Are you a newbie who’s willing to learn and get started with Blockchain? If yes, you’re at the right place because this article is a comprehensive guide on this revolutionary technology. Although the interest in Blockchain has drastically evolved in the past few years, it’s better late than never!
You will be happy to know that the golden years of Blockchain development and adoption are yet to come. So, this is the right time to get started and learn the process to enjoy the ride in future.
Do you know that the worldwide investment in Blockchain systems is expected to hit $11.7 billion by the end of 2022? Moreover, if we look at the scenario in the second quarter of 2021, there were more than 70 million registered Blockchain wallets.
A Blockchain refers to a decentralised public ledger distributed digitally across a given network. It is a system of recording and storing in a manner that cannot be modified, hacked, removed or cheated easily.
One can use Blockchain technology to create a transparent, public ledger that exists over a network. This permanent ledger compiles diverse data on sales and transactions and tracks payments made to various content creators (for example, musicians or wireless users).
In short, Blockchain technology is used to track the entire digital use and transactions made across different computer networks and accounts. It is nothing but a distributed database that is stirred permanently and shared across various network nodes.
Difference Between Blockchain and a Typical Database
One major difference between a traditional database and a Blockchain is recording and storing the data. In a Blockchain, the data is collected in ‘blocks,’ which are groups holding sets of information.
A database generally structures the information into table formats, while a Blockchain structure stores information into ‘block’ or chunks, which are held together firmly. In a decentralised system, the data structure becomes irreversible when lines of information are being added.
In a Blockchain, each block comes with a certain storage capacity, which, when filled, is closed and interlinked to the block that was filled previously. Once a block is filled, a new block is created to store new sets of information.
In this way, the process continues, and a data chain is created. A block is added only after it is filled and closed once the total storage capacity is utilised. Every block in a chain is given a timestamp to denote the exact time it was added and linked to the chain.
Blockchain for Beginners
‘Blockchain for beginners’ (Bitcoin for beginners) is a popular search term on the internet, suggesting its tremendous popularity and the learning zeal among people worldwide, especially the young generations. Blockchain is being rapidly adopted among diverse sectors starting from businesses, investors, traders, and governments.
Looking at the global banking scenario, the sector alone can generate nearly $1 billion in revenue solely from Blockchain-based cryptocurrencies. Further, the global market size of Blockchain technology is expected to grow at a CAGR rate of more than 69% between 2019 to 2025.
Learning Blockchain will help you understand how the world economy works and be a part of the next generation.
The Blockchain Architecture
The Blockchain architecture consists of these three key components:
As mentioned above, blocks are the foundation of a Blockchain architecture. These blocks comprise sets of data and form a chain of information when several blocks are created.
Blocks are formed in a linear fashion in any given chain, in which the last block is attached to the previous block once it is completely filled with information. That’s because every block has a certain storage capacity, beyond which it cannot hold any more data. When a block is filled, it gets closed and is linked to the previously completed block in the chain.
The structure of the data stored in any particular block is determined by the type of the Blockchain and the way it manages and records data. For instance, a Bitcoin Blockchain includes some basic information about a certain transaction, such as the details of the sender, the receiver, and the bitcoin amount being transferred.
Moreover, the first block of any Blockchain is called the Genesis block, which does not have any preceding block. Each block can be subdivided into three parts –
- Previous Block Hash
A hash refers to essential information stored in the block. It may be used to determine the authenticity of a block, which again helps to signify whether that particular block is eligible to be attached to the current chain.
Every block has a unique hash value, and therefore, nobody can replace or replicate it through malicious activities, thus protecting and securing the entire Blockchain. Whenever a hacker tries to steal or modify the information within a certain block, the hash will change, raising warning signs and preventing the block from being attached to the chain.
A transaction occurs when one peer sends valuable data to another peer within the network. Transactions are the critical components of any Blockchain – no Blockchain is ever complete or meaningful without a valid transaction. It includes information like the sender’s details, the receiver’s details, and the value of the transaction. You can easily use platforms like Coingate to execute the transactions through a secured Blockchain network.
A transaction made on a Blockchain is similar to that made on credit card platforms. The main difference between the two is that Blockchain follows a decentralised authority. Since the Blockchain works on a decentralised network, it must be updated regularly by all the nodes.
Consensus is a method to validate the Blockchain’s transactions. Different Blockchains may have other consensus methods depending on the Blockchain type.
For instance, the PoW (Proof-of-Work) is used in a Bitcoin system, whereas Ethereum uses the PoS (Proof-of-Stake) method. Other consensus methods include DPoS (Delegated Proof-of-Stake) and Practical Byzantine Fault Tolerance (PBFT).
In other words, the consensus algorithms come with a set of rules that everyone involved in the network needs to follow. Besides, there should be enough node participation to implement a particular consensus method.
How Does Blockchain Work: A Step-by-Step Guide
You can follow these basic steps to get started right with Blockchain.
Step 1: First, your transaction is requested on the given network. The transaction may be of any kind – either of some monetary value or the transmission of some vital information.
Step 2: Next, a block is created to record and store the requested transactional information. However, in this stage, the transaction would not be validated yet.
Step 3: The new block containing your transactional information is then sent to different nodes of that network. If you are using a public Blockchain, the transaction will be sent to every node in the chain. Every block within that chain holds data about the current and the previous block hash values.
Step 4: In this step, the nodes begin to get validated as per the particular consensus algorithms of the Blockchain used. For example, if the Blockchain is a Bitcoin, the PoW method will be used. Different Blockchains floor different consensus methods.
Step 5: After getting validated successfully, the node will now receive a reward depending on its effort.
Step 6: Finally, the transaction is marked complete after the validation of the node.
By going through several steps and safety processes, you can be sure of the highest forms of security in a Blockchain network.
The Use Cases of Blockchain
Learning about the use cases of Blockchain technology will give you an idea of the practical scenario in the cryptocurrency market; you will also be able to understand how various industries work to meet large-scale productions and supply chains.
In the previous year, cross-border payments were considered the most significant individual use case for Blockchain technology, as it alone has accounted for nearly 16% of the global Blockchain market. Next comes the industry of lot lineage and provenance, which has accounted for a good 10.7% market share.
Apart from the above, some of the widespread use cases of Blockchain technology include:
Supply Chain Management: Blockchain in supply chain systems helps businesses track the flow of their products efficiently and accurately, thus eliminating any counterfeiting problems. It not only reduces business losses but also improves transparency, cost-efficiency, and customer satisfaction rates.
- Energy Market: Consumers these days need to wait for the energy distribution company to complete the installation process. However, with Blockchain, the nodes would trade and generate electricity without requiring any centralised authority, thus reducing waiting times.
- Healthcare: Using Blockchain, healthcare institutions can now have their patients’ reports stored safely over a Blockchain network. Healthcare professionals can easily retrieve this information later, thus making the caregiving process faster, smoother, and safer.
- Real Estate: If you use Blockchain for real estate, you will be benefited in numerous ways. Many players in this sector, many of whom are still struggling to set a firm foot.
However, suppose you use Blockchain in your real estate investments. In that case, you can expect a safe, smooth and efficient transaction, thanks to the smart contracts provided by Blockchain to automate property buying and selling tasks. It’s cost-effective and will also help you do an efficient ownership verification.
Blockchain has a promising future across various industries in the upcoming years, and it is undoubtedly going to change the ways businesses operate. According to research studies, by 2024, we can expect that enterprises would be spending around $20 billion every year on different Blockchain technical solutions.
So, if you haven’t already, it’s time to start now to get ready for the new world of cryptocurrency and Blockchain.