Blockchain is a revolutionary concept because it reduces the risk of fraud for any transaction. The basic structure of any system is a transaction. Whether it is finance, economics, legal, political or even moral, some types of transactions occur when two entities interact. Therefore, three crucial parts or players of any interaction first are the details of both parties; second is the actual transaction, and third is the records containing the data point of any transaction. If we note the fact of any interaction, then the core will always be these three concepts. The rise in the transactional power of computers has resulted in the growth of the digital economy. There are many problems in maintaining the transparency for a transaction. The concept of blockchains emerged as a solution to these problems, and it promises transparency in every transaction.
As per the concept, this is the core of any virtual currencies such as bitcoin, ethereum, xrp etc. It is an open distributed ledger technology, which can record the transaction between two parties that cannot be altered and remains verifiable at any point of time. It operates through a distributed database on the decentralized network. So in short, the process is as follows, whenever a transaction takes place, a digital asset is created, distributed to the decentralized network with full real-time access. A transparent ledger which preserves all the details about the digital asses and transaction is maintained. It creates trust in the digital asset and removes many obstacles caused by intermediaries. It also gives freedom to individual, organizations or machines to transact and interact with each other.
There are three components of Blockchain: Blocks, miners and nodes. The blocks are present in every chain in multiple numbers. Each block has data, a 32-bit whole number known as nounce which is randomly generated at block-creation. And then there is a hash which is a 256-bit number with many zeroes in the beginning. At the time of first block creation, a nounce produced a cryptographic hash and data is signed and ties to the nounce and hash until it is mined. The second component is the miners. The miners follow a mining process for creating the new blocks on the chain, which is a complex process as every block has unique nonce and hash. It also has a reference of the previous block in the chain. All the miners work on unique software for finding the nonce, which can generate an accepted hash. Also, since nounce contains only 32 bits, the hash has 256 bits so there can be colossal combination possible, so many combinations are to be mined before one reaches the right one. It is an advantage of the Blockchain as it doesn’t allow any manipulation. Once the block is successfully mined, all the nodes accept the change and the miner gets the reward. The third component is the nodes. It is an electronic device which maintains the copies of the Blockchain. Every node has its copy, and the network approves any newly mined block with the help of an algorithm. Because of the transparency in the foundation, every action in the ledger can be easily checked and verified.
Blockchain came in existence as part of a proposal for bitcoin in 2008. Since then, there is a transformation going on in several industries to adopt the blockchain methodology. One of the main reason for implementing the Blockchain is that it slashes the cost of the transaction. There is an immense possibility in the Blockchain. The transformation may take some time because of the complexity, but this will revolutionize the organization if implemented well.
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