Want to learn about blockchain? This guide will put you through all you need to know about the features, benefits and types of blockchains, and their smart contracts.
We know you have must have heard the word a thousand times and you still cannot understand the fuss around it. This is why we have cared to explain the concept in a few simple words.
First of all, what is a Blockchain?
- A blockchain is a distributed and unchangeable ledger that makes it easier to record transactions and track assets in a business network.
- There are two types of assets, and they are tangible and intangible.
- A tangible asset is physical and may be a car, cash, house, or land.
- An intangible asset however does not exist in physical form and examples include patents, intellectual property, branding, and copyrights.
- A blockchain network can record or sell almost anything of value.
What are the key elements of blockchain?
A blockchain is made of certain unique features and they are listed below:
1. Blockchain Technology and Distributed Ledger Technology
- We know that the blockchain is a distributed ledger and is unchangeable/immutable.
- Now, this ledger and its record of transactions are accessible to everyone who participates in the blockchain network.
- This shared ledger allows each transaction to be recorded only once, and this eliminates the duplication of effort which is common in traditional commercial networks.
2. The Immutability of Blockchains
- As soon as a transaction is approved and recorded to the shared ledger, it becomes impossible for any network participant to tamper or edit with it.
- If an error is found in a transaction record, a new transaction must be inputted to correct the issue, and both transactions are visible afterward.
3. Smart Contracts on Blockchain
- The blockchain stores and implements a set of rules, known as a smart contract, and executes them automatically to speed up transactions.
- It is a self-executing contract that has the terms of agreement of a transaction designed into lines of code.
- With a smart contract, thousands of transactions are carried out among anonymous parties without any need for a legal system, central authority, or an external enforcement mechanism.
What are the various types of blockchain?
A blockchain network can either be private, public, permissions, or created by a consortium.
Public Blockchain network
- In a public blockchain network, anyone can join and participate when they want because there is no restriction. A popular example is the Bitcoin network.
- The good thing about the public blockchain is that all participants have equal rights no matter what.
- However, this system has its drawbacks. Firstly, they consume significant energy. This is because the network requires a computer to solve complex problems to verify transactions.
- Additionally, the security may be inadequate.
Private blockchain networks
- A private blockchain network is a decentralized peer-to-peer network, similar to a public blockchain network.
- However, the network is governed by a single organization, which determines who is authorized to participate, implements a consensus procedure, and maintains the shared ledger.
- A private blockchain network has several benefits. Firstly, it is highly efficient. This is because it doesn't admit everyone.
- Additionally, a private blockchain can be used within a company's firewall and even hosted on-site.
- The other types are Permissioned blockchain networks and Consortium blockchain.
- A permissioned blockchain network is mostly set up by businesses that create a private blockchain.
- When all members need to be permissioned and share responsibility for the blockchain, a consortium blockchain is perfect.
What are the benefits of blockchain?
The blockchain offers its stakeholders several benefits and we have listed some of them below:
As a member of a private network on a blockchain, you can be confident that you are receiving timely and accurate data. You can also rest assured that your confidential blockchain details will be exclusively shared with the network members to whom you have authorized access.
ALL confirmed transactions are unchangeable because they are permanently recorded. It is impossible for anyone, including the system administrator or the algorithm developer, to delete a transaction.
Transaction record reconciliations are more efficient when a distributed ledger is shared across network members. Because of the self-executing smart contract, there is no wasting of time in transactions.
Yes, that is it. The concept is that simple. Care to know more about blockchain technology? Check our other posts on the blockchain!