The 3 Pillars of The Bitcoin Blockchain
Blockchain technology supports the Bitcoin network. As this technology is extremely secure, many organizations across the world are seriously looking at it for their financial transactions as well as carrying out their supply chain processes as well. So, we will discuss the 3 pillars of the blockchain technology behind Bitcoin.
The Decentralization Pillar
Before blockchain was invented, most online transactions were carried out through a central server. This server stored all of the essential data that supported the service that is provided. A good example of this is the banking system. Your bank stores your money and when you need to pay someone you have to use them and they charge you for this.
Client-server technology is everywhere online. When you use a search engine to find something your query ends up on a central server that dispatches the information that you asked for. The problem with client-server is that there are a number of vulnerabilities:
- The biggest and most obvious of these is that everything is stored in one place. This makes a central server a real target for hackers.
- If there are any operational issues with a central server the whole system grinds to a halt.
- The data held on a central server can be compromised which shuts down the whole operation.
The solution to these centralized vulnerabilities is decentralization. With a decentralized network, all computers have the same information stored. If you want to interact with someone else on a decentralized network you can do this without any third-party intervention. You can send and receive Bitcoins without the use of a bank and a centralized server.
The Transparency Pillar
A lot of people do not fully understand the concept of transparency when it comes to blockchain technology. Isn’t the Bitcoin network supposed to be private? Yes, it is but it is also public for verification purposes.
You need to understand the concept of public and private keys here. A public key is used on the blockchain to show that you have made a transaction. Your private key is never shared. It is linked to your public key to make the transaction valid.
Bitcoin blockchain uses public keys for all transactions. Public keys provide unique transparency which you cannot find with any other financial system. The much-needed level of accountability is provided by a blockchain, that financial institutions also should certainly need to provide.
With the blockchain public address, you can view all of the transactions made using that key. Several financial institutions have started looking at blockchain for this reason, but few are concerned that it could force them to reveal all of their transactions!
The Immutability Pillar
Blockchain technology creates immutable records. This means that after verifying a transaction you cannot change it. Any transaction once added to the blockchain there is no turning back. You cannot reverse the transaction.
The blockchain immutability results from the cryptographic hash functionality. The blockchain system can receive input strings of any length and converts them to an output string of a fixed length. The Bitcoin blockchain uses the most secure SHA 256 algorithm.
Blockchain is basically a linked list of transactions. Each block consists of a hash pointer connecting it to the previous block. In case a hacker tries to change the details of a block then the entire blockchain will be affected, which means the blockchain is next to impossible to be hacked.