1) What is Blockchain?
Blockchain technology is not a company nor an app but rather an entirely new way of documenting data on the internet.
The technology can be used to develop blockchain applications, such as social networks, messengers, games, exchanges, storage platforms, voting systems, prediction markets, online shops, and much more. In this sense, it is similar to the internet, which is why some have dubbed it “The Internet 3.0”.
The information recorded on a blockchain can take on any form, denoting a transfer of money, ownership, a transaction, someone’s identity, an agreement between two parties, or even how much electricity a lightbulb has used.
However, to do so requires confirmation from several devices, such as computers, on the network. Once an agreement, otherwise known as a consensus, is reached between these devices to store something on a blockchain, it is unquestionably there, and it cannot be disputed, removed, or altered, without the knowledge and permission of those who made that record, as well as the wider community.
Rather than keeping the information in one central point, as is done by traditional recording methods, multiple copies of the same data are stored in different locations and on different devices on the network, such as computers or printers. This is known as a peer to peer (P2P) network. This means that multiple copies remain safe and secure elsewhere, even if one storage point is damaged or lost. Similarly, suppose one piece of information is changed without the agreement of the rightful owners. In that case, countless other examples exist where the information is correct, making the false record obsolete.
2) Why is it Called “Blockchain”?
Blockchain owes its name to how it works and how it stores data, namely that the information is packaged into blocks, which link to form a chain with other blocks of similar data.
This act of linking blocks into a chain makes the information stored on a blockchain so trustworthy. Once the data is recorded in a block, it cannot be altered without changing every block that came after it, making it impossible to do so without it being seen by the other participants on the network.
Typically, each block contains the data it is recording, for example, a transaction like 1 Lisk token being sent from Alice to Bob, as well as timestamps of when that information was recorded. It will also include a digital signature linked to the account that made the recording and a unique identifying link, in the form of a hash (think of it as a digital fingerprint), to the previous block in the chain.
This link makes it impossible for any of the information to be altered or for a block to be inserted between two existing blocks. To do so, all following blocks would need to be edited too. As a result, each block strengthens the previous block and the security of the entire blockchain because it means more blocks would need to be changed to tamper with any information.
When combined, all of these create unquestionable storage of information, one that cannot be disputed or declared to be untrue.
Let’s take the example of Google spreadsheet or MS Excel (Windows). This spreadsheet is shared among different networks of computer, where everyone has a copy of it. The spreadsheet contains information about the transactions committed by real people.
Anyone can access that spreadsheet, but no one can edit it.
It works with Blocks, whereas a spreadsheet works with “rows” and “columns.”
A block in a blockchain is a collection of data. The data is added to the block in a blockchain by connecting it with other blocks in chronological others, creating a chain of blocks linked together. The first block in the Blockchain is called Genesis Block.
Blockchain is a distributed ledger, which means that accounting is spread across the network among all peers in the system, and each peer holds a copy of the complete ledger.
3) How Does It Work?
3.1 A node starts a transaction by creating and digitally signing it with its private key (created via cryptography). A transaction can represent various actions in a blockchain. This data structure most commonly represents the transfer of value between users on the blockchain network. Transaction data structure usually consists of some logic of transfer of value, relevant rules, source and destination addresses, and other validation information.
3.2 A transaction is propagated (flooded) by using a flooding protocol, called Gossip protocol, to peers that validate the transaction based on preset criteria. Usually, more than one node is required to verify the transaction.
3.3 Once the transaction is validated, it is included in a block, propagating onto the network. At this point, the sale is considered confirmed.
3.4 The newly-created block becomes part of the ledger, and the next block links itself cryptographically back to this block. This link is a hash pointer. At this stage, the transaction gets its second confirmation, and the block gets its first confirmation.
3.5 Transactions are then reconfirmed every time a new block is created. Usually, six confirmations in the network are required to consider the transaction final.
Transactions are then reconfirmed every time a new block is created. Usually, six confirmations in the Bitcoin network are required to consider the transaction final.
4) The different types of blockchains.
There are three primary types of blockchains, which do not include traditional databases or distributed ledger technology (DLT) that are often confused with blockchains.
- Public blockchains like Bitcoin and Ethereum
- Private blockchains like Hyperledger and R3 Corda
- Hybrid blockchains like Dragonchain
5) What is a public blockchain?
Let’s explore the different types of chains. And start with public blockchains, which are open source. They allow anyone to participate as users, miners, developers, or community members. All transactions on public blockchains are fully transparent, meaning anyone can examine the transaction details.
5.1 Public blockchains are fully decentralized, with no individual or entity controlling which transactions are recorded in the blockchain or the order in which they are processed.
5.2 Public blockchains can be highly censorship-resistant since anyone is open to joining the network, regardless of location, nationality, etc. This makes it extremely hard for authorities to shut them down.
5.3 Lastly, public blockchains all have a token associated with them that are typically designed to incentivize and reward participants in the network.
6) What is a private blockchain?
Another type of chain is private blockchains, also known as permissioned blockchains, which possess several notable differences from public blockchains.
6.1 Participants need consent to join the networks
6.2 Transactions are private and are only available to ecosystem participants that have been permitted to join the network
6.3 Private blockchains are more centralized than public blockchains
6.4 Private blockchains are valuable for enterprises that want to collaborate and share data but don’t want their sensitive business data visible on a public blockchain.
These chains, by their nature, are more centralized; the entities running the chain have significant control over participants and governance structures. Private blockchains may or may not have a token involved with the chain.
7) What is a consortium blockchain?
Consortium blockchains are sometimes considered a separate designation from private blockchains. The main difference between them is that consortium blockchains are governed by a group rather than a single entity. This approach has all the same benefits of a private blockchain and could be considered a sub-category of private blockchains instead of a separate type of chain.
7.1 This collaborative model offers some of the best use cases for the benefits of blockchain, bringing together a group of “frenemies”- businesses that work together but compete against each other.
7.2 They can be more efficient, individually and collectively, by collaborating on some aspects of their business.
7.3 Participants in consortium blockchains could include anyone from central banks to governments to supply chains.
8) What is a hybrid blockchain?
Dragonchain occupies a unique place within the blockchain ecosystem because it’s a hybrid blockchain. This means it combines the privacy benefits of a permissioned and private blockchain with the security and transparency benefits of a public blockchain. That gives businesses significant flexibility to choose what data they want to make open and transparent and what data they want to keep private.
8.1 The hybrid nature of the Dragonchain blockchain platform is made possible by our patented Interchain™ capability, which allows us to connect with other blockchain protocols easily. Allowing for a multi-chain network of blockchains
8.2 This functionality makes it simple for businesses to operate with the transparency they want without sacrificing security and privacy.
8.3 Also, posting to multiple public blockchains at once increases the security of transactions, as they benefit from the combined hashpower being applied to the public chains.
9) How Bitcoin and Blockchain are different?
9.1 What is Bitcoin?
Bitcoin is a cryptocurrency, a type of digital cash. It’s a decentralized currency with no central bank or single administrator that can be sent from user to user on top of the peer-to-peer bitcoin network without intermediaries.
9.2 What is Blockchain?
A Blockchain initially blocks chains of a growing list of records, called blocks, which are connected using cryptography. Every block contains a cryptographic hash of the previous block, a timestamp, and transaction information.
10) Difference between bitcoin and Blockchain:
- Blockchain technology allows finances to be transferred wherever in the world securely, inexpensively, and in a substance of minutes.
- Blockchain technology is very flexible and advanced, with the ability to correct any business model and resolve accessible problems.
- The Blockchain applies Proof-of-Work algorithm to validate the process. All user has to develop a POW.
- Bitcoin transactions are stored and transferred via a distributed ledger on a peer-to-peer network that is open, public, and unidentified.
- Bitcoin hub on lowering the cost of influencers and reducing the time of transactions but is less flexible.
- When Bitcoin users want to turn their Bitcoins into fiat money, they can use cryptocurrency exchanges to deal with them for fiat currency or other Cryptocurrencies.
These industries are employing Blockchain today and in the future:
Internet identity and DNS
Education and Academia
Car leasing and Sales
Industrial IoT and Mesh Networking
Music/Entertainment Rights And IP
Healthcare and many others.