Blockchain for Dummies
- Hussain Ziniya
- Apr 8
- 4 min read
Just like all the modern digital payment platforms such as UPI and e-wallets, blockchain technology is a decentralised platform for online payments. But what is blockchain, how does it function? Well, there’s a lot more to blockchain than just rapid e-payments. So, let’s simplify it first and then see what kind of purpose does it solve.
Blockchain- Revolutionising our sense of security & transparency
Whatever you do online, you want to do it with a sense of security and transparency. And blockchain has revolutionised both aspects of online payments. Before we dive into the working of blockchain, let’s visualise what these 2 aspects mean for you today.
Security: Let’s say you placed an online order. You want the order to go through without any double-spending or fraud taking place.
Transparency: let’s say a heated argument took place on your Facebook timeline. You want everyone to see it exactly as it is… The entire contents of it (All the nasty comments) along with their timestamps.
Imagine a platform offering these 2 together, simultaneously. That’s blockchain for you! Blockchain is a chain of data blocks that store information about transactions happening on the network. These blocks are validated before they are added to the main registry. Unlike our regular banking system, the blockchain registry is not centralised and is viewable by everyone at any time.
Before a new block gets added to the chain, special computers called ‘nodes’ validate the block by attributing a unique code to it, known as ‘hash’. One block after another and a chain starts to form. The information about all the blocks with their unique hash numbers form the main registry, which is available on all nodes. Whenever it gets updated, the update passes onto all the nodes.
When a change in the registry is made on one node, the entire registry on that node is automatically cross-referenced with others. The registry that is accepted by the majority (>50%) of nodes, is the one that will be accepted by all nodes.
Blockchain transactions: How does money work?
Any blockchain platform, like Bitcoin, operates using its native currency. ‘Token’ is the generic term for it. A typical blockchain platform comes pre-loaded with a fixed number of tokens to be used in circulation. Think of it as a fixed amount of currency coins which can be divided into an infinite number of sub parts, but only that it's digital.
The unique hash for any block is generated via complex calculations performed by a node. People doing the validation work are called miners, and are rewarded in tokens for their work as the hash-generation process demands tons of computing power (basically, lots of electricity!) The work performed in hash-generation attributes value with each block and thus, creates value for the entire blockchain making it more and more credible.
Anyone wanting to hack and edit information on these blocks will have to do the following;
Regenerate new hash and change old hash numbers of that particular block
Update the history/ledger on all nodes present in the blockchain network (change the consensus
This means the hacker himself/herself will need computing power that is more than that of 50% of all the nodes present… which is just impossible!
The pre-loaded tokens are activated during the hash-generation process, with more units (tokens) coming into action as the demand rises. Blockchain kicked off with Bitcoin in late 2009 with just one computer! And now there are millions of nodes on every popular blockchain network. Just like miners, there are validators, who voluntarily do the hash-generation, aka block validation, to sustain the blockchain network. It’s just that mining incentivizes the whole thing so that more people put in efforts to strengthen the blockchain network. Anyone, even you, can become a validator provided your system (node) meets with the rules set by the blockchain network.
It’s a people’s network... used by people and governed by people! You can buy tokens using regular currency and do transactions on blockchain platforms for a nominal fee. The tokens are stored in a native blockchain wallet.
The future- Should you care about blockchain?
Blockchain technology is evolving faster than you can imagine. With the latest cloud-based tech, it has now become infinitely scalable, with each block being a lot bigger than the initial size of 1 Megabyte. That means more transactions per block and faster validations. The global blockchain technology market is projected to grow from USD 17.57 billion in 2023 to USD 469.49 billion by 2030
Every industry, organisation, and individual can benefit from it. Let’s see a few examples;
Government spending: You’ll be able to see where and how every Rupee is spent by the government.
Nationalised income: Similar to the concept of universal income, imagine every citizen of India being connected to a network where anyone can earn a standardised wage for a particular job or task.
Smart contracts: Smart contracts are basically blockchain-based legal contracts or real estate stipulations, to make sure they are duly honoured by each party.
But you don’t need to be an expert on blockchain to make money! On a personal level, you can benefit from the technology to increase your wealth and make life easier for you, through crypto trading and financial services provided by Binance, where you can use crypto and blockchain from the comfort of your phone.
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