In the centralised world where power is vested in the big players of industries instead of communities, Blockchain emerged as a new hope. Imagine a world where banks have no more centralised power over our assets and customer owns their data. In a world where trust was difficult to come by one day, a new hero emerged – a technology called blockchain. Its a digital ledger that’s transparent and immutable. Blockchain is a new promising way of doing things. It is like a magical book where every transaction has been recorded in transparent ink, visible to all yet safe from prying.
A blockchain is a distributed database or ledger that records transactions across a computer network’s nodes. It has been designed to be secure and immutable so that it cannot be deleted or changed once the information is added to the blockchain. A blockchain database stores data in blocks and they are linked together in a chain.
Blockchain is a decentralised gateway for this super-centralised world. It helps in eliminating intermediaries, making transactions secure, immutable and supports diverse industries to bring decentralised revolution.
How does Blockchain technology work?
Well, It’s a bit confusing, right? How does this whole blockchain thing work so smoothly, without a central authority overseeing every transaction? Let’s unravel the mystery behind blockchain technology and understand how it maintains such efficiency and security across a decentralised network.
The Basics of Blockchain Operation
1. Initiating a Transaction – So, how does it all begin? Suppose, you want to send some bitcoin to a friend. You start by creating a transaction, which includes details like the recipient’s address and the amount you wish to send. This transaction is then broadcast to the blockchain network.
2. Broadcasting and Verification – Once your transaction is broadcasted, it reaches all nodes in the network. Each node, essentially a computer connected to the blockchain, gets a copy of this transaction. But before anything can be added to the blockchain, it needs verification. Nodes check if the transaction is valid or not. Then they pass the confirmation, meaning you have sufficient funds and the transaction adheres to the network’s rules.
3. Consensus Mechanism – Here’s where things get a bit more technical. To maintain trust and integrity, the network uses a consensus mechanism. This is a process by which nodes agree on the validity of transactions. Different blockchains use various consensus mechanisms, such as:
- Proof of Work (PoW): Nodes, or miners, compete to solve complex mathematical problems. The first to solve the problem is adding the blockchain block of transactions.
- Proof of Stake (PoS): Nodes are chosen to validate transactions based on the amount of cryptocurrency they hold and are willing to “stake” as collateral.
4. Adding a Block – Once a transaction is verified and consensus is reached, it is grouped with other verified transactions into a new block. This block is then added to the existing blockchain, which has a continuous chain of blocks. Each block contains a cryptographic hash of the previous block, linking them together in a secure chain.
5. Distributing the Updated Blockchain – After a block is added, the updated blockchain is distributed to all nodes in the network. Each node updates its copy of the blockchain to reflect the new block. This distribution ensures that all participants have the same version of those blockchains, maintaining consistency across the network.
6. Ensuring Security and Immutability – How does blockchain keep its data so secure? Each block includes a unique hash, a digital fingerprint of the block’s data. This hash is created using a cryptographic function, which ensures that even a tiny change in the data will result in a completely different hash. In addition, since each block contains the hash of the previous block, altering one block would require changing all subsequent blocks – an impossible task without controlling a majority of the network’s computing power.
Milestones in the History & Evolution of the Blockchain:
So, how does this blockchain technology start? The journey of blockchain technology is a fascinating tale of innovation and evolution that began with a simple idea and has grown into a revolutionary force reshaping various industries. Here’s a look at the key milestones in the history and evolution of blockchain technology:
The origins of blockchain technology can be traced back to the 1980s and 1990s when pioneers in cryptography and computer science began exploring concepts that would later form the foundation of this revolutionary technology.
2008: The Birth of Bitcoin and Blockchain
A pseudonymous individual or group known as Satoshi Nakamoto published a whitepaper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” This whitepaper introduced the concept of blockchain technology as the underlying structure for Bitcoin, the first cryptocurrency. The blockchain was designed as a decentralised ledger to securely record transactions without the need for a central authority.
2009: The Launch of Bitcoin
Bitcoin, the first implementation of blockchain technology, was launched by Nakamoto. The network began with the mining of the genesis block (block 0), which included a hidden message in the Coinbase transaction. Bitcoin’s launch marked the beginning of the blockchain era, demonstrating the practical application of a decentralised ledger and creating the first blockchain-based cryptocurrency.
2011: Emergence of Alternative Cryptocurrencies
Following Bitcoin’s success, several alternative cryptocurrencies (altcoins) were developed, including Litecoin and Name coin. This period saw the diversification of blockchain applications beyond Bitcoin, exploring different consensus mechanisms and use cases for blockchain technology.
2013: Introduction of Smart Contracts
Vitalik Buterin proposed Ethereum, a blockchain platform designed to support smart contracts and decentralised applications (DApps). Ethereum’s introduction expanded the functionality of blockchain technology, allowing for programmable contracts and more complex decentralised applications. It marked a significant shift from simple cryptocurrency transactions to broader use cases.
2014: The Rise of Initial Coin Offerings (ICOs)
The ICO model emerged as a popular method for blockchain startups to raise funds by issuing new tokens or coins to investors. ICOs provided a new fundraising mechanism for blockchain projects, enabling them to launch and scale quickly, though they also introduced regulatory and security challenges.
2016: The DAO Incident and Hard Fork
The DAO (Decentralised Autonomous Organization), built on Ethereum, was hacked, resulting in a significant loss of funds. In response, the Ethereum community executed a hard fork to reverse the effects of the hack. This event highlighted the vulnerabilities in smart contracts and led to the creation of Ethereum Classic (ETC) as a separate blockchain, demonstrating the potential for blockchain networks to evolve and adapt.
2017: The Rise of Blockchain Beyond Cryptocurrencies
The concept of blockchain technology gained traction beyond cryptocurrencies, with applications being explored in supply chain management, healthcare, and finance. This period marked the beginning of blockchain’s broader adoption and exploration, as businesses and industries recognized its potential for improving transparency, security, and efficiency.
2018: The Launch of Enterprise Blockchain Solutions
Major corporations and consortia, such as IBM and the Hyperledger Project, launched enterprise blockchain platforms aimed at solving specific business problems. The focus shifted towards blockchains designed for enterprise use, emphasising scalability, privacy, and regulatory compliance.
2020: The DeFi Revolution and NFTs
The rise of decentralised finance (DeFi) platforms and non-fungible tokens (NFTs) brought innovations to the blockchain space, offering decentralised financial services and unique digital assets. DeFi and NFTs showcased blockchain’s versatility, driving significant growth and investment in the sector and expanding its applications to new domains.
2021 and Beyond: The Growth of Web3 and Layer 2 Solutions
The concept of Web3, a decentralised internet powered by blockchain, gained momentum. Additionally, Layer 2 solutions such as rollups and side chains were developed to address scalability issues in blockchain networks. These advancements aim to enhance blockchain technology’s scalability, user experience, and integration with existing systems, paving the way for a more decentralised and efficient digital future.
