An electronic blockchain is a distributed database shared by all the nodes of a computer network. The information is stored in digital form electronically. Most people are familiar with blockchain technology as a means of maintaining a secure and decentralized record of transactions in cryptocurrency systems, such as Bitcoin. As a result of the blockchain, data integrity and security are guaranteed as well as trust is generated without the need for a trusted third party.
The data structure of blockchain differs from that of a typical database. Blockchains consist of groups of information, called blocks, that hold sets of information. In the blockchain, each block stores a certain amount of data and is linked to the last block that it has previously contained, forming a chain of data. Whenever a newly added block is followed by new information, it will be compiled into a newly formed block that, when filled, will also be added to the chain.
The data in a database is typically organized into tables, whereas the data on a blockchain is organized by chunks (blocks) which are strung together. When implemented in a decentralized fashion, this data structure creates an irreversible timeline of data. Blocks are set in stone when filled in and become part of this timeline. A time stamp is given to every block in the chain when it is added to the chain.
In what Way Does a Blockchain Work?
Blockchain aims to enable the recording and distribution of digital information, but not its editing. A blockchain, then, is a system for recording immutable records of transactions that are immutable and can never be altered, deleted, or destroyed. The blockchain is also referred to as a distributed ledger technology (DLT).
Bitcoin was the first widespread application of the blockchain concept in 2009, having been proposed in 1991 as a research project. Due to the emergence of various cryptocurrencies, decentralized finance (DeFi) applications, non-fungible tokens (NFTs) and smart contracts, the use of blockchains has grown astronomically over the past few years.
Decentralization of blockchain technology
Let’s say a company maintains a database of all the information about its clients on a server farm with 10,000 computers. All of these computers are housed under one roof in a large warehouse building owned by this company, and the company has full control over each of these computers and all of the information they contain. The only problem is that there is one point of failure. If that location loses power, what will happen? When the connection to the Internet is destroyed, what will happen? What if the connection burns down? How would you react if a bad actor wiped everything out with a single keystroke? Data gets wiped out or corrupted in some way.
Blockchains allow data placed in a database to be distributed across a variety of network nodes across various locations. Redundancy is created while maintaining data fidelity, such that if a record is changed at one node, it won’t affect the other instances of the database and so an act of bad intent cannot occur. When one node manipulates Bitcoin’s transaction records in an online Bitcoin Wallet, all other nodes will cross-reference each other and will be able to identify the node that tampered with the information. Such a system can provide an accurate and transparent order of events. The network is protected from changes caused by a single node within it.
As a result, historical information and transactions (including cryptocurrency transactions) cannot be reversed. Blockchains could contain records of transactions (such as cryptocurrencies), but they could also store other information such as contracts, state identifications, or product inventories.
Transparency about transactions
Due to Bitcoin’s decentralized nature, all its transactions are transparent either to those who run a node on their computers or to those who use blockchain explorers to view them live. Every node maintains its own version of the chain, which is updated as new blocks are confirmed and added. Bitcoin can be tracked wherever it goes if you wish to track those transactions.