.
These networks tend to be much smaller than public networks but require lower maintenance costs and user fees since fraudulent checks and verifications are not performed as regularly as on public networks.
Hybrid — these can be a mix of both public and private blockchains in the sense that the ability to read and write information onto the blockchain may be extended to an exclusive group or nodes.
In our next post we’ll diving deeper into blockchain technology, taking a look at the way it works and assessing its potential impact.