Ever since the famous Bitcoin raised the urge for people to trade with digital currency, there has been a simultaneous escalation in the technology behind its success. Blockchain thus became the recent muse of tech freaks. This frenzy is now taking over the business of existing entities in the web world to the next level by promising a rock solid security system.
This strong security system is fuelled by the concept of decentralised database. Traditionally, a network aways holds its entire database in one place with single authority which requires huge running power to maintain and also makes it an easy target for hackers. To eliminate this risk, Bitcoin used the decentralised database or a distributed ledger system. In this method, the data and its transaction history are stored in unique Hash values which sits in a block and a series of blocks are created to form a chain which is secured by cryptographic principles. In this way, the ledger of a blockchain is entirely distributed among its users or peers in the network.
Each time a new transaction is made, a new block is created and this has to be verified by a majority of peers in the network to make it valid. Hence there is no central authority and this makes it impossible for a hacker to beat the system’s capacity to nullify the security system. However, blockchain is widely misconceived in certain facts that are taken for granted when it comes to the underlying facts behind this famous technology.
BLOCKCHAIN IS A DATABASE
Blockchain like any other technology, holds a database in its system. But the fact is that Blockchain is in-fact a DATA STRUCTURE. Furthermore, a typical database is also a data structure that stores information and is highly centralised. Whereas the data structure of a blockchain is decentralised and has distributed authority. So, depending upon the nature and the use of a website, either database or blockchain has to used.
BLOCKCHAIN IS DECENTRALISED
Blockchain is famous because of its security system which routes back to a decentralised database or distributed ledger system. But, this technology can be structured either in a decentralised or centralised method. Decentralised database is one of the two types of blockchain. In this method the ledger is public and accessible to all the peers in the network. While this might not be necessary for all business nature, partial transparency can be achieved in centralised private blockchain where the access to the transaction ledger can be limited to certain peers in the network.
BLOCKCHAIN IS ONLY P2P
There are three types of blockchain namely public, private and hybrid. Of the lot, public blockchain is most spoken of where the ledger is open to the peers in its network. While this might not be practical in all cases, blockchain technology doesn't necessarily have to be a peer-to-peer network, as a Private Blockchain can work with centralised database that doesn’t require peers. Whereas a hybrid can make the best combination of the other two types.
BLOCKCHAIN IS ONLY FOR CRYPTOCURRENCY
Blockchain became extensively noticed because of Bitcoin’s fame, as it changed the business of digital currency transaction.However, this technology can be applied to a wide variety of industry applications like finance, defence, retail and so on. Blockchain is only a method that is used to eliminate the risk of hacking its network for fraudulent dealing. Hence, this method can be very useful in banking applications where a monetary transaction can take place in a highly secure platform.
BITCOIN IS BLOCKCHAIN
Bitcoin is a cryptocurrency or digital currency that is powered by Blockchain technology. Although, Bitcoin is the reason behind blockchain’s fame, it is simply an application of blockchain which used the decentralised ledger system to gain the trust of people in managing monetary transaction in the most secure way. Ethereum, another famous cryptocurrency, is also an example for blockchain’s application. Some famous companies using blockchain are FedEx, IBM, Walmart, Microsoft etc.
BLOCKCHAIN IS MORE COMPLEX
As a technology, Blockchain can be easily build, but it is misunderstood as complex because of Bitcoin as it integrates many other technologies in the backend. Blockchain is merely an open source technology which has replaced the traditional intermediate transaction fee by collective consensus theory which verifies the transaction which accounts to a huge amount of security and speed in the network.
BLOCKCHAIN TRANSACTIONS TAKES MORE TIME
As Blockchain has distributed authority among its users or peers it takes more time for transactions to be validated. It uses a consensus algorithm which requires the conformity of over 51% of its users to confirm and validate a transaction or data that can be added to its network as it uses peer-to-peer network in decentralised method. This would mean that the peers spread across the globe should be active to complete the process as quick as possible. But if speed is a priority then Private Blockchain can be used where the peers can be limited.
BLOCKCHAIN NEEDS MORE POWER
The same reason as to blockchain needing more time to process a transaction or data due to its peer-to-peer networking system, it also requires huge power backup to validate the entry of new data through Consensus Algorithm.For example, Bitcoin uses POW - proof of work which takes time and take us a lot energy as it runs by entire set of peers, but Ethereum uses POS - proof of stake where a peer with higher stake can validate the and confirm transactions making this a comparatively quicker method.
After all, Blockchain is a new concept in the market with very many interesting applications which will resuscitate and revive some of the existing technology. Although there are many misconceptions that prevail, it can be easily sorted with a few examples. Understanding this technology can go a long way in the days to come. Hope this blog has cleared the air of confusion around the concept of Blockchain.