A blockchain is a decentralized block of all transactions across peer to peer networks. The blockchain contains a unique identifier to differentiate it from other blocks in the chain.
Blocks are created by solving cryptographic problems.
The process of solving these problems is mining. Mining a block on the blockchain will give a reward to miners. Blockchains are decentralized data records. The blockchain is stored on every user’s computers that are given blockchain.
How blockchain works
The requested transaction is broadcasted to peer to peer network consisting of computer nodes. The P2P network of nodes validates the transaction and the user’s status know algorithms. A verified transaction is involved cryptocurrency,contracts,records and other information. After the transaction is verified, it will be combined with other transactions to create a new data block for the ledger. Then the new block is added to the existing blockchain which is permanent and unalterable and then the transaction is complete.
Advantages of blockchain
- Accuracy : transactions on a blockchain network are approved by a network of computers. It reduces the human involvement in the verification process, human error and enhances an accurate record of data.
- Decentralized system : the approval of regulatory authorities by government or banks for transactions. However, transactions are approved by the mutual consensus of users; results in transactions are safers and faster.
- Transparency : Most blockchains are open source. It means that anyone can view the code and transactions.
Disadvantages of blockchain
- Illegal activity : Although confidentiality on the blockchain network protects users from hackers, it allows illegal trading on the blockchain network.
- Speed inefficiency : Bitcoin’s system takes a bit long to add a new block to blockchain. Although other tokens such as Ethereum perform better than bitcoin, their blockchains still limit.