Every year the number of companies using blockchain is increasing day by day, cryptocurrency and blockchain are rapidly entering everyday life. However, at the level of the average man, few people understand exactly what it really is. For that reason, let’s try to get the essence of the technology underlying the rapidly gaining popularity of digital assets together.
What is blockchain in simple terms
Blockchain technology is used to record, process and store any type of information. Today the developed methodology is widely used in trade, medicine, organization of production processes or holding elections. Blockchain is, in fact, the most reliable modern way of distributed data storage.
The difference between blockchain and conventional data warehouses lies in decentralization. There are no regulators or organizations responsible for preservation. Information is not concentrated at one point, on a single server, but is distributed over millions of computers connected by the Internet. Therefore, it is reliably protected.
Important note. By the end of the third quarter of 2021, more than 2,000 blockchain-based tools had already been in use. The number of wallet users had exceeded 75.6 million.
The success of any business project directly depends on the processing speed and data storage reliability. IBM experts argue that blockchain is an ideal tool to ensure the maximum speed of information flow. All authorized contributors are given open, instant access to important information in an immutable ledger.
Who developed the blockchain
The year of birth of blockchain technology is considered to be 2008. At this time, Satoshi Nakamoto developed a distributed ledger technology for the first cryptocurrency – Bitcoin. However, there is no evidence that a person with such a name actually exists or ever existed. Many believe that this is a pseudonym made up by the team that developed the blockchain. Every year the number of applicants for the title of inventor of a new information processing technology is steadily growing. One of the most famous is entrepreneur Craig Wright, who insists that he is the creator of Bitcoin, and demands that Bitcoin Core give him back access to the blocked wallet.
Features of blockchain operation
Most business representatives choose blockchain for organizing complex production processes. The technique can be used when buying an apartment on a mortgage or creating impeccable supply chains for the delivery of goods, organizing the production of medicines or building any business.
Basically, a blockchain is a chain of several autonomous blocks, where each of them keeps a record of important information. Each user has free access to the entire volume of information, but cannot change it. This is ideal for cryptocurrencies. The date, time of block creation, address and other necessary information are recorded.
With the help of certain algorithms, using unique sets of characters and numbers, new hashed clusters are created with any transaction. Each new block necessarily refers to the previous one, which creates a continuous chain of data, composed in a strict sequence.
Special nodes signify the place where the blockchain is stored. Here it is synchronized, regularly updating each member’s information. Nodes can be full or lightweight.
- All blocks are stored in full ones.
- In lightweight – only blocks created recently.
All blocks in the chain can be queried if necessary.
How blockchain transactions are recorded
In order for a block to get into a chain, a number of consecutive steps are required.
- Verification of the transaction. Confirmation of the network of computers is required.
- After verification, the information goes to the block. It contains data about time, date, amount, digital signature of both parties.
- The block is assigned a unique, encrypted identification code and hash of the previous packet in the chain.
- After completing the hashing, the block is added to the blockchain.
Why blockchain is the safest form of information storage
Remember. Each block appears in the chain in strict chronological order. It contains all information about the time of the transaction, the date of creation, the hash of the block in front of it and an encrypted personal code.
The information included in the block cannot be deleted or changed. The guarantee of one hundred percent safety – information, immediately received by the user, about attempts to make any changes to the block. One of the examples of blockchain benefits is that it is used by military services to ensure the maximum protection of their information, and this says a lot.
A sophisticated proof-of-work algorithm is a solid barrier to any hacker trying to gain access to data. You will need to solve a huge complex of complex mathematical problems for nodes and miners, which is almost impossible.
Since the system is completely transparent, many users monitor the work of the blocks at fixed time intervals. You cannot try to hack the system and go unnoticed. Therefore, the blockchain is completely secure.
In addition to being used for cryptocurrencies, blockchains are the ideal way of digital identification. By placing the data of a passport, driver’s license, insurance in the blockchain, it is possible to significantly simplify movement around the country, communication with financial institutions, and obtaining various services.
Where you can use the blockchain today
The most widespread use of blockchains is in the circulation of cryptocurrencies. However, modern technologies are finding new uses by eliminating the need to involve a third party in transactions. Lawyers as intermediaries in such deals are a thing of the past. It is an ideal tool for fighting corruption due to the 100% transparency of any transaction. Apart from financial institutions, blockchain is widely used in various industries.
- When forming supply chains.
- In the work of pharmacological enterprises or the healthcare system.
- Blockchain is widely used by retailers.
- The transition of government agencies to the use of new technologies will reduce corruption.
- Gas and oil production or processing industries.
- Telecommunications, media work.
- Protecting copyright laws on the Internet.
Investments in blockchain startups are growing steadily annually. In two quarters, investors have used more than $4.5 billion for advanced technologies. Over the past ten years, the blockchain, thanks to the widespread use of cryptocurrencies, has confidently come out on top in popularity.
Disadvantages to be aware of
Despite the fact that most experts unanimously argue that the blockchain is completely secure, there are several disadvantages to keep in mind.
- Scalability. An avalanche of new users increases the complexity of transaction processing. Ethereum, the second largest cryptocurrency by capitalization, took two years to solve this problem.
- 51% attack. Several users with large computing power, having united, can access blocks with confidential information in order to change the data. The latest example is the attack on the Bitcoin SV cryptocurrency, when hackers managed to compromise 570 thousand transactions.
- Insufficient testing when using blockchain. Cryptocurrencies use their own testing algorithm, which enables developers to immediately detect vulnerabilities. Businesses are rarely that careful about such checks, so they are more likely to appear under attack by hackers.
However, everyone can agree on the opinion that the future lies behind the blockchain, as it is the ideal tool for working on the Internet. All that remains is to improve the protection and control system of theirs for acquiring the perfect result.