Blockchain: what it is and how it works

Blockchain

Why everyone talk about it things to know about the revolutionary technology developed with Bitcoin? Here we will discuss it in detail. Blockchain is perhaps the most popular word today in the digital and technical-financial field, so it is essential to understand well what it is, how it works, where it is used, and why it is considered a revolutionary technology. Explaining the blockchain is not easy, but in this guide, we will try to do our best.


Blockchain, which literally means a chain of blocks, is a large digital register in which the items are grouped in blocks linked together in chronological order. Think of the blockchain as a huge shared database to which new blocks can be added and to which everyone can access, but it cannot be changed, and its security is guaranteed by cryptography. Its origin is quite recent (it dates back to 2009), and it is due to the mind of Satoshi Nakamoto, the mysterious inventor of Bitcoin. Nakamoto's revolutionary idea includes a type of data storage in which everyone can see what's inside and make sure it's real. Not a single bit can be changed, and once something is on the network, it stays there forever.

Initially linked to Bitcoin and the world of cryptocurrencies and used to verify all transactions between users and avoid fraud, the blockchain then expanded to different application areas, revealing its usefulness for countless industries, from banks to asset management, passing for works of art.

For example, the blockchain can be used to certify the origin of an agri-food product or the exchange of securities and shares, or to make contracts and votes online safe and unalterable. It is no coincidence that many companies and investors have already climbed (or are thinking of doing so) on the blockchain wagon by investing in the sector.

 

Blockchain: what is and meaning

 

In simple terms, a blockchain is a series of immutable data records in which each data block is fixed and bound to one another using cryptographic (chain) principles. The blockchain is a simple and ingenious system at the same time to pass information from A to B in a completely automatic and safe way. There are global blockchains, such as bitcoin, but you can also create a blockchain for a separate company or community.

This definition makes the blockchain a constantly growing technology as soon as new "complete" blocks are added to the previous ones. Once a new block has been added to the chain, nothing can be done to modify it. To change something, you will add a block above the previous one, and this operation will be notified to everyone.

The peculiarity of the blockchain is that it has no central authority: by its very definition, it is a decentralized, democratized, and transparent system. Since it is a shared and immutable book, all the information it contains is accessible to anyone.


Blockchain: how it works

 

To better understand the definition, meaning, and functioning of blockchain technology, we can compare it to the conventional banking system. From this point of view, the blockchain can be defined as a complete history of bank transactions and blocks as individual statements. Bitcoin transactions are chronologically entered into the system, exactly as for bank transactions.

The blockchain has no transaction costs (it is possible to charge any amount in any quantity without worrying about third parties that affect profits) but the only infrastructure.

This is how it works: part of a transaction starts the process by creating a block, and everyone can form a block of data. This block is verified and validated by thousands, perhaps millions, of computers, distributed on the network, and so it is added to the chain permanently. The moment a block is completed; another is generated, which has given rise to an exponential number of blocks.


All information is encrypted with mathematical cryptography, which makes any attempt at fraud and forgery virtually impossible. Furthermore, no intermediaries are necessary since all transactions take place from person to person, and there is no central decision-making power since each user has a voice that counts.

 

The uses of the blockchain

 

As mentioned above, the areas of application of the blockchain are many, and potentially infinite. It starts with cash transfers executed with the help of cryptocurrencies, these are extremely secure transactions and without charges. Even smart contracts are benefited by the blockchain since they are impartial and neutral towards all the parties involved, they have no human emotions and no interest in cheating since they are basically algorithms.


In a world increasingly exposed to hackers and privacy violations, the blockchain becomes an essential tool for verifying the information. As we explained earlier, what is added to the blockchain remains there permanently and unchangingly. This means that identities cannot be stolen or altered because, in the blockchain register, there is only one identity for each person. The same happens for objects: a person cannot say that he wrote that book or took that picture if thousands of sources say that the author is another.

We still think about cloud storage: the blockchain becomes useful to anyone who needs to store huge amounts of data at a relatively low price. They take all the information, crypt it and store it in small pieces on all the computers on the network, in a secure way. Since there are no intermediaries, only the service will have to be paid.

Again, the blockchain can be very useful for providing a communication system between all the machines within a company or system, in practice, an Internet of Things on the blockchain.


Finally, it is the blockchain that benefits from the production and distribution of goods, both from the point of view of the producer. (who can know, for exampleBlockchain, if the pieces are defective before assembly) and from the point of view of the final consumer. Who can know the exact origin of all the parts that make up a final product?

words

963 Words

words

Jan 09, 2020

words

2 Pages

Looking for a professional
essay?

Order Now