What is Blockchain Technology? Blockchain Wallet? Advantages of it

                            
What is Blockchain? Everything Explained!

                              

When bitcoin and blockchain were all the rage. The two were brought up together so often that the technologies seemed almost inseparable. But the two things are not synonymous, and blockchain has potential uses far beyond bitcoin and other cryptocurrencies.

 So what exactly is blockchain, what can it be used for, and what’s holding it back?




What is Blockchain?

What is Blockchain? Everything Explained!

To understand blockchain, first I want you to picture a ledger, like your bank statements. Your bank keeps track of every transaction and how much money is coming into and going out of your accounts.


It’s also the central authority keeping track of everything. If There's a bank error in your favor and you collect $200, good for you! Actually, spending that money can be legally tantamount to theft… so, maybe not. 



And if a decimal is misplaced or an auto payment is charged twice and your account is zeroed out, it can be a headache dealing with the bank to fix it. Enter distributed ledger technology or DLT.


Rather than having just one authority keeping tabs on transactions, DLT is managed by an entire network of participants who all share the ledger of transactions. If over half the systems on the network verify a transaction, then it’s approved.


Records of multiple transactions form a block, which is then added on top of previous blocks to form a chain, hence the name. Each block contains records of the transaction details, as well as a unique cryptographic “hash,” which is like an alphanumeric fingerprint plus the hash of the previous block in the chain.


Altering the information of the block will also generate a new hash, so tampering with a blog earlier in the chain creates a mismatch that invalidates all the blocks after it.


While Malicious hackers can quickly generate new hashes for all the blocks in the chain to try and cover their tracks, the decentralized nature of DLT makes their job more difficult.


Remember over half of the systems keeping track of the ledger have to agree with any changes, so hackers would have to take control of 51 percent of the network to achieve their goal. Plus, some blockchains artificially increase the time it takes to generate new hashes, making the process of hacking multiple blocks impractical. 


For example, Bitcoin’s“proof-of-work” mechanism means new blocks are added to the chain in 10-minute intervals. Basically, blockchain can be a way to get multiple parties that may not trust each other to share and agree on data. It’s this peer-to-peer system that’s made blockchain engaging for financial applications like Bitcoin and other cryptocurrencies. 


But ironically, the same features that make it secure also make it impractical for many applications. Making every node in the network keeps track of every transaction, plus intentionally slowing down the generation of hashes, means transactions can take an inconvenient amount of time.


While a credit card company can handle well over a thousand transactions per second, bitcoin can't handle more than seven.


 Cryptocurrencies are trying to find ways to speed up these transactions without compromising security, which is a major hurdle. Still, there are other applications where a blockchain can come in handy, like tracking shipments. Some ports and shipping companies are testing out DLT so everyone can securely track and monitor containers.


 After a batch of lettuce was contaminated with E. coli, Walmart made produce providers use a distributed ledger so they could automatically track exactly where all its products came from and where it went. 




What is Blockchain Wallet? and How to Create it?


What is Blockchain? Everything Explained!


 To use a cryptocurrency, you need a wallet to store your virtual coins. And just like a bank account, it has a unique address. It looks somewhat like this, depending on the cryptocurrency.


It seems like a completely randomly generated string of letters and numbers but in reality, there is a bit more going on. The first thing we need to know is how these are created.


 Anyone can create a new wallet by generating a public and private key pair with a certain algorithm. In the case of Bitcoin or Ethereum that is via an elliptical curve digital signature algorithm. That’s quite a mouthful, but the takeaway away here is that the algorithm will spit out a private key and an associated public key. These keys are mathematically linked to each other. 


You can take the private key and derive the public key from it. But you cannot take the public key and turn into the private one. Now, these two keys serve a different purpose.


The public key will become your wallet address, kind of like your bank account number. And the private key is your way of proving that you are the owner of the wallet and thus that you can spend the money inside of it. 


So in summary: public keys can be shared with everyone while private keys must be kept to yourself. Unless you want other people to decide what to do with your money. So far so good.


But this system has a few interesting side effects that I want to mention. For starters, everyone can generate an unlimited amount of wallets, right on their own computers. It’s only limited by how fast your computer can generate key pairs.


 However, nobody will know about the existence of your wallet until it receives some coins. See, a cryptocurrency only keeps track of transactions between wallets. It does not have a list of all existing wallets. So if your newly created wallet has not been involved in any transaction, it simply doesn’t exist for the outside world. 


Think of it this way: the blockchain is just a giant spreadsheet with transactions going from one wallet to another. The blockchain itself doesn’t really care about if these wallets exist or not.


It’s only when you want to spend coins in a wallet that you have to prove that you’re the owner. And you can only do that with the private key that is associated with the address of the wallet.


 Another side effect is that you can transfer coins to a wallet address that doesn’t exist. Again a Blockchain doesn’t have a list of valid addresses, so it cannot check if you’re transferring coins to a valid one.


In case you transfer coins to an invalid address then they're just lost unless someone can generate the private key for that particular address. 


So that was a quick overview of how wallets work in a cryptocurrency.




What can blockchain use for?


                          
What is Blockchain? Everything Explained!

   

There are potential uses for the blockchain in healthcare, like managing data in medical trials while maintaining anonymity. But the enthusiasm for blockchain has dimmed since the word entered the public lexicon a few years ago.


As is typical with any emerging technology, laws have lagged behind its development, making it hard to legally use blockchain applications, especially across jurisdictions like is required for international finance. 


In some cases, there is already other software that can do most of what blockchain does, just without the security of a decentralized network. So, if security isn’t a huge concern, there’s no need to adopt it.


And smaller networks might not be that secure anyway, since it’s easier for bad actors to take control of over51 percent of the nodes. 




Blockchain Advantages


What is Blockchain? Everything Explained!

  • Blockchain is a data structure that represents a ledger programmed to record and track anything of value Unlike a standard database Blockchain is distributed, secure, transparent, immutable, and accessible. Standard databases have a centralized structure that revolves around a central point of authority Once it is corrupted, the whole system fails On the other hand. 


  • Blockchain has a distributed structure and no central point of authority. This protects the system from corrupt nodes. 



  • Blockchain is made out of digital blocks that contain information on every transaction ever made on the system. Once part of the data is hacked, the system rejects the tampered information and remains secure. This makes the data immutable. 


  • Data can’t be changed, and whenever an update takes place, a new block is created. So many people buy products without knowing their origins. On the other hand, Blockchain allows consumers to access the whole history of a product throughout its supply chain, from manufacturing to distribution. 


  • Last but not least, Blockchain is accessible allowing different parties to share information, ensuring a smooth and fast flow of data. So, whenever you hear about Blockchain remember it’s not just a standard database! It is distributed, secure, transparent, immutable, and accessible.




CONCLUSION


Blockchain is a really cool and precocious idea that just hasn’t found its slot yet. Give it a few years for the systems to advance and laws to mature... and you may one day be relying on blockchains without even realizing it.


Some countries are trying to develop their own blockchain and cryptocurrency, like China’s digital yuan and also blockchain stock. For more on their approach and what it could mean for cryptocurrencies as a whole check out my video on it here.


So, what do you think? Is blockchain worth the hassle? Let us know in the comments below.