Blockchain technology is that which lots of people use or have heard of but don’t truly know what it means or how it works. This article gives a broad explanation of Blockchain. It explains the meaning, mechanisms, decentralization, and Blockchain elements.

Blockchain- What does it mean?

Blockchain technology is a decentralized system for recording transactions and tracking assets which is difficult or impossible to hack. Blockchain is mostly used as a ledger for transactions. Storage and security of transactions occur in Blockchain. When transactions are stored in Blockchain, it verifies their authenticity. For the longest of time, a way people use to verify things is by record-keeping. For example, to verify that a baby is born, a birth certificate is produced. To verify that something was bought, a receipt is produced. Likewise, Blockchain verifies transactions in cryptocurrency. But how does it perform this operation? To explain this, we have to delve into Bitcoin mining. Bitcoin mining is the process by which Bitcoins are produced by using high-powered computers to solve complex mathematical problems. After these problems are solved, miners put transactions in a block. Each block is then added to the Blockchain, a safe and secure ledger.

Decentralization of Blockchain

Decentralization refers to the shifting of control from a central point to a distributed network. Most government and financial organizations make use of centralized systems. In centralized systems, a sole body is given authority. Because power is allotted to a central point, it could lead to abuse of authority. Oftentimes, people in power tweak things to their advantage. This can be seen in politics and business. For this reason, Bitcoin came to remove control from the central authority to a distributed one. For better understanding, we will make use of the banking analogy. For transactions to be made in traditional financial organizations, a third party is required. This third party is usually the banks. The banks record, secure, and confirm transactions. Before any transaction can be made, it must pass through that. But of course, there is a downside to this. Data can be tweaked and manipulated without the knowledge of the mass. On the other hand, Blockchain implements decentralization. Every transaction is made public. It would be very difficult or impossible to manipulate a ledger when lots of eyes are looking to verify it.

Core Elements of Blockchain

For the successful operation of Blockchain, important elements must be considered. These elements allow for easy verification of messages, information sharing, and proof-of-work. The following are core elements of Blockchain:

1.Peer-to-Peer Network:

This is a network in which computers or nodes share data directly with each other without the need for a central server. These computers have equal responsibilities for data processing. A Peer-to-Peer network allows for cryptocurrencies to be transacted without the need for a middle man or a third party.

2. Cryptography:

This is the process of encoding and decoding data. It involves encryption and decryption to secure communication. Because of the processes involved in a peer-to-peer network, proper security must be ensured. This is where cryptography comes in. Cryptography allows for the verification of messages as well as proving their authenticity.

3.Consensus Algorithm:

This is a procedure that involves the distributed networks in Blockchain meeting an agreement on the state of a distributed ledger. Consensus Algorithm involves the use of rules to reach these agreements. In Bitcoin, a consensual rule known as Proof-of-Work is used. As mentioned, high-powered computers solve complex problems to mine Bitcoin. After these problems are solved, the computers display them to the network to prove the work has been completed. This is called proof-of-work.

4. Punishment and Reward:

This element of Blockchain helps to keep people in check. It ensures that people follow the rules by rewarding those who abide by them and punishing those who do not. Reward, usually in form of token or coins are granted each time a consensus is reached or a new block is added to the chain. On the other hand, punishment is meted out on people who try to manipulate the Blockchain. The punishment includes losing the money spent on computational power used for mining. This element makes people follow the rules because doing so strongly benefits them.

Applications of Blockchain

A common misconception is that Blockchain is only used in Bitcoin. Over the years, Blockchain has been employed in other areas. Individuals and organizations have noted the relevance of its decentralized feature that it is now gradually being adopted. The following are the main applications of Bitcoin.

1. Voting:

The use of Blockchain checks electoral malpractice as records cannot be easily manipulated. Blockchain technology was applied in the 2018 midterm election in West Virginia. The same was the case for the 2020 presidential election in Utah County. Using this technology helps to maintain accurate and transparent results.

2. Medicine and healthcare:

Hospitals and health care centers have plenty of medical records. The traditional method of record-keeping might not be completely efficient as these records impact tons of people. When medical records are generated, they can be stored in Blockchain. This assures patients for the safekeeping of their unalterable records.

3. Smart contracts:

Everyone understands the long and tiring process of contracts. The inclusion of a third party is another tasking procedure to deal with. Often, the parties take costly fees. With Blockchain, the inclusion of third parties to finalize contracts is eliminated. A smart contract is a program stored on the Blockchain that automatically executes actions according to the agreement between parties involved. Suppose you need $1000 funding for a project. People can donate different amounts to the smart contract. When the goal of $1000 is reached, the money is then transferred to you. If the goal is not reached, the money is refunded to the supporters. Smart contracts protect the interest of both parties involved.
From this article, you must have understood the mechanisms, elements, and applications of Blockchain. Blockchain is no doubt a futuristic technology that aims at eliminating the bad vices brought by central entities. From this article, you must have understood the mechanisms, elements, and applications of Blockchain. Blockchain is no doubt a futuristic technology that aims at eliminating the bad vices brought by central entities.
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