Even if you don’t work in the IT sphere, surely the term blockchain is not completely foreign to you. But do you know what it means?
Blockchain technology is one of the most innovative developments of the last decade. Blockchain became famous because of Bitcoin, as it was in the cryptocurrency that the technology found the widest application. Today blockchain is capable of transforming any sphere, from the financial system to music and advertising.
Blockchain in simple words
Blockchain is said to be the foundation of the virtual future. But what is so innovative and revolutionary about it?
Blockchain is a technology that allows information to be stored securely through a chain based on cryptography. Blockchain begins with a so-called genesis block, which is joined by successive blocks that form a master chain. Each successive block contains information about the contents of the previous ones, so the appearance of a new element in the system requires a full update of the blockchain.
What is a node in a blockchain network?
It is nothing more than a computer connected to the blockchain network. Depending on the type, nodes can store only part or all of the blockchain data. Since the blockchain is a decentralized data registry, the failure of some of the nodes does not disrupt the network.
How does blockchain work?
The advent of blockchain has transformed the traditional process of managing money, documents and, in general, anything of value. Blockchain performs the functions that banks and financial institutions traditionally performed, and performs them more efficiently.
Operations cost users less and happen more efficiently. In addition, blockchain is positioned as the safest way to store information, as it rules out data theft, protects property rights, etc. The guarantee of blockchain’s security is the dispersion of the data registry combined with cryptographic techniques and a consensus algorithm.
Blockchain works on the basis of several basic principles: decentralization and dispersion, transparency, immutability and indelibility, as well as data security.
We will now illustrate the blockchain transaction scheme. Let’s imagine that Mr. X wants to transfer one bitcoin to Mrs. Y. In order to receive the money, Mrs. Y may have a cryptographic key that opens her access to the bitcoin. Mr. X hands over the key to Mrs. Y, and with it the rights to manage the coin. A new transaction signed with the private key appears on the network and waits for network participants to verify its validity. After the necessary number of confirmations, the transaction is added to the end of the blockchain. Thus, the transaction has been finalized: Mrs. Y received 1 BTC on her Bitcoin address.
Thus, there was a confidential transfer of funds in a virtual environment without recourse to intermediaries. Simple, right?
Application of blockchain technology
On a practical level, blockchain is considered a secure, endless log of transactions that can be used to conduct at least financial operations. Although blockchain is mainly used in finance, the scope of its application is constantly expanding. Blockchain technology creates new opportunities in various spheres. Let’s mention here the recording of digital diplomas and certificates, confirming copyrights or conducting elections. Blockchain is also finding applications in the philanthropic sector and real estate industry.
main photo: unsplash.com/Hitesh Choudhary