Demystifying Blockchain: A glimpse at the concept that's revolutionizing the financial sector

A blockchain is a distributed ledger database that employs cryptography to safeguard any type of information. The ledger is made up of a succession of entries or "blocks," each of which is added to the preceding block in the chain, thus the term "blockchain."

A timestamp, data, and a hash are all included in each block. This serves as a unique identifier for all of the block's contents, similar to a digital fingerprint. Importantly, data cannot be changed once it has been recorded and confirmed in a block. If a modification is required, it is instead recorded and validated in a new block and then added to the chain.

Each new block strengthens the prior block's verification, and hence the whole blockchain. The hash of the preceding block in the chain is also included in this block. A public blockchain's backbone is made up of these.

So, what exactly are hashes?

It's how everyone in a public, decentralized network may agree on how a block should be validated and added to the chain. A cryptographic hash function is a mathematical method that converts data of any length into a fixed-length output.

So, if you wish to express a list of names with different lengths, a hash function will turn each of these names (data) into a unique string of integers with a defined length. The hash is the name given to this string of integers. No matter how many times you input the same data, the hash function will always return the same hash. If you modify the entered data even a little, the hash will change altogether.

Hashing is a function that only operates in one direction. That's because reverse-engineering the data that generates a certain hash without a massive amount of processing power is highly infeasible - but not impossible.

Guessing and checking over and over again is the quickest technique to figure out what data makes a particular hash. Computers on the Bitcoin blockchain, which utilizes a proof of work consensus method, partake in this complicated guessing game in the hopes of being the first to answer the riddle. The machine with more processing power - the capacity to process more guesses quicker - is more likely to win the race and hence verify the block for the Bitcoin price.

Different types of Blockchain:

It's vital to note that the term "blockchain" does not refer to a specific database or network. It's a form of technology and several blockchains function in various ways.

• Anyone may join a public blockchain, such as Bitcoin, and view the distributed ledger. A closed network is a private blockchain. It still employs some decentralization and a peer-to-peer approach, but access is confined to a specific network and is managed by a single organization.

• A hybrid blockchain combines the benefits of both public and private blockchains. This type of blockchain enables an organization to disseminate a ledger with certain data that is publicly available while restricting access to more sensitive data within the network.

• A consortium blockchain resembles a private blockchain solely in appearance. Rather than being governed by a single entity, this ledger is managed by a group of them.