Have you ever wondered if there was a method to conduct transactions without having to deal with online wallets, banks, or third-party apps? Well, thanks to Blockchain, it’s now possible.
Everything you need to know about Blockchain is right here.
Imagine Jaden, Barney, Sam, and Jeff, four friends. They get together for dinner. When they’re finished, Jaden pays the bill, and they all decide to split the cost.
When Jeff sends his portion to Jaden the next day, the online money transfer goes through without a hitch, but when Barney and Sam send their respective shares to Jaden, their transactions fail. It’s possible that the unsuccessful transaction was caused by bank troubles. That’s when Jaden learns about the various ways a bank transaction might go wrong. It could be due to bank technical troubles, one of their accounts being hacked, daily transfer restrictions being surpassed, and occasionally additional charges such as transfer charges linked with transferring money that the concept of cryptocurrencies was born to remedy these concerns.
In a nutshell
Cryptocurrencies are a type of digital or virtual currency based on the Blockchain technology. Cryptocurrencies are impervious to counterfeiting, require no central authority, and are safeguarded by powerful and complicated encryption methods thanks to Blockchain.
Returning to our earlier scenario, have Jeff, Barney, and Sam each send Jaden two bitcoins as their contribution to the supper the night before. Assume that Jeff, Barney, and Sam each have three bitcoins on hand, while Jaden has five. Jeff sends two bitcoins to Jaden first. A block is used to represent a record. This block is permanently imprinted with the transaction details between them. This record also keeps track of how many bitcoins each of the friends has, thus after Jeff’s transaction, Jaden has seven bitcoins and Jeff has one, so Sam and Barney transfer Jaden two bitcoins.
For each of the transactions, a new block is formed. The transaction details, as well as how much bitcoins Sam, Barney, and Jaden have in reserve, are stored in these blocks. These blocks are linked because each one uses the preceding one to calculate the quantity of bitcoins each buddy has. This collection of data or blocks is referred as a ledger, and it is shared across all of the friends, forming a public distributed ledger. Blockchain is built on this foundation.
So what happens if Jeff only has one bitcoin left and attempts to send two more Bitcoins to Jaden? The transaction will fail.
This is due to the fact that all of his buddies have a copy of the ledger. Jeff’s buddies will mark this transaction as invalid because he only has one bitcoin remaining. Because each user has a copy of the ledger, a hacker will be unable to alter the data in the blockchain. Complex algorithms encrypt the data within the blocks. With the help of blockchain technology, all of this is achievable.
A blockchain is a collection of interconnected records that are highly resistant to tampering and are secured by cryptography.
How It works.
Now, let’s take a closer look at Jaden and Jeff’s Bitcoin transaction and see how it works. A public key and a private key are held by each user in the Bitcoin network. The public key is an address that everyone in the network is aware of, similar to a user’s email address. The private key is a one-of-a-kind address that only the user knows about, similar to a password. First, Bill uses a hashing process to pass the number of bitcoins he intends to send to Jaden, as well as his and Jaden’s unique wallet addresses.
All of this is included in the transaction information. Jeff’s unique private key is used to encrypt these details using encryption methods. This is done to digitally sign the transaction and show that it was initiated by Jeff. Using Jaden’s public key, this output is being sent all over the world. Only Jaden’s private key, which only Jaden knows, can decrypt the message or transaction in this way. Different hashing algorithms are used by different cryptocurrencies.
The SHA 256 algorithm is used by Bitcoin. The Ethash algorithm is used by Ethereum, a well-known cryptocurrency. This transaction, as well as countless more like it, is going place all over the world. These transactions are verified before being added one by one. Miners are the people who validate these blocks. Miners must solve a complicated mathematical problem in order for a block to be validated and added to a blockchain. The miner who solves it first gets 12.5 Bitcoins and adds the block to the network.
Proof of work is the process of solving a complex mathematical problem, while mining is the act of adding a block to the blockchain.
Jaden’s wallets have been updated as a result of this fill-in. Like everyone else in the network who has successfully completed a transaction. Now that you’ve learned about blockchain and its key principles, take a quick quiz.
Real Life Application
Let’s have a look at how Walmart uses blockchain to give better service to its consumers.
Walmart was having difficulty delivering high-quality merchandise to its customers. Due to the poor quality of their products, they had a high return rate and a considerable volume of refunds. They couldn’t pinpoint the point of failure in the supply chain, which included everything from the farm to storage to transit to processing and finally to the customer. After that, Walmart decided to use blockchain technology. The quality of the goods at each step was permanently imprinted within a block utilising Blockchain.
When a client reports a broken product, for example, it may be accurately determined where the product was damaged along the supply chain, assisting Walmart in identifying and correcting the issue locations. This is only one example of how blockchain can be applied in real-world scenarios.