The Blockchain Technology Explained in Layman Terms
The blockchain technology is all the rage these days. Everyone and their dog are talking about it.
But there are still many people that have no clue what is blockchain and what all the hype around it is about. So this article is going to be for those people, explaining them blockchain technology in very simple terms.
The Practical Implication
Before we jump deeper into what blockchain technology is, let us simply understand its practical implication, which is probably going to be a more important piece of information for most people interested in learning about it.
So practically, the blockchain technology is simply a way to transfer a unique piece of digital asset to another user on the internet, in an anonymous way. However, it works in a way that ensures that the transfer will be securely made without any possibility of a failure.
No one would be able to challenge the status of the transaction, as a huge network of nodes (computers in the blockchain network) are used to verify such transactions and the decision is not in the hand of any one person or even a few major parties.
The Underlying Technology
The blockchain technology is all about the blockchain networks and how they work. These networks often have millions of computers voluntarily connected to the network (which are technically known as ‘nodes’).
What these nodes do is verify and approve transactions as well as share the updated information. All transactions made by these nodes are publicly available, but without giving away the anonymity of the involved parties.
On a general level, it’s similar to how Wikipedia works. Many users contribute information to it, and the information is constantly updated as well as is publicly available.
Similarly, no single user controls the information, and the final information on Wikipedia pages are not a property of any single person.
Likewise, even in a blockchain network no single node or a single party controls or can claim to own any information they have worked on, as millions of other nodes have worked on it at the same time too.
Going a Little Deeper
While it’s easy to understand how blockchain works when we compare it with Wikipedia, but as we go a little deeper into it, the differences become very clear.
This is because the ‘master copy’ of the information is stored in a centralized server in the case of Wikipedia, and there are accounts with special privileges or admin accounts that can change the information however they want.
This is pretty much how the highly protected servers work, which are used by banks, governments, insurance companies and other parties.
While they allow users to make changes to their servers by letting them perform some specific actions, the approval or rejection is in the hands of the controlling authority. Similarly, the servers are centralized, meaning they are controlled by the owners.
This is the fundamental difference between traditional way of managing information and the blockchain technology. In blockchain, there’s no centralized server, and no controlling authority.
The servers and the ‘master copy’ of information is decentralized, and the majority of the nodes in the network have to agree with a change or addition in order for it to come into effect.
Finally, this might make someone think if a blockchain network can be compromised, if someone somehow manages to control the majority of the computing power in the network. While theoretically speaking it is possible, practically it would be something extremely difficult – if not near impossible – to achieve.
This is because it would take a huge amount of computing power to have control of the majority of the powering resources in the network, which is something that gets increasingly difficult with time as more and more nodes join the network.