Blockchain, AI and machine learning are the latest buzzwords in the IT industry. Building a blockchain is also becoming a need for various businesses. Recall, that a “Blockchain” is the distributed shared ledger for recording and storing transactions. Each of the participant in the business network has a copy of the ledger which is updated regularly.
Before building a blockchain, there are a few keywords that have to be mastered and we will discuss them today.
This is the shared copy of transactions. It is similar to the account book that is maintained to record transactions. The major difference is that the ledger is shared between the different participants of the business network. For example, in the case of a supply-chain blockchain network , the supplier will have a copy of the shared ledger and the retailer will have a copy of the ledger as well. This ledger will get updated in real time and one will know the status of the goods as they move across the network.
‘Smart contract’ defines the rules(in coded form) in the blockchain network. It is defined within the blockchain itself and executes automatically. The rules are the same rules that are present in a physical contract but they are defined programmatically. This ensures that the rules are enforced instantly when appropriate business conditions are met.
Perhaps the most important aspect of ‘Blockchain’ is ‘immutability’. Immutability is the concept where the blocks in a blockchain cannot be changed. Unlike the case of databases where unwanted changes can be “rolled back”, in the case of blockchain – transactions once committed to the blockchain will stay there. The next transaction will reflect the change.
4. Genesis block
The first block in a blockchain is known as ‘Genesis block’.
Since there is no central authority in a blockchain, how will a transaction be considered legitimate to be added to the blockchain? This is done by means of ‘consensus mechanisms’ that strive to provide authenticity to the blockchain. The nodes agree that the transaction is really legitimate via a ‘consensus mechanism’ to be added to the blockchain.
6. Private blockchain
Did you know that there is ‘private blockchain’ and ‘public blockchain’? A business will employ a private blockchain to simplify the business needs by communicating with all their stakeholders. Only approved participants can add transactions to the blocks.
In a private blockchain, permissions can be set to ensure that only certain participants can view certain transactions. For example, if Harry is planning to sell a car to Henry, there is no need for Suzy(another participant) to know about it as yet.
Examples of private blockchain is the ‘Hyperledger Composer’.
7. Public blockchain
In a public blockchain, anybody can join the network. In order to achieve ‘consensus’ on a public blockchain, one should solve complex mathematical formulae. The most popular implementation of the public blockchain is ‘Bitcoin’!
We have seen few definitions of ‘Blockchain’ in this post… join me as I uncover more Blockchain secrets in subsequent posts! 🙂