Blockchain Technology is an immutable, decentralized digital ledger for creating and storing transaction records, such as each transaction's time, amount, and address.
According to MarketsandMarkets, the global blockchain market, valued at exactly $7.4 billion in 2022, is expected to skyrocket to $90 billion before 2027. Gartner also predicts this technology will dominate 10% to 20% of the worldwide economy's infrastructure by 2030. This predicted growth in valuation and significance reflects the importance and potential of this technology.
For a technology with great promise as blockchain technology, understanding the nitty gritty, including its key elements, how it works, and its types, helps you leverage it better.
What is Blockchain Technology in Simple Words?
Blockchain is a decentralized and immutable digital ledger consisting of interconnected “blocks” that store transaction information (transaction time, amount, and addresses) across a network of computers — nodes.
Each block is digitally encrypted into consecutive blocks to form a sequential chain of blocks, hence, “blockchain”. This way, the technology keeps a secure, transparent, and permanent record of transactions.
Key Elements of a Blockchain
Distributed Ledger Technology (DLT): Every user of a particular blockchain technology has access to its distributed ledger containing transaction details. Unlike contemporary banking networks, this ensures transparency and saves the effort of recording transactions multiple times.
Fixed Transaction Records: Every blockchain transaction is permanently stored and cannot be altered.
Smart Contracts: A smart contract is an automatic, self-executing computer program that contains a set of rules and regulations stored on a blockchain and guides all transactions made. Each transaction gets completed once the conditions in the smart contract are satisfied.
How Does Blockchain Work?
Transaction Initiation: It begins with a blockchain network user initiating a transaction.
Block Formation: Details of such transactions, including the date, timestamp, and transaction sum, form a block to be approved through users' unique signatures.
Block Verification: The newly formed block is transferred to every node of the blockchain network for verification.
Irreversible Block Addition: Once a block is verified, it is added to an existing chain of blocks — blockchain.
Blockchain Update and Distribution: The blockchain is updated and distributed across nodes in the network.
Transaction Completion: After distribution, the transaction is completed and becomes part of the digital ledger.
Types of Blockchain;
Below are the various forms of blockchain technology that exist:
Public Blockchains
These are the most popular blockchains known for their easy accessibility to the public. Anyone can join the network and verify transactions. Popular examples are Bitcoin and Ethereum. They are ideal for cryptocurrency transactions and decentralized applications (dApps). However, there are concerns about public blockchains' transaction privacy and security.
Private Blockchains
This blockchain has a governing body that approves individuals seeking access to the network, automates the set protocols, and updates the shared digital ledger.
Consortium Blockchains
Selected organizations control this type of blockchain. It is a semi-decentralized blockchain technology ideal for banking and record-keeping between different organizations.
Hybrid Blockchains
These blockchains blend private and public features. They are accessible to the public but also have restricted accessibility, where some information is limited. This is perfect for real estate and voting system transactions.
In Closing
Blockchain technology is popular for being decentralized, immutable (irreversible), and secure for different types of record-keeping. This technology has enjoyed growing adoption since its inception. However, experts believe recent innovative applications of the technology in politics and other integral aspects of our everyday lives will further skyrocket its adoption.