Basics of Blockchain
In this article, we will understand the need for blockchain. At the core of blockchain technology are decentralized and distributed databases.
Before we talk about blockchain technology, let's have a peek into the type of databases. We can categorize the databases into the following three types:
1. Centralized databases
2. Decentralized databases
3. Distributed databases
What is a Centralized database?
A database that is held in a single location is known as a centralized database. This can be a server CPU, cloud, central computers, or database system, such as Amazon Web Services (AWS), Google Cloud Platform (GCP), or Microsoft Azure.
What are Decentralized Databases?
In a decentralized database, there is no single point of control where a unified decision is taken. Every node within the system is autonomous, and the behavior of the entire system is the result of the collective responses of the individual nodes. Depending on the architecture, the system may vary in terms of its characteristics.
What is a Distributed database?
A distributed database can be summed up as a stretched version of a decentralized database. In a distributed database, the data processing is across the nodes; however, the decision-making can be centralized.
Need for a Blockchain
The traditional system requires a centralized, trusted party to act as an intermediary between two unknown parties. Take banking, for example, where the bank has complete control of the transaction between two parties. This system does not guarantee transparency and can present security issues.
In response to this, Satoshi (a pseudonym of an individual, organization, or group of professionals) proposed a revolutionary technology that could disrupt current business models and provide transparency.
It's clear why distributed architecture is needed in today's world. Now, we'll explore what a blockchain is and how it works.
A Blockchain network is a decentralized architecture that does not have centralized control. Let's delve into the key technologies that form the backbone of this revolutionary form of distributed ledger technology.
What is Blockchain?
Blockchain is a combination of the decentralized and distributed database containing a registry of transactions that are distributed among peers or fellow participants in the network.
The registry includes a long list of transactions and is continually updated with new transactions as they take place.
In a blockchain, starting from the very first transaction, many transactions are grouped into a block as per a predefined block size (1MB in the case of Bitcoin).
Once the block size is achieved by one block, the next set of transactions forms another block linked to the previous block.
Over time, a series of blocks is formed where each block is connected to another block created just before.
In our next articles, we will discuss how transactions take place in a blockchain network.