#Blockchain #Digitization - Basics

Dear Professional Friends,

Today I am sharing my insights on new "Blockchain" technology to comprehend the basics and its uses in rapidly growing "Digitization" of enterprise models and processes.

What is Blockchain?

A "Blockchain" is a database of every transaction that has ever happened using a particular cryptocurrency. Groups of information called blocks are added to the database one by one and form a very long list. So, a blockchain is a linear chain of blocks! Once information is added to the blockchain, it can’t be deleted or changed. It stays on the blockchain forever and everyone can see it.

It works on "Distributed Ledger Technology (DLT)" to remove third parties from their systems. DLTs are shared databases where transaction information is recorded.

As per the research, the first blockchain was designed by Satoshi Nakamoto for Bitcoin.

It is also important to understand that the whole database is stored on a network of thousands of computers called "Nodes". New information can only be added to the blockchain if more than half of the nodes agree that it is valid and correct. This is called consensus. Hence, unauthorized access and edit is restricted.

What is Block ?

The structure of a Block is illustrated here:

Therefore, the main purpose of the blockchain is to allow fast, secure and transparent peer to peer transactions. It is a trusted, decentralized network (nodes) that allows for the transfer of digital values such as currency and data.

In simple words, Imagine the blockchain as a digital database, just like an Excel spreadsheet. This database is typically shared across a large network containing many computers (known as “nodes”) and it is completely public. To get blockchain explained fully, it is important to know that the more nodes there is, the more secure it is — that’s why it’s good to have large number of nodes running the blockchain.

Every time the network makes an update to the database, it is automatically updated and downloaded to every computer on the network.

Blockchain technology is secured with Cryptographic techniques, making it near impossible for hackers to make changes to it. The only way to make changes would be to hack more than half of the nodes in the blockchain, which again, is why it is more secure to have more nodes/computers running the blockchain.

Now, how the Blockchain is different from traditional process is explained below:

How Does Blockchain Work?

It is important to note that Blockchain stops double spending without the need to trust centralized accounting as banks do. Blockchains aren’t secured by trust or people. They are secured by math done by computers.

Benefits of Blockchain

Someone truly said that:

“Blockchain will do to Banking what the Internet did to the Media”

How it will benefit the large industries?

• It removes the cost of third parties.
• Payment and data are processed much faster.
• Database management between Business is more flexible and easy.
• Data protection, security is improved on a large scale.

# Hash Function and use in Blockchain

These are one way mathematical functions that transform, or "map" a given set of data into a bit string of fixed size, also known as the "hash value".

How is it calculated? - A hash function utilizes complex mathematical algorithms that convert data of arbitrary length to data of fixed length (for instance, 256 characters). If you change one bit anywhere in the original data, the entire hash value changes, making it useful for verifying the fidelity of digital files and other data.

Use in Blockchain-

Hashes are used in several parts of a blockchain system. First, each block contains the hash of the block header of the previous block, ensuring that nothing has been tampered with as new blocks are added. its using proof of work, furthermore, utilizes hashing of randomly generated numbers in order to arrive at a specific hashed value containing a series of leading zeroes. This arbitrary function is resource-intensive, making it difficult for a bad actor to overtake the network. The same input will always generate the same output but changing just one character will drastically change the output.

Hashing the word “hello” will produce an output that is the same length as the hash for “I am going to the store.”,

To summaries the Blockchain in under 100 words....

You (a "node") have a file of transactions on your computer (a "ledger"). Two government accountants (let's call them "miners") have the same file on theirs (so it’s "distributed"). As you make a transaction, your computer sends an e-mail to each accountant to inform them.

Each accountant rushes to be the first to check whether you can afford it. The first to check and validate hits “REPLY ALL”, attaching their logic for verifying the transaction ("proof of work"). If the other accountant agrees, everyone updates their file.

This concept is enabled by "Blockchain" technology.