You have probably discovered the word ‘Blockchain’ throughout last year. Even when we all tend to have an idea about what it is, the truth is that most of us could not justify why everybody speaks about it in every variation and technology forum. I will help you understand how blockchain works and why it is essential. But first things first, let’s learn what blockchain truly is.
Blockchain is a shared, stable ledger that promotes recording transactions and tracking assets in business channels. An investment can be visible (a house, car, money, property) or hypothetical (intellectual property, licenses, branding). Virtually anything valuable can be traced and sold on a blockchain network, decreasing risk and lowering costs for all included.
Why is blockchain important?
The business operates on the information. The faster it’s acquired and the more specific it is, the better. Blockchain is perfect for passing that information because it gives immediate, shared, and transparent information saved on a permanent ledger that can be reached only by network members’ permission. A blockchain network can trace orders, payments, accounts, production, and more. Because members share a particular view of the truth, you can see all aspects of a transaction, as well as new capabilities and opportunities.
According to Safex, eCommerce stores generally have many customers, inventories, and transaction data. Data must be stored and managed well, so make sure that your production results are compelling. That’s where blockchain technology comes in handy. Blockchain technology – especially blockchain based eCommerce platforms and other kinds of applications – merges transactions in the form of blocks linked to form a chain.
How does blockchain work?
The purpose of Blockchain technology comes from the spread security of the system. For this reason, several features are essential for developing or using a blockchain.
There are five key things when it comes to the basis of blockchain:
- Cryptographic hash
A hash is a cryptographic role that converts any information data into a fixed-length sequence of numbers. Every single data of the hash function will create a different output, and the result is deterministic. If you use the same information, the output value will always be the same.
The blockchain nodes use Hash functions to produce a particular identifier of any block of transactions. Every block adds the Hash benefit of the previous block.
- Immutable ledger
This characteristic connects to the last one. Considering every block of the chain holds the hash of the previous one, it is impossible to alter any block without changing the entire chain. Therefore, the chain works as a changeless digital ledger.
- Peer-to-peer Network
The blockchain does not require any external or internal support authority; this is possible because the blockchain data divide among all the users. Every user has its model of the transactions and hashed blocks, and they lay out the information of every new transaction to the entire network. This way, it is impossible for anyone to change the chain’s report since it is not collected by an original thing but by a whole network of connected users.
Once a block of transactions is confirmed, it is attached to the chain, and every user renews their local information. Even if an intruder were to change your local chain, the network would not receive any block from the altered blockchain.
- Consensus protocol
Users need to join an agreement about the legality of the chain before combining more blocks. Every time a link adds a new block, all the users have to verify the block by using a standard protocol. Typically, the connections reach an agreement about a new block’s accuracy by Proof of Work or Proof of Stake methods.
The word ‘mining’ applies to the act of meeting the Proof of Work demands for attaching a new block with pending transactions to the blockchain.
The blockchain grants users to form a reliable and stable system for recording any transaction or information. There is no need for outer or inner authority. Every user relies on the technology itself, following predefined rules to face agreement and to ensure the data’s honesty and authenticity.