Blockchain Tutorial for Beginners: Learn Blockchain Basic Concepts

Blockchain is one of the most desired skills within the tech sector. A 2018 PwC survey of 600 executives from 15 regions found that 84% said they used blockchain in some capacity. (Source)

As both private and public organizations seek to make use of this powerful technology, there is a growing demand for blockchain professionals in India. This buzz can leave you wondering, "What's Blockchain?"

We have created the following tutorial on blockchain for beginners to help you answer this question. This tutorial covers all aspects of blockchain, so that you can become familiar with the technology and start a career in this field.

It is an extensive tutorial on blockchain, so bookmark this page. It can be saved as a reference so you can return to it later.

Our tutorial on blockchain for beginners will begin by explaining blockchain.

What is Blockchain?

Two words, "blockchain" and "chain", make up the term "blockchain." Blockchain can be described as a collection of blocks that contain information. Blockchain timestamps digital documents to make it impossible for anyone to alter or change their dates. Blockchain's primary purpose is to eliminate the need for a central server and keep duplicate records.

You can program it to store almost any value. It is an incorruptible digital record of transactions. A blockchain is simply a set of blocks that holds records of all transactions in the network.

The "block" part of the blockchain is digital information, while the "chain" part is public data. The blocks in a blockchain are distributed across multiple systems, and not stored in one location.

What is the Blocks Process? - Understanding Blockchain Technology

Blocks store all primary information about transactions, including date, time, amount, and so on. It also contains information about the transactions' participants. The block could store your digital signature if you buy a product from a vendor. It doesn't even store your name. Every user is assigned a unique digital signature. The information about transactions is stored by the unique signature, and not their real name.

Users of the blockchain don't have to be the only ones with unique characteristics. Each block in a blockchain network is unique because it has its own code that makes it different from all others. This unique code is known as a "hash".

The number of transactions a block can store will determine how much data it can hold. A single block can host a few thousand transactions. The hash code and other features ensure that each block on the blockchain is compatible with the others.

The ledger size will increase if there are too many blocks within the blockchain. A blockchain's security is due to the large network that it uses. It is decentralized so that one block's failure won't result in the loss of the whole network. The network will remain intact. Furthermore, even if one block's security is compromised, that won't cause the whole blockchain to be breached.

Blockchain is a software protocol that's similar to SMTP email. However, a blockchain can only be run without the internet.

Use Cases

Blockchain technology is versatile and reliable. Because of its unique nature, it can be used in almost any industry.

Possible Use Cases

Blockchain technology is relatively new and can be used in many industries. Here are some potential uses of blockchain.

Record-Keeping and Bookkeeping

Each industry must maintain bookkeeping and records. The records contain valuable information that can be accessed by anyone. This could lead to many problems for the business. Blockchain is a secure method of record-keeping and bookkeeping that prevents malicious parties from accessing them.

Voting

Blockchain technology can be used by governments to issue voter IDs and record votes in order to prevent fraud. Blockchain technology is highly secure for data storage. However, it can be very difficult to make changes to data stored on the blockchain. Blockchain can be used to speed up and keep the voting process transparent.

Self-Driving Vehicles

Self-driving cars will use blockchain technology to protect their data from unwelcome parties. IBM filed a patent in 2019 for a project that allows information management through blockchain for self-driving vehicles.

Robotics & IoT

Blockchain can be used to create a distributed network of robots and drones. This ensures that one drone's failure doesn't impact the rest of the network.

Data Management for Healthcare

Blockchain can be used by hospitals, nursing homes, and other medical institutions to store and manage data. Learn more about Blockchain technology uses.

Existing Uses

These are real-life blockchain implementations.

Blockchain in Dubai

In 2016, the smart Dubai office launched the Blockchain Strategy to connect developers and investors with venture capitalists and investors. It was created to promote Dubai's development and make it the 'world's most happiest' city. They want Dubai to be fully blockchain-based by 2020.

UN World Food Programme

In 2017, the UN World Food Programme used blockchain technology to aid rural areas in Pakistan's Sindh province. They sent food, money and other material to the people and used blockchain technology to track all transactions. Blockchain made sure that all transactions were transparent and secure.

Blockchain-based Startup

Incent allows content creators and businesses to increase their audience, reward them, and monetize their content. The system generates codes that are used by viewers to identify a creator. This is called Consumer retention as a Service (CRaaS). These codes can be redeemed by viewers and they will both benefit the creator and the viewer. They use blockchain technology to make their transactions.

Cryptocurrencies (Bitcoin and Ethereum, etc. ()

The most widely used application of blockchain technology, cryptocurrency, would not be complete without our beginner's blockchain tutorial. Bitcoin is the most widely used cryptocurrency at the moment and offers many benefits to its users. Businesses can conduct transactions more safely and efficiently with cryptocurrencies.

Misconceptions about Blockchain (What Blockchain Is Not)

Blockchain is best understood by separating the myths from the facts. These are the most common myths surrounding blockchain.

Myth: Blockchain can replace a transaction processing system

Realism: Blockchain can only be used to replace transaction processing systems in certain situations. Blockchain is not meant to replace a fully-fledged transaction processing platform.

Myth: Blockchain Is Necessary Even If There Is No Business Network

Reality: Blockchain technology is not necessary if a business network does not exist.

Myth: Blockchain Is a Product

Reality: Blockchain isn't a product that you can buy. Blockchain's utility lies in the many applications that can be built on top of it.

Myth: Blockchain Is All About Bitcoins or Blockchain is Bitcoins

Reality: While bitcoin is the most prominent application of blockchain technology, it isn't all about bitcoins. Bitcoin is a cryptocurrency that is based on blockchain. Blockchain is the ledger and bitcoin is the digital token. Blockchain can be created without bitcoins, but not without blockchain.

What is Blockchain Variants?

This section will cover different types of blockchain technology.

Public Blockchain

Every user can see the distributed ledgers on the public blockchain. Every user can modify and verify the blocks on the public blockchain. Some of the most prominent examples are Ethereum, Factom and Bitcoin.

Private Blockchain

A private blockchain network is usually owned by a specific organization. Only a few people can modify transaction blocks in this case. However, anyone can view the blocks but cannot modify them. To modify blocks in such a network, you will need to have permission from each user. Two prominent examples of private blockchains are Multichain and Blockchain.

Consortium Blockchain

Only a few people or organizations are allowed to add transaction blocks to a consortium blockchain. Only a limited number of people or organizations can access the ledger in such a network. It is highly secure, and can only be used by specific sectors. R3, Hyperledger 2.0, and Ripple are examples of consortium blockchain.

What is Blockchain Philosophy?

There are many philosophies within the blockchain.

Blockchain Permissioned

Blockchain without Permission

These are the main differences between the two philosophies.

Permissioned Block

A permissioned blockchain has an access control layer that allows only certain people to perform certain actions. This configuration helps to control the network's transactional activity. Large companies and enterprises love permissioned blockchains for their high security.

An IT-services provider may use a permissioned Blockchain network to store client sensitive information. Although third-parties may be involved in transaction processing of sensitive information, they should not have access to that sensitive information. Permissioned blockchains would prevent third-parties from accessing such information.

Permissionless Blockchain

A permissionless blockchain, as the name implies, is the opposite to a permissioned one. A permissionless blockchain allows anyone to access the blockchain. This is in contrast to permissioned blockchains, where only a few can access it.

Two notable permissionless blockchains are Ethereum and Bitcoin. Proof of Work (PoW), which is required to determine the trust-level, is essential. What is Proof Of Work? This is what we will discuss in the next section.

Why is Blockchain so secure? (PoW, Distributed P2P Network).

Blockchain is a collection of blocks that contains transactional information. We know this already. Every block is signed with a unique hash. But hashes alone are not enough to secure the blockchain network.

Advanced computers can compute hundreds of thousands of hashes in seconds, and hackers can modify any block without permission. He or she can then repeat the process to modify the rest of blockchain.

Blockchain has two options to address this problem:

The Proof of Work (PoW).

Distributed P2P network

Proof Of Work

Proof of Work is a complex computational problem that takes a lot of effort. It takes very little time to verify results of this problem compared to the time it took to solve it.

If a hacker wishes to manipulate a blockchain, they must perform Proof of Work on one block, then implement the modification, and then redo the whole process for all subsequent blocks. Combining hashing and Proof of Work, blockchain is highly secure.

Distributed Pe2P Network

Every blockchain is connected to a peer-to-peer network. It does not have a central authority to manage it, but instead relies on its peer-to-peer network.

A user who joins the blockchain network receives a complete copy of the blockchain. Every computer on the network is called "a node". Each time a new user creates an additional block in the blockchain it is sent to all users.

After verifying the block, each node (computer in the network) can add it to the blockchain. The consensus of all the blockchain nodes is established about which blocks are valid and which ones are not. The nodes will reject any tampered blocks in the blockchain.

After gaining access and redoing the Proof of Work, hacker can now control more than half of the distributed P2P network. This makes the blockchain significantly more secure.

How do Blockchain Transactions work?

While we have already discussed the fact that a blockchain stores transactional data, how can a transaction be made in one? Here's how it works:

A user can request a transaction about a specific blockchain (cryptocurrency records, contracts, etc.). You can find out more.

Every node within the peer-to–peer network receives the requested transaction.

By using the appropriate algorithms, the nodes verify the transaction and user status.

Once the transaction is complete, a new block is added onto the blockchain. This makes it permanent and unalterable.

The steps involved in a blockchain transaction are:

Send an email

Broadcast

Validation

Additional

The process applies to any type of blockchain, regardless of its application. This process applies to any type of blockchain, whether you are using it for cryptocurrency or to keep records. Learn more about href="https://www.upgrad.com/blog/how-blockchain-technology-works/">how blockchain technology works.

Why do We Use Blockchain?

Blockchain has many benefits. These are the top ones.

Security

Blockchain is one of the most secure technologies we have. There are many security measures in place. It is almost impossible to misuse it.

Flexibility

Blockchain can be used in every industry, from healthcare to transport. You only need to have a working knowledge about blockchain and the industry in which you wish to implement it.

Automation

Software implementations are responsible for the majority of operations within a blockchain. This automation makes blockchain networks extremely efficient.

Transparency

All users who have access to the blockchain can see every change made. This makes it transparent and increases the flexibility of this technology.

Global Adaptation

All over the world, organizations are trying to implement or implementing blockchain in some way. It's an internationally recognized technology that is being widely adopted and is rapidly gaining popularity.

Reliability

Each party involved in a transaction using blockchain technology is verified and certified. This eliminates double records and makes it much easier to verify transactions.