Blockchain is increasingly being heard in the world of technology, not only among IT kids but reaching various circles.
This is because crypto that uses blockchain as a foundation is increasingly in demand, even though blockchain is used for crypto alone and can be used for various industries.
So, what is blockchain, how does it work, what benefits, and other exciting things about this technology? To answer this question, read this article to the end.
What is Blockchain
Block and chain are the only words that makeup blockchain technology. The term “block” describes a block of data, whereas “chain” describes a chain that employs cryptographic principles.
These two words mean that blockchain is a series of data or records that work using cryptographic principles.
Blockchain became known along with the presence of Bitcoin in 2009. However, the idea of blockchain was sparked by Scoot in the Journal of Cryptography: How to Time-Stamp a Digital Document,1991.
According to Blockchain for Dummies by Manav Gupta, it is stated that blockchain was initially developed to meet the need for an efficient, cost-effective, reliable and secure system for conducting and recording a financial transaction.
How Blockchain Works
Blockchain works with a decentralized system, meaning certain parties do not control it.
It starts to work when there is incoming information or data; then, a validated hash and cryptography based on the previous hash will finally form a network. Let’s compare the operation of blockchain to something more familiar, shall we?
- An online store has a transaction process, but the payment tool is Bitcoin. The seller provides a Bitcoin wallet address to the buyer who wants to buy goods or services offered by the seller. This needs to be done so that Bitcoin gets to its destination.
- After sending Bitcoin to the seller, the transaction process is sent to the miners or Bitcoin miners. Miners are people who use special computers to perform complex and mathematical calculations to open new blocks on the blockchain.
- These calculations are based on a combination of previous cryptographic hashes that cannot be changed.
- After a new block is created and is used to store Bitcoin in transactions between the seller and the buyer.
- The verified transaction is indicated by adding Bitcoin to the seller’s wallet.
Differences between Blockchain and Crypto
Blockchain is the technology that supports the Bitcoin cryptocurrency, but Bitcoin is not the only one that uses blockchain.
Several other cryptocurrencies use blockchain. Following are some of the differences between the two.
Blockchain is a transparent mechanism, whereas bitcoin operates anonymously.
Blockchain has much more extensive use, while bitcoin is only limited to digital currency exchanges.
Bitcoin is only used to transfer digital currency, while blockchain transfers ownership information, digital assets, rights, etc.
Blockchain has several uses and benefits apart from managing bitcoin, which will be explained in the following points.
Benefits of Blockchain
Smart contracts
With the help of blockchain technology, it is possible to create a straightforward contract that will be carried out if and only if the predetermined requirements are satisfied.
It is possible to pre-program intelligent contracts to carry out various tasks.
By illustration, derivatives may be paid out when a financial instrument reaches a predetermined set of benchmarks. Utilizing blockchain technology in conjunction with Bitcoin makes it possible for payments to be made mechanically.
This intelligent contract may benefit employment contracts, company contracts, and other arrangements.
Sharing Economy
The peer-to-peer blockchain system can open the door to industry interaction more easily.
Fundraising
may make the process of fundraising simpler, and it has the potential to produce more donors through the transparent distribution of the funds raised.
Government Database
By using blockchain, the government can create a transparent, distributed and accessible database to the public.
Data Storage
Blockchain can store data securely and avoid hacking because data is decentralized across multiple networks.
Copyright Protection
Blockchain can hold intelligent contracts that contain data on copyright, which can assist innovators in avoiding the theft of their ideas and reduce the likelihood of their ideas being redistributed. In addition to helping individuals in the sale of their copyrights.
Identity Management
A more dynamic approach to establishing an individual’s identification can be accomplished using shared ledgers on the blockchain. It is also a method for safely digitizing personal documents, particularly useful for conducting business online.
3 Main Pillars of Decentralized
In a decentralized system, there is not a single entity that is responsible for storing the information. The information is accessible to all users of the network.
If you wish to communicate with your friends in a decentralized network, you can do so directly without needing a third party to mediate the conversation.
For instance, you have your own money, are accountable for the asset, and are free to send it to whoever you like of your own will. On the blockchain, that would be considered decentralized.
Transparency
Although some hold the opinion that blockchain is open and public, others also have the opinion that blockchain is private and confidential.
Blockchain users can conceal their true identities by utilizing sophisticated cryptography. It is possible to hide the user’s identity; however, this cannot be done with transactions.
Because every transaction and update made to the blockchain is publicly viewable, it is exceedingly impossible to manipulate the data.
Eternal
Eternal When we talk about data being immutable, we mean that once information has been added to the blockchain, it cannot be changed in any way.
This is possible due to the use of a hash function; for instance, if a hacker targets block three and attempts to modify the contents.
Because of how hash functions work, even a relatively minor alteration to the data might result in a significant shift in the hash.
Every minor adjustment will result in a whole rewrite of the chain, which is virtually difficult. Because of this, the blockchain cannot be altered in any way.
Conclusion
Blockchain is a technology that creates a network between blocks and chains. With blockchain, cryptocurrencies can work safely and transparently.
But besides being used for crypto, blockchain can also be used for other things in various industries, such as distribution.
In the future, it is predicted that technology will be used by many groups and become the foundation for various technological innovations.
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