The field of blockchain technology is an evolving one. In fact, blockchain technology is not as complex as it sounds. It is a new internet system that stores information visualized as a block made up of hashes.

Additionally, the information or data stored on a blockchain is however immune to manipulation from any party. 

In this article, you will understand all or almost all there is to know about blockchain, what makes blockchain secure, and the features of blockchain. So stay put as we dive into this new field. 

However, to understand what makes  blockchain technology secure, a knowledge of the centralized and decentralized governments is essential. If you have no background knowledge, keep reading as in the next few paragraphs, we will break down these subjects.  

What Makes Blockchain Technology Secure? 

We cannot talk about blockchain technology without touching a bit into decentralized governments. As opposed to centralized governments like banks and top financial institutions, decentralized governments eliminate all sorts of third parties to enable transactions.

For instance, people trust that the banks will help keep their money secure and facilitate transactions  which is why they sleep peacefully at nights knowing that their money is safe in the bank. The reverse is the case in decentralized governments where nobody, not even a single authority holds power. 

If you understand the above background, certainly, you will understand how blockchain networks are secure. While banks help resolve issues with transactions, what entity revolves around conflicts on blockchain networks?

Blockchain technologies like Solana and the great Bitcoin settle disputes through the use of smart contracts, nodes, and consensus mechanisms. They are all features of a blockchain. 

What are Hash and Hash Functions in Blockchain? 

A blockchain hash is a digitized fingerprint of a set of data. With a hash, you can verify if information has been tampered with or not. The information, depending on the type of blockchain network, is verified by nodes, miners, or validators. 

A blockchain hash is generated through cryptography. Hash functions, on the other hand, are algorithms that determine how information is encrypted. With hash functions, information is secure, and detecting the content of a hash (information) Is difficult. 

Hash Functions are very important and have a few features such as:

  1. They are collision-free: A hash is usually 64 digits long. That being said, no two different input hashes can map out the same output hash. 
  2. They can be hidden: A hash contains data. It is however difficult to guess the input by looking at the output. 
  3. They should be puzzle-friendly: Solving a hash should be puzzle-friendly and at the same time not easy to exactly guess the input that provides the output.

Similarly, if you understand how data is stored on a blockchain with hash functions, understanding Merkle Tree will be a plus. 

Merkle Tree

A Merkle tree is a data structure that encodes data securely and efficiently. View the Merkle tree as a family tree that stores all the transactions in a block and provides a digitized fingerprint.

Additionally, the Merle tree is created by calculating hashes until there is only one hash remaining. So if a single detail in the transaction is changed, it will automatically reflect in the hash of the transaction.

How Do Transactions of Blockchain Work?

The whole idea of blockchain technology is to allow for decentralization. However, how do you make a transaction with a stranger when no single authority controls the blockchain?

This is where the private and public cryptocurrency keys come in. Crypto transactions are impossible without these keys and are used to transfer money from your crypto wallet to another. 

A public key as it sounds is a key that can be shared with anybody. The importance of a public key to enable another person to be able to send money into your wallet. Without your public key, people won’t be able to send anything to your wallet. 

However, a private key must never be shared with anybody. In real life, a private key is like your BVN. Once a person knows your private key, they get access to your wallet. It must be fully protected. 

Consensus Mechanisms In Blockchain Networks

The main objective of blockchain technology is to give room for decentralization. This is the elimination of central authorities such as banks and the government. If there exists no authority, how are disputes settled on the Blockchain?

What are the chances that all transactions in the blockchain are valid? Are there chances that users could spend funds they don’t own since there’s no one to validate transactions? 

On blockchains, nodes replace central authorities. These nodes maintain the integrity of the Blockchain through consensus mechanisms. A consensus mechanism is a system of reaching an agreement on the Blockchain. 

Take, for instance, the giant Bitcoin Blockchain by Satoshi uses Proof of Work (PoW). Before a transaction is added to the Bitcoin Blockchain, nodes which are heavy computers run by humans solve complex computations to validate such transactions.

If a transaction is found invalid, these nodes have the right to reject it. On the other hand, if it is valid, the same nodes have the right to add it as a block to the blockchain. 

While Proof of Work (PoW) and Proof of Stake (PoS) are the most popular types of consensus mechanisms, others include Proof of Capacity, Proof of Activity, Proof of Authority, Proof of Burn, and Proof of Elapsed Time.

Proof of Work Consensus Mechanism 

Just like it sounds, proof of work consensus mechanism requires work- a whole lot of work by miners. Eventually, these miners are rewarded with incentives from the blockchain.

In Proof of Work, miners compete to solve something like a puzzle. Here’s how it works: When a transaction occurs on the blockchain, it forms a hash (A hash contains the transaction information).

This hash is a puzzle that must be solved to add it as a block to the blockchain. The first person to solve this hash gets to add a new block to the blockchain and also gets rewards. 

Though proof of work could be rewarding, it has various downsides. 

First, it requires huge and expensive computers and other resources to solve these puzzles. These computers cost an arm and a leg. 

Secondly, it is extremely difficult to add a block to the blockchain network. While verifying information is easy-peasy, solving the hash of a block requires hard work. Proof of Work is time-consuming. 

Proof of Work has its pros which makes it very secure and trustworthy. Aside from being the most popular consensus mechanism, PoW has a higher level of security when compared with other consensus mechanisms.

The difficult nature of solving complex puzzles makes it very secure. Cryptocurrencies such as Litecoin and Dogecoin use the proof of work consensus mechanism. 

Proof Of Stake Consensus Mechanism

The most popular consensus mechanism after proof of work (PoW) is proof of stake (PoS). In proof of stake, validators are randomly selected by the blockchain as opposed to the competition system in Proof of Work. To be selected, validators must stake a certain amount of coins as a means of collateral. 

To stake means to lock up crypto coins. The more coins you stake, the higher your chances of being selected to validate transactions and add a new block. For instance, Ethereum requires a minimum of 32 ETH to be a validator. Tron (TRX) and Cosmos (ATOM) are other blockchains that use the proof of stake consensus mechanism.

Unlike proof of work, proof of stake doesn’t require huge computers and resources. Another difference between both consensus mechanisms is that while block creators are called miners on PoW, block creators are called validators on PoS. 

Use Cases Of Blockchain Technology 

As blockchain technology keeps evolving, it has been adopted for many reasons. Some use cases of blockchain technology are: 

Feasible Transactions

Blockchain technology is popular for making transactions. These transactions are completed at a fast rate even at a low price. This is called scalability. Many blockchain networks can process thousands of transactions in a second. 

Education

Educational systems making use of blockchains are at an advantage. Blockchain technology stores students’ records safely. This information can not be lost or altered in any form. 

Healthcare

To ensure safety, blockchain technology serves as a storage system for health information. The information store can easily be accessible without going through the traditional method of storing data on paper. 

Entertainment Industry

Problems such as copyright, privacy, and plagiarism can be solved with blockchain technology. Blockchains help to protect your privacy and data from being manipulated. Also, blockchain technology ensures you get your royalties on time. 

Personal Identity Safety

Personal information should be protected at all costs. Going forward, blockchain technology stores data like birth certificates and health information. This ensures that your information is properly kept without interference from a third party. 

Conclusion

Summarily, decentralization is the bedrock of blockchain technology where there is equal power amongst all peers on a network as opposed to centralized governments. In situations where disputes may arise, blockchain networks use smart contracts and consensus mechanisms to settle disputes. 

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