“What is blockchain?” this was my first introduction to the word “blockchain”. I have heard a lot about this term in recent years but didn’t get any opportunity to dig deep into it. Few days back, a friend introduced the same term again to me “blockchain” which actually motivated me to come out with this blog, I always wanted to get acquainted with the logic that makes these magical “blockchains” work. :)
Believe me.. After going through more than a few articles and strongly debated sessions with my colleagues, I could easily figure out a simple yet powerful mechanism behind blockchain. The technology is already widespread and being used for giant organizations like Bitcoins. Yup! You read it correct.. “Blockchain” mechanism is what makes Bitcoins run around. Alright, before we see more use cases of blockchain mechanism, lets understand some of its fundamentals.
As the name suggests, Blockchain is nothing but a set of data lumped together to form a chain of information (series of transactions carried out at different levels) blocks using cryptography technique.
The official definition you would find goes like
“Blockchains are decentralized database and peer to peer network that stores a registry of transactions.”
The image shown below will help you understand the idea behind it.
The magic is all hidden in this peer to peer network wherein the data is being stored on all the nodes within one network. Cryptography provides a way to keep your data safe and untampered. The transaction once done in blockchain cannot be undone and this is the beauty.. You can go back in history to see the timeline of all transactions. As the nodes are connected in peer to peer topology and all data is replicated to all the nodes in a network; every transaction is persisted on all nodes keeping the the data secure even if one of nodes fails.
As Blockchains are decentralized system that exists between all permitted parties, there’s no need to pay intermediaries (Middle Man) thereby avoiding any delays and conflicts. Moreover, there has to be some agreement/contract between these permitted parties as this is achieved using Smart Contract.
“A Smart Contract is a small computer program that runs blockchain (code with conditions – business logic), Like an algorithm of ‘If This Then That’ which executed upon certain condition. These are nothing but self-executing contracts”
In Smart Contract, every party has an identical copy of the same agreement, irrespective of the continuous change happening in that agreement.. The below mentioned diagram is a quick demonstration of how things actually look like in smart contract.
Smart contracts helps to exchange money, property, shares, or anything of value in a transparent, conflict-free way while avoiding the services of a middleman.
Decentralized Autonomous Corporations (DACs) or Decentralized Autonomous Organizations(DAOs) are set of contracts that interconnect to run an organization automatically.
Blockchain Key Traits:
Blockchains are permission less, accessible by anyone, anyone can write or read from blockchain, however there is community of sources to verify the data
Visible to everyone and thus the changes are traceable
Ex: Phone Directory
Permanent – Can add new data however old data can’t be deleted.
Ex: Land registry, title related assets storage (property owner can be changed to new owner however old owner name can’t be deleted)
Not easy to tamper – Data is secure with cryptography. It’s secure because it is distributed, each node has its own copy so changes needs to alter in every node which is difficult. It is further supported by the history of records, which is there in block chain to re-validate all the information.
Block Chain Business Cases:
1. Asset Tracking
2. Identity (Certified Identity)
3. IoT App Development (Internet of Things)
Well Known examples of Blockchain
2. Torrent download
Please comment here with more examples/usecases of block chains you have heard/read about.