Blockchain is the name of the technology that powers cryptocurrencies such as Bitcoin and Ethereum, as well as other crypto networks. The most common use so far has been storage and distribution of transaction data but other data sets can also be used.
Blockchain is a digital ledger that records, duplicates, and distributes transaction data originating on it. In India, the technology is used in areas such as banking, financial services, insurance, land title registration, vehicle lifecycle management, health record management and more.
What Is Blockchain?
- Blockchain is a decentralised digital electronic ledger that records every data set originating from its network. These data sets can be distributed among participating users’ computers, which are referred to as data nodes.
- This distributable electronic ledger duplicates and adds a data entry each time a new one takes place so that every user always has entirely updated data.
- A blockchain network works using the Distributed Ledger Technology (DLT) and the blocks of data are encrypted.
- The most popular use of blockchain is in the area of cryptocurrencies, where digital records are maintained of all transactions originating on the said crypto’s network. The other purpose is safekeeping digital ownership records of crypto tokens.
How Does It Work?
- The main difference between a blockchain and a traditional database is the way the data is stored. A blockchain groups every transaction data into a series of blocks. When storage capacity of a block is full, it is closed and automatically tagged with the previously filled block, which forms a ‘chain’.
- No single user controls the entire network. Since all the data entries are chained together and then distributed, a rogue entry (without necessary validation) is automatically flagged and rejected.
- In a crypto blockchain, users get rewarded in the form of cryptocurrencies for processing and validating transaction entries. In other types of blockchain, the reward depends upon the agreement between the users and originators.
How Does It Help?
- Businesses can use blockchain technology to store and conduct transactions with relative ease. Since blockchain stores the record of every transaction right from its point of origin, all the data related to a transaction can be quickly referenced in case of need.
- A blockchain database is highly secure, and since updated copies of it are distributed to all users as soon as a new transaction occurs, it helps to control data, which nobody can then tamper with.
- Blockchain can also help to securely encrypt any document with cryptography keys so that tamper-proof government documents and other similar certificates can be issued.
- Blockchain is also used to convert and distribute digital art forms of various physical assets.