We have observed how the terms "blockchain" and "web3" have gained popularity. But how does Blockchain technology actually work? Is this a substantial modification or merely an addition?

Let's start by demystifying this technology because it is still relatively new and has the potential to be revolutionary in the future.

What is a Blockchain?

A blockchain is a decentralized, unchangeable distributed ledger that is composed of chains of blocks, each block containing transactions. The most well-known application of blockchain technology is in the creation of cryptocurrency systems like Bitcoin. The innovation of a blockchain is that it fosters confidence by ensuring the accuracy and security of a record of data without the requirement for a reliable third party.

The way the data is organized in a blockchain differs significantly from how it is typically organized in a database. In a blockchain, data is gathered in groups called blocks that each include sets of data. Blocks have specific storage capabilities, and when filled, they are closed and connected to the block that came before them to create the data chain known as the blockchain.

The information stored on the blocks is encrypted using cryptography to ensure that user privacy is not compromised and data cannot be changed. Once a block is put together (mined) by some miner on the network, it is propagated to the rest of the network; all nodes add this block to the end of their blockchain.

Blockchain is unique in that no one controls it; it is run by the people who use it.

Components of a Blockchain

An open, public blockchain typically includes the following components:

• A state machine that executes transactions in accordance with consensus rules.
• A chain of cryptographically secure blocks that serves as a record of all verified and accepted state transitions.
• A consensus algorithm that decentralizes control over the blockchain by requiring participants to cooperate in enforcing consensus rules.
• A type of incentive scheme designed to economically secure the state machine in an open environment, for example, proof-of-work costs plus block rewards.
• Open source software implementations(referred to as "clients").
• A peer-to-peer (P2P) network connecting participants and propagating transactions and blocks of verified transactions
• A set of consensus rules that govern what constitutes a transaction and what constitutes a valid state transition.

Remember that while all blockchains are distributed ledgers, not all distributed ledgers are blockchains.

Now that we know what a blockchain is and that data is stored in blocks, let's look at what's inside a block.

What exactly is in a block?

• stateRoot: contains the entire state of the system, including account balances, contract storage, contract code, and account nonces.
• nonce : a hash that, when combined with the mixHash, demonstrates that the block has undergone proof-of-work.
• blockNumber: the number of blocks in the blockchain.
• timestamp: the date and time the block was mined.
• parentHash: the unique identifier for the previous block (this is how blocks are linked in a chain).
• transactions: the transactions contained within the block.
• difficulty: the amount of effort needed to mine the block.
• baseFeePerGas: the fee per gas that must be paid in order for a transaction to be included in the block.
• mixHash: a one-of-a-kind identifier for that block.

Benefits of the Blockchain:

• Transparency

  Real-time data are provided in the Blockchain and there is no room for tampering with any of the data recorded on the network because all records stored in a blockchain are updated to the network at all times. Every component of the network will be able to see any modifications or changes, making the system incredibly transparent.

• Efficiency

  It takes a lot of work to complete a transaction using conventional paper-based systems since they require third parties to mediate and are prone to human mistake. Blockchain can speed up and discipline these antiquated processes, minimize error-proneness, and increase trading's efficiency. Parties don't need to maintain various records because there is only one ledger, which results in significantly less clutter. Additionally, building trust is simpler when everyone has access to the same information. Settlements can be made simple and easy without the need for middlemen.

• Automation

  With "smart contracts," transactions can even be automated, enhancing your productivity and accelerating the procedure even further. The subsequent stage in a transaction or process is automatically initiated after pre-specified requirements are satisfied. Smart contracts lessen the need for human intervention and rely less on outside parties to confirm that a contract's provisions have been adhered to. When a consumer files a claim for insurance, for instance, the claim may be immediately settled and paid once the customer has submitted all required evidence. -I#### mmutability: It can be argued that transactions are tamper-proof because data in blockchain technology cannot be altered because any modification will be reflected in all nodes due to its decentralized architecture.

• Decentralization

  Because every participant in the network at any given time may examine all transaction records no matter their location, a blockchain is decentralized. This makes it safer than having it under the control of a single entity that can determine what should be recorded in the database and what shouldn't.

• Security

  By all measures, blockchain is more secure than any other method of maintaining records. Only a blockchain network's consensus can update and/or modify the shared records of transactions. A record is only updated if the majority of nodes, or all of them, agree. A transaction is also encrypted and linked to the prior transaction when it is accepted. Therefore, a record cannot be changed by a single party or individual. Blockchain technology can be used to impose strict security in any sector that has a crucial need to secure sensitive data, such as governments, healthcare, financial services, etc.

Downsides of the Blockchain

• Energy consuming:

  Verifying any transaction requires a significant amount of energy, making it problematic. According to the survey, by 2018, the verification of transactions made using blockchain technology consumed 0.3 percent of the world's electricity.

• Time consuming:

  Miners must compute nonce values numerous times in order to add the next block in the chain, making this a time-consuming operation that must be sped up before being used for commercial purposes.

• Legal requirements:

  Due to some environmental concerns, several nations have outlawed the use of blockchain technology applications, including cryptocurrencies. These nations do not support the use of blockchain technology in the business sector.

• Scalability:

  One of the major problems of blockchain technology is that it cannot be scalable because each block must be a specific size in order to store information. Due to the 1 MB block size, only a few transactions may be stored on a single block.

• Storage:

  Since blockchain databases are stored on each node of the network, there is a problem with storage as more transactions occur.

• Regulations:

  Some financial institutions have issues with blockchain. To implement blockchain more widely, other technological facets will be necessary.

• Immaturity:

  Since blockchain technology is still relatively new, people do not place a lot of trust in it and are not yet willing to invest in it. Despite the fact that a number of blockchain-based applications are flourishing across a variety of industries, blockchain still needs to gain the trust of more people in order to be acknowledged for its full potential.

I believe that most of these drawbacks will be resolved over time since this technology is still in its infancy, . Some of them are already being dealt with; for instance, Ethereum is developing a new version of its blockchain that consumes far less power and energy and will be faster, more efficient, and more scalable.

Possible use-cases/applications of the Blockchain

• Banking

  Banks can utilize blockchain to reduce fraud and simplify payments. Due to its centralized infrastructure, banks are particularly vulnerable to cyberattacks. Blockchain technology can increase security in the banking sector. Blockchain technology can be used to preserve a digital record of transactions using smart contracts, and because the system is decentralized it is less vulnerable to hackers. As middlemen are eliminated from the system by the blockchain, transactions will likewise be borderless.

• Healthcare

  By using a digital ledger system, blockchain can be utilized to store a patient's medical history, changing the way that traditional record-keeping methods are done. Other doctors can receive the information about the patients health history without the patient having to go through moving files from one hospital to another. A patient's progress can also be monitored in real time using its smart contracts. It will cut down on the time needed for record-keeping.

• Real Estate

• The Blockchain ledger system is unquestionably trustworthy. It is the best method for safeguarding real estate transactions, doing away with issues like buying a property twice, buying one that has already been sold, etc. Large blockchain-based enterprises employ smart contracts to keep track of rental agreements, property leases, and tenancy agreements.

Conclusion

A blockchain is essentially a decentralized database or ledger. Each node of the network has an exact copy of the whole database, and data are stored in data structures called blocks. Security is ensured since if somebody tries to edit or delete an entry in one copy of the ledger, the majority will not reflect this change and it will be rejected.

I hope you have a better insight into how the blockchain works and how it can be used in real life.

Thanks for reading!

Till I come your way again,

Adios