What is Blockchain? The Technology Behind Bitcoin Explained

Know how Blockchain works, what are its core elements, what makes it so secure and how it can be the 'next big thing' in the world of technology.

By Admin Last updated Apr 13, 2018

Blockchain technology is all the rage these days in the technology world. Just in case you have never heard of this before, Blockchain is what powers the crypto-currencies, like the Bitcoin. While Bitcoin has been a hotly debated topic around the globe, its widespread popularity has largely been because of its involvement with money. But in case you think that Bitcoin is in itself a revolutionary technology, you are wrong on many levels. Primarily because it is not Bitcoin that translates into a ‘path-breaking technology’ but Blockchain. In essence, Bitcoin is a very small, but an important application of the Blockchain technology. Bitcoin IS NOT Blockchain.

So what is Blockchain? In very simple terms, blockchain is a ‘distributed ledger’ or a ‘distributed record’ that is used to keep a track of information transfer between points. Consider a monetary transaction between person A and person B. In the banking system prevalent today, it is the bank that keeps the transaction record between the two people. Now consider that an entire network of people has a record, containing all the transaction history amongst these two people (in an encrypted form of course). This shows the ‘distributed’ element of the blockchain.

So how is it better? It is simple. If the bank has its records deleted tomorrow for any reason, there will be no record of the transactions between person A and B whatsoever. Now consider the same scenario in a distributed ledger. If the records from any one system are deleted for any reason, there is a whole network of people having the same records as a backup. So essentially, the transactions that took place between person A and B will never be lost.

That is not the only plus of a distributed ledger though. It also helps secure the records, more than a centralised system. As an example, consider that a bank’s system is hacked in a cyber-attack. The hackers have to target only one system and approve the transactions from there in order to move the money to their account. However, in a blockchain, a transaction cannot be initiated until the time more than 50 percent of systems in that distributed ledger approve it. So to steal money in this scenario, the hackers would have to target more than 50 percent of systems for the same.

Now, this is just an overview of how the Blockchain technology works and its advantages. Let us dive a little more into the depth of this technology’s working. For this, let us first know how it all started.