What is Blockchain Technology & How Blockchain Technology Works
Blockchain technology has radically transformed the way businesses conduct transactions; small wonder that there is a huge buzz and hype surrounding it. So what exactly is blockchain?
It is a decentralized technology used to transfer digital assets like Cryptocurrency across peer to peer networks. It offers an efficient method of recording and transferring data safely, and with transparency. It is also very resilient, capable of being audited, and has minimal outages.
What makes blockchain so great, and why is there such a demand for blockchain development services?
Let’s understand how Blockchain works:
The underlying principles of blockchain are actually not new – what has changed is the way in which these principles have been reorganized and applied.
1. Private Key cryptography
This is the first step in the blockchain development process, and it’s used for creating a secure digital identity reference that allows two individuals to make secure transactions over the internet, where both individuals have a public and a private key. Combined together, the keys form a digital signature, which helps to establish and authenticate identity, and is an efficient form of consent. But to secure a digital relationship, a way to approve permissions and transactions is required – this is accomplished by the distributed network.
2. A distributed network with a shared ledger
This is a validation of a certain action taking place; a large network where mathematical verification is done. Think of the thought experiment about a tree falling in the forest. If there were several cameras that all captured the fall, we can confirm almost definitely, that the tree did fall – even if we don’t know the cause. Similarly, on a vast network, numerous validators use mathematical verification to conclude that they all saw the same event happening at the same time. In other words, algorithms are executed for evaluating and verifying the history of the individual block.
Let’s say individual X uses their private key and announces that they are sending a certain amount of Cryptocurrency (bitcoin), and attaches it to the public key of individual Y. Every node in the network will receive a ‘block’ that contains the digital signature, timestamp and other necessary information.
3. Network service protocol
Now you may wonder why would there be cameras in the forest waiting to capture a tree falling- or, why would hundreds of computers service a network just to enhance its security? In anonymous public blockchains, it works on the concept of mining. That is, when you offer the processing power of your computer for servicing the network, a reward is made available for one computer. Where bitcoin is concerned, the protocol seeks to eliminate the possibility of one bitcoin having been used in different transactions simultaneously. The nodes that serve the network develop a record of the transaction history for every single bitcoin, through mathematical verification. The computing power is used to either reject or accept new blocks; when the majority of miners are at the same conclusion, a new block, which has a time stamp and data, is added to the chain. The amount, verification, and type for each blockchain need not be the same; there could be different rules as to what constitutes a valid transaction and what does not. The verification process is customized for individual blockchains. When a sufficient number of nodes are at a consensus on the transaction verification process, new rules and incentives are crafted.
How are blockchains configured?
Blockchains can be structured to work in several ways that utilize numerous methods to arrive at a consensus on transactions. It defines familiar participants and excludes all others. Bitcoins use anonymous public ledgers where participation is open to all; in private blockchain usage, organizations deploy blockchains with permissions for controlling the participants in a given transaction activity.
What are the advantages of blockchain technology?
- Greater Efficiency
- Reduced data storage cost
- Tvisha Technologies
- Saving in time
- Avoid data duplication
- Enhanced data security
- Lower risk
Though blockchain technology has been a huge game changer for banking, finance, healthcare, IoT, cloud storage and so on, it can be successfully implemented in numerous industries like online shopping, renewable energy, travel, e-learning etc. thanks to the advantages it offers. It can be used for business transactions like administration, order tracking, contract validation and more.
IPIX Tech Services is capable of servicing all your blockchain application or blockchain development needs – regardless of the challenges of complexity involved. Our custom blockchain app development services include multi-cyptocurrency wallets, smart contracts, crypto-exchange, and a whole lot more. Our dedicated blockchain development team is adept at delivering industry- specific, affordable, bespoke, resilient blockchain based applications and platforms. We also offer support for the blockchain solutions we deliver.
If you want to leverage the potential of this revolutionary technology, please contact us – and we’ll tell you how we can help your business growth.