Everything You Wanted to Know About Blockchain
What is a Blockchain?
The easiest way to understand Blockchain is to think of it as a distributed ledger of transactions or a continually updated list of all transactions. For more information, visit bit.ly/2hJOr1h.
How It Works
Blockchain is a data structure of linked data blocks. All participants or nodes in the network have a copy of the Blockchain and, when someone wants to add a block, the nodes perform mining. Mining is when the nodes run algorithms to review and validate the transaction. If a majority agree it looks valid, then the transaction is approved and the new block is added to the chain. Several flavors of Blockchains exist. Bitcoin is a public and permission-less version where anyone can take part and add to the chain. However, private or permissioned Blockchains involve nodes which have to be preauthorized to participate. Either way the nodes in the network participate in determining what transactions are valid and, thus, what gets added to the chain. For more information, visit on.wsj.com/1nBCZ6e.
Three key things needed for a Blockchain to function are a network of nodes, an agreed upon protocol and a consensus mechanism for mining. The consensus mechanism consists of the rules used to determine how transactions are verified and how the nodes will agree on the current state of the Blockchain. There are multiple consensus algorithms available, depending on whether the chain is a public or private chain and also on how much trust has already been established. The nodes evaluate transactions and, if approved, they get packaged into a block that’s added to the chain, which is then redistributed to all the nodes in the network. This can happen rapidly so many transactions can be processed.
Where To Use Blockchain
Blockchains can be used for digital banking, compiling data on sales, tracking digital rights usage, tracking payments to content providers, and tracking shipments. Blockchain can be used for smart contracts and decentralized applications such as ride sharing or crowd funding. Blockchains can be used for implementing prediction markets and generic governance tools. They can also be used for digital signatures; tracking and verifying integrity of messages; and automating processes.
IBM has published multiple articles on Blockchains (ibm.co/1OhUGnS). They expect Blockchains to be used in the creation of more efficient systems for multiple areas including:
internet of things networks,
multimedia rights management,
government proof of identity
insurance record management.
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