Introduction to Blockchain

Barely nine years ago, a new digital currency appeared which is open sourced, exists entirely over internet & without any traditional governance. This currency is called Bitcoin, has captured our imaginations. A way to pay each other immediately and securely without any financial intermediaries like banks. This gives a game changing technology and a new distributed database called a Blockchain. A technology so disruptive to have the potential to impact in the long run than the internet itself. In this article, I would like to introduce the basic understanding of the blockchain.

Re-think traditional database. Database is a place where we store all type of Structured Data (XML, tabular, JSON etc.) and Unstructured Data (emails, social media posts, voice etc.) typically called server or data center. Data stored in these databases can be highly secure like bank accounts or publicly available like this article. When a database is available on a single location or a server, it’s called Centralized Database. When database is available on various locations on the network (intranet / internet), it’s called Distributed Database. But in either type, there must be a governance body who is solely responsible for providing permission to perform actions on these databases. This model mostly assumes to be secure but has some limitations as well. Means what happen when someone unauthorized gets the access to database and alter secure data. Here introduced blockchain, a new type of database which offered solutions to the traditional database challenges like security, validation and single governance.

What problem blockchain solve? In current automated systems, validation is still done by humans itself or workflow designed by humans. So whenever there a transaction placed, it needs to be validation by governance which in the end takes time, cost money, vulnerable to hacking, require special skills and error prone. Now blockchain solve these problems because it is a new type of database, instead of a centralized or distributed database, this installed on each individual computer used by the actual users. Every application which uses this database, already coded with the acceptable user’s permission. So, whenever a user performs an authorized transaction than each instance of the database replicates it in the form of a new encrypted data block. For example, If I have 10 bitcoins and I want to sell 5 out of them then I am authorized to do so. But if a want to sell 20 then it won’t allow, even if I hack the application and forcefully feed 20 bitcoins balance, because other databases know my authorized transaction history.

How blockchain works? Basically, it saves data in the form of encrypted blocks, which are chain together in the form of linked list, where each block has the reference of its previous block. Every new transaction saves as a new data block either it is for create or update or delete request.

Every block contains the following information:

► Block ID – It can be referred as index number of the block.

► Nonce -  It is an arbitrary number that can only be used once in the complete chain. Once data is validated it generated a nonce and saved inside the block. Nonce and hash key together helped in identifying and decryption the data.

► Data – This the actual data saved inside the block in the encrypted format. This can be structured data or unstructured data.

► Hash key (SHA256) – It is the address of the data block. Without this block neither be located nor decrypted.

► Previous Hash key – It is the address of the previous block. It can be null once in the complete blockchain.

What is Mining in blockchain? It is a process to validate the transaction and generating a unique nonce and hash key for every new block in the chain and sync it between other distributed blockchains. This process requires a huge amount of computing power.

Future of blockchain. In this digital age, we still have several places where manual intervention or governance bodies are required. Like banks, election boards, education boards etc. which provide us hard copy of documents for validation purpose. Suppose in future we all vote using our mobile devises and there is no election commission required to validate our vote. No need to go to election centers and use voting machines which might be tempered. Yes, this is very possible scenario in the blockchain world.

We just discovered this amazing technology and its actual power is still waiting to unfold. What can be the future ideas of implementing Blockchain? Share your successful ideas or feedback in the "Comments" section below.

~ Deepak Bansal