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Understanding Blockchain and it's basics 

05.26.21 07:16 PM By Bindya

What is a Blockchain? How is this different from any secure banking database?

What is a BlockChain?

 

    A blockchain is a type of database. Now question arises, what is a database? A database is a collection of information, stored electronically, typically in tabular form to allow for easier searching and filtering as and when any specific information is needed. One might think this feels like a spreadsheet but the amount of data a database holds which can be accessed, filtered or manipulated in no time by any amount of users cant be achieved using spreadsheets which are designed to be accessed by individual or a group of people.

    These large databases are hosted on big servers with greater computational power and storage capabilities for many users to access the information simultaneously. These databases are owned by business and are managed by professionals that have complete control over the storage and has a know-how of how it works and the data it is carrying.

    Now the question is how is this different from Blockchain then; the major difference is how the information/ data is structured. A blockchain collects information together in groups, also known as blocks, that hold sets of information. Blocks have certain storage capacities and, when filled, are chained onto the previously filled block, forming a chain of data called as the Blockchain. All new information that follows that newly added block is compiled into a newly formed block that will then also be added to the chain once it is filled.

  Where a database collects and stores information in tabular forms, blockchain stores the data in the form of blocks chained together which inherently makes an irreversible timeline of data, that is implemented in a decentralized way. When a block is full, it is fully enclosed and made a part of this timeline. Each block in the chain is given an exact timestamp when it is added to the chain.

 What does decentralization mean?

    As mentioned earlier, databases are stored on greater computational servers and are owned by a specific business but these blockchain are spread over different geographical locations, where the systems/ computers (known as nodes) are owned by different individuals who are contributing in validating and storing the transactions/ data/ information. Blockchain could be centralized if it is owned by a particular party which is storing the information within the network owned and operated by them.

 

    In a blockchain, each node has a full record of the data that has been stored on the blockchain since its inception. So, if one node has an error in its data it can use the thousands of other nodes as a reference point to correct itself. This way, no node within the network can alter the information held within it. Because of this, the history of transactions in each block in blockchain is irreversible. and any tampering could easily be cross-referenced and corrected. This way system is irreversible and transparent (at any given point, can be viewed by either having a personal node or by using explorer.).This way, it is possible for a blockchain to hold a variety of information like legal contracts, state identifications, or a company’s product inventory. In order to change how that system works, or the information stored within it, a majority of the decentralized network’s computing power would need to agree on said changes. This ensures that whatever changes do occur are in the best interests of the majority.

How transparent the Blockchain is?  

    Each node has it's own copy of the chain that gets updated as new blocks are confirmed and added. Even if the hacker, hacks the information; the coin is generated through the blockchain, will not be validated, till 51% if the nodes agreed to the new information. Any node within the network can also view the live transaction and check the time stamp associated.

Is Blockchain Secure?  

    Blockchain technology accounts for the issues of security and trust in several ways. First, new blocks are always stored linearly and in chronological order, which means new blocks are always added to the end of the Blockchain. Like the case of Bitcoin' blockchain, each block is added to the chain and the position is called “height.”

    After a block is added to the end of the blockchain, it is challenging to go back and alter the contents of the block unless the majority reached to an agreement and accepts the new contents. That’s because each block contains its own hash, along with the hash of the block before it, as well as the previously mentioned time stamp. Hash codes are mathematical functions. These functions are predefined algorithms to convert digital information into a string of numbers and letters. If that information is edited in any way, the hash code changes as well.

    Lets understand this security feature using an example, Let’s say a hacker wants to alter the blockchain and steal Bitcoin from everyone else. If they were to alter their own single copy, it would no longer align with everyone else's copy. When everyone else cross-references their copies against each other, they would see this one copywouldnt match and will be considered illegitimate. Now if this hacker wants to steal, he needs to own atleast 51% of the copies of that blockchain so that the new copy becomes the majority copy or agreed-upon copy of the chain, which indeed require immense amount of money, resources and computational power (to alter time stamps and hash codes).

    Lets see this by taking example of Bitcoin which is the product of first blockchain coin itself, As Bitcoin network size is huge and so is the complexity, cost of pulling this off would be enormous. Not only would this be costly, but it would also likely be fruitless as doing such a thing would not go unnoticed, as network members would see such drastic alterations to the blockchain. The network members would then divert to a new version of the chain that has not been affected. This would cause the attacked version of Bitcoin to fall in greater value, making the attack ultimately pointless. It is built this way so that taking part in the network is far more economically revenue generating than attacking it.