Other than definition and working, another important aspect of appreciating blockchain includes the so-called “three pillars” of the system. There are different thoughts in the online community regarding how many pillars of blockchain exist. Some say it’s seven, others say nine. Let’s not make it complex, we’re going to hold on to three and they are:
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The real meaning of decentralization is not having a central unit. When we say decentralization in blockchain, it means that blockchain does not have a central governing unit and hence is autonomous.
Let’s understand this example to get an idea about decentralization and why is it beneficial. At the time, when blockchains weren’t introduced, we were familiar with the services that were fully centralized. Consider banks, for example. Your bank gathers or pile-up your money, and you can’t access it online (or in-person) without undergoing the bank’s centralized and traditional systems or operations.
Well, these centralized systems have assisted us well for many years. When a centralized system is enhanced or modified, everything sucks. What I mean is, if it gets shut down, anyone who wants to use it is automatically shut out.
However, in blockchain, the information or data is possessed by every node in the network as it is a decentralized system. So, if you need to access data, you need not interact with third parties. In simple words, you are the owner of your money, then you don’t want to get involved with banks to get your own money or assets.
Well, via the use of complex cryptography, we can achieve complete transparency. For example, one can see the ciphertext(encrypted code) of an individual’s transaction history but its identity will remain unknown. Most blockchains are feigned in this way, but that doesn’t mean that they’re completely anonymous. Nonetheless, in this system, real identities can be kept mainly secure, as long as users are careful to do so.
Transparency in real life means something with zero opacity. Now if we take this concept to Blockchain, it means that blockchain has zero privacy to be exact when we talk about transactions, all the transactions are public and anyone on the network can view them.
Immutability is at the center of blockchain is the concept. Immutability means invariableness. This means that once something has penetrated into the blockchain, it cannot be altered, changed, or tampered with.
This would be really helpful. Just try to imagine how many money fraud rackets could be stopped in their tracks once people understood that company accounts would be significantly harder to manipulate.
Well, we can achieve this immutability or durability with the help of cryptographic hash functionality. Hashing suggests taking an information cord of variable length and giving an output of a static or fixed length. With respect to cryptographic methods of cash like bitcoin, the exchanges are booked as info and go via a hashing computation (bitcoin operates as SHA-256) which shares a fixed property experience.