Virtual currency like Bitcoin is the most trending topic dealt by the internet after a spurt in the number of ransomware attacks. Technology at the heart of it is Blockchain forming the basis for any cryptocurrency. Blockchain are an open, distributed ledger that can record transactions between parties in a much more efficient, transparent and permanent way. Contracts engaged with here are embedded in digital code and stored in transparent, shared databases thus protecting them from deletion, tampering and revision. Blockchain serves as the public ledger for all transactions performed using the digital currency Bitcoin.
Main advantage of using blockchain is the absence of a third-party intervention such as lawyers and brokers. Transfers are made directly by the client and thus is more cost effective, transparent, self-sufficient and trustworthy. All the transactions dealt with is permanent, thus once it is made it will be linked with other transactions to form a block, and this block will be attached with the ledger, where it will be stored permanently. Computers that are connected in this network are known as nodes and they can remain anonymous. Nodes that are present in this network will have a copy of the database (distributed ledger) used, thus when any change is made in the database, it will be simultaneously updated in all other database copies and in this way, it ensures more security.
A new block will be added to the ledger in every ten minutes and the process of finding a new block so as to add them is known as mining. When the miners find a new block a copy of it will be passed to all the nodes, who will verify it and then add it to the ledger. Blocks that are not added to the network are known as Orphan blocks. Processing of a transaction begins with the request for a transaction by the client which is verified by the miners. Then the verified transactions will be linked with other transactions to form a block, which is then attached to the ledger permanently. At this point the transaction is said to be successfully completed.
Some of the problems associated with blockchains are that it is a limited technology supporting only a few transactions per second. The technology used is complex in nature, implementation challenges are huge, and the competing platforms used are aplenty. An attacker trying to break into the system can do so if they are successful in damaging the blockchain creation tool. This way the attacker will be able to control most of the part of the transactions and do various transactions as they prefer. Blockchains are private holdings relying on a community of anonymous miners to process the transactions.
Blockchain is due to bring about a trend gradually replacing centralized solutions to a decentralized or distributed solution. It is challenging to see what is beyond the reach of technology in realizing what blockchain is and what it is not. Even with its limitations blockchain is gaining footprint marking the beginning of a new era.
By Ed Sable | August 10th, 2017 | Business Analytics & AI