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In this glorious 2017 everyone is talking about bitcoins, digital currency, crypto-currency, block chain and many more things and these are some of the terms that are one of the more searched in the internet. Without due let’s jump into the topic
What is Block Chain?
Block chain is a distributed de-centralized system. Just understand it in this way for now and you will get to know everything by the end of the article.
It stared to emerge in 2008 and here we are now at the end of 2017 moving ahead to 2018 with most of the things that are moving to block chain.
Spoiler: Article is little long but interesting. Everything in this article will be illustrated so take a cup of coffee.
- Let’s say you want to transfer money to USA from India or vice versa. What you will do is to put money in a bank or any third-party guy whom you trust. That guy will send money to guy you wanted to.
- Third party will take some amount for the service provided. It usually takes three days to get this process done
- What block chain is trying to do is to remove that third party and do that transaction at cheaper price and the trust? You can trust block chain but differently. Block chain technology helps you to trust in different way.
- Advantages are removes Third party, instant transaction, cheaper price
How it does?
Complete technology is based on ledger. Let’s say there are four members
A has $50 and wants to send $30 to B
Similarly, B wants to send $20 to C. And if anyone wants to know how C got $20 they can look at the transaction as it contains from where the transaction started.
Now A wants to send $30 to D which is not possible, because he doesn’t have $30.
This is how transaction looks like
See the chain of transactions and this is how it got the name Block Chain
This model is called open ledger. Where everyone in the network knows where the money is and how much it is with everyone.
Advantages are tracking transactions and validation can be done instantly.
But when the number of transactions and nodes in the network increases it is difficult to validate the all the transactions. This is time to introduce you to distributed ledger.
What is Distributed Ledger?
To understand distributed ledger, you need to know about the miners.
Miners are the people that verifies the transaction in the block chain. To verify they require some computing power and time.
In distributed ledger the transaction record is kept with all the miners and whenever the new transaction occurs it is their responsibility to validate the transaction. The one who does it the first gets the reward.
The problem with the distributed ledger is it needs continues synchronization with other copies in the network
Once the miner updated the transaction validation in the ledger then all the transaction records with the miners are updated.
Here the things that miners need to do
Validate: Validate the transaction
Key: This key is used to add transaction to previous transaction which is a random number and computation power is used to find this.
Publish: Publish transaction record to other miners in the network
Here is how centralized, De-centralized and distributed system looks like in block chain
Info-graphic of typical transaction in a block chain
What makes block chain technology so secured and reliable?
As simple as every transaction has a previous node key which makes us to track the root and the changes it went through.
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