What is the need for blockchain?
In this article, we will understand the need for blockchain. But before going there, let's spend some time understanding the three different types of databases. These are:
1. Centralized
2. Decentralized
3. Distributed
Centralized Database
A centralized database is a database that is located and maintained in a single location. This location is often a central computer, database system, server CPU, or cloud, for example, AWS, Google Cloud Platform (GCP), or Microsoft Azure.
Decentralized Database
In the decentralized database, there is no single point where the overall decision is made. Every node in the system makes its own decision, and the system behavior is the sum of those responses. Also, a single node may or may not have complete information about the system, depending on the architecture.
Distributed Database
A distributed database can be summed up as a stretched version of a decentralized database. Distributed databases are best described as a system where data processing is shared across all the nodes, but the system decision might still be centralized based on the complete system knowledge.
Why Blockchain?
In the traditional system, the centralized trusted part plays the role of the intermediary between two unknown parties. E.g., Banks where the complete power of executing a transaction between two parties is with the bank.
It generally doesn't depict the transparent picture as one party has control over all the operations and causes possible security concerns.
Therefore, Satoshi (an individual, an organization, or a group of professionals) thought about the possible revolutionary technology that has the potential to disrupt existing business frameworks and provide transparency.
So far, I hope that you are convinced about why distributed architecture is needed in today's world. Next, we will understand what a blockchain is.
What is Blockchain?
Blockchain is a combination of the decentralized and distributed database containing a registry of transactions that are distributed among peers or fellow participants in the network.
The registry includes a long list of transactions and is continually updated with new transactions as they take place.
Starting from the very first transaction, many transactions are grouped into a block as per a predefined block size (1MB in the case of Bitcoin).
Once the block size is achieved by one block, the next set of transactions forms another block which is then linked to the block previously formed.
Over time, a series of blocks is formed where each block is connected to another block that was created just before it. Thus, we call this chain of blocks the blockchain.
Stay tuned to demystify the above statements further and understand how blockchain network works in other articles on this website.