The cryptocurrency market has been booming for the last ten years like never before. After this year’s Union Budget, we all became aware of the bright future of the crypto market. But, most of us don’t know that the basic technology behind the cryptocurrency, blockchain, is more dynamic than the cryptocurrency itself. We can consider blockchain as the backbone of cryptocurrency. Cryptocurrency is one of the many applications of the current tech world that is developed using the blockchain. Blockchain to cryptocurrency is similar to the connection between networking technology and the internet.
What is blockchain?
In simple words, Blockchain technology can be described as the online, distributed, decentralized ledger that can be shared within a network. The term “distributed ledger” indicates that the ledger in blockchain can be shared with the participants within a network at a time. For simplicity, we can compare this feature of blockchain with the collaborative nature of Google Docs, but the blockchain is far more complex than Google Docs. The decentralized feature of blockchain indicates that no one can solely control this, and all of the participants within the network have the equal right to access the ledger in real time.
How does blockchain work?
As the name suggests, many blocks are connected through a chain to develop a data-sharing platform in Blockchain technology. Each block of the blockchain contains information, including data, the hash of the chosen block, and the previous block’s hash. The hash works as the block’s key that connects each of the blocks with its previous one and collectively makes a chain of blocks. This feature also makes the Blockchain one of the most secure technology networks.
Why do Tech Companies love blockchain?
Following are the five main advantages of adopting blockchain in the business environment:
- Improved security
- No centralized power
- Transparent transaction
- Higher level of traceability
- Cost-effective in the long run
Difference between Blockchain and Distributed database
The function of blockchain is similar to the database, and many times, people get confused over blockchain and the distributed database, as both work in a centralized manner.
But they are not the same.
The following are some of the factors that distinguish the distributed database from the blockchain:
- First and foremost, the Blockchains are decentralized, and no power or authority can control them, but the distributed database is controlled by administrative groups and centralized in nature.
- The two technologies follow different architectural models. The blockchain follows the distributed network architecture, whereas the distributed database follows the client-server architecture.
- Blockchain technology is harder to implement than a distributed database systems.
- Blockchain technology is slower to implement and run than distributed databases.
The different types of Blockchains
The blockchain can be categorized mainly into three sections:
- Public Blockchain: This type of blockchain works in a fully decentralized environment, where no single person or organization would control its access. This type of blockchain is used in cryptocurrency.
- Private Blockchain: Though initially, we mentioned that the blockchain uses decentralized authority, some types of blockchains are centralized by some specific organization or authority. This type of blockchain is mainly used for supply chain management and asset management.
- Consotrium: This is also a permissioned version of the blockchain, but here the access is controlled by a group. This version of the blockchain is more scalable and secure than the other version. This type of blockchain is used in banking.
- Hybrid Blockchain: This is a mixed form of blockchain that includes both features of private and public blockchains. Though there is some centralized control access in this type of blockchain, some features of this blockchain can be accessed by the users without permission. This type of blockchain is used in health management.
Blockchain and Data Security
Blockchain can be considered as a collection of interconnecting blocks where each block contains a very small percentage of the total information contained in the whole chain. Each node in the blockchain is connected to the previous lock by its hash number, and so to change or access the information of any block, one has to have access to the previous block as well. The Blockchain stores data in an encrypted format, making it even harder to manipulate the data stored in the blockchain. This is why more and more data security companies are adopting blockchain technology.
Read my next blogs to know how Blockchain technology is used in some of the major business areas, including Cybersecurity, digital currency, and supply chain management.