A blockchain is defined as a public ledger of transactions that is maintained and verified by a decentralized, peer-to-peer network of computers that adhere to a consensus mechanism to confirm data.
Here are key features of blockchains that make then unique to other technologies and that you should know:
Decentralized
A blockchain is a decentralized network i.e., it has no central authority to control the network as is the case in the client server model.
Peer-to-Peer
This characteristic of blockchains allows transactions to involve only two parties, the sender and the receiver, thus removing the requirement of ‘third party authorisation’ because everyone in the network are themselves able to authorise the transactions.
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Consensus Mechanism
A consensus mechanism is described as a fault-tolerant mechanism used in a blockchain to reach an agreement on a single state of the network among distributed nodes. These protocols make sure all nodes are synchronized with each other and agree on transactions, thus making them legitimate and therefore can be added onto the blockchain.
There are two leading mechanisms:
- Proof-of-Work (PoW) – Proof-of-work is done by miners who compete to create new blocks full of processed transactions
- Proof-of-Stake (PoS) – Instead of needing to do intense computational work (mining), in PoS, validation of transactions is done by members who have staked crypto in the network
Immutability
No participant can change or tamper with a transaction after it’s been recorded to the shared ledger. If a transaction record includes an error, a new transaction must be added to reverse the error, and both transactions are then visible.
Distributed Ledger Technology (DLT)
All network participants have access to the distributed ledger and its immutable record of transactions. With this shared ledger, transactions are recorded only once eliminating the duplication of effort that’s typical of traditional business networks.
Smart contracts
To speed transactions, a set of rules – called a smart contract – is stored on the blockchain and executed automatically.
A smart contract can define conditions for just about anything, including corporate bond transfers, terms for travel insurance to be paid, and much more.
Most people largely think that Blockchain is Bitcoin and vice-versa. But it’s not the case. In fact, Bitcoin is a digital currency or cryptocurrency that works on blockchain technology. Together with Ethereum, the two were the original leading blockchains employing Proof-of-Work (PoW).
Howver, other chains, like Solana and Cardano, later emerged, applying the more efficient PoS consensus mechanism.
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RECOMMENDED READING: DEVELOPER PERSPECTIVE: How to Become a Solidity Blockchain Coding Ninja
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