Blockchain is a decentralized ledger that allows you to keep transaction records. It is resistant to system failures and helps prevent data tampering, but there are disadvantages too. In this article, we will provide some basic information regarding what kind of technology blockchain is with familiar examples. Let’s use it in your life. The blockchain protects important transaction records and handles user information in the future.
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What is blockchain? First of all, let’s get an overview.
In a nutshell, a blockchain is a mechanism that records transaction history in a way that connects transaction history from the past by a single chain protected by cryptography.
Bitcoin treats a single transaction as a block and connects all transaction histories and chains, which are the blocks we have accumulated so far to maintain accuracy and operate the service. Therefore, it should be remembered that blockchain is the fundamental technology of bitcoin. Next, we will know the features of Blockchain and their benefits in detail.
Two major beneficial characteristics of Blockchain:
- Less Susceptible to system failures, etc.
- Useful for tamper prevention
What kind of mechanism is used to prevent tampering and realize the strength of failures?
There are three mechanisms and technologies that support the blockchain to protect from system failure and prevent tampering. The three main mechanisms of blockchain structure and technology are-
- P2P communication
- Consensus algorithms
It may seem a little difficult, but please refer to it because it will explain clearly.
- P2P communication:
Peer to Peer (p2p) communication is a technology that shares information on multiple PCs, smartphones, and other devices directly without any central regulatory body. P2P is a general term for communication systems in which terminals have no difference in functions on a network using data and functions.
Usually, the systems and software we use ask terminals that have roles such as clients and servers to present information by correctly applying for it.To serve information, they need to regulate it from a central point of regulation. But, in the case of bitcoin’s P2P communication, that central operator does not exist. This network is just like an open-sourced network with easy accessibility.
Cryptographic encryption is a high security technique that prevents fraudulent activities. There are two main types of it.
- Hash function and
- Public-key cryptography
Both have strong cryptographic performance and are used for security in many ways. A cryptographic hash is a 64-digit hexadecimal number that is encrypted in the blocks. That number is complex and differs from block to block. Enormous possibilities can be there. By incorporating these two cryptographic technologies into the blockchain, we can provide even greater security.
- Consensus algorithms/Proof of Work (PoW):
Bitcoin’s Blockchain uses a consensus algorithmic process that isknown asProof of Work (PoW). While verifying each block of the Blockchain PoW determines that the answer to the earliest block’s hash value calculated on the blockchain is correct.
Therefore, since the speed of the calculation process is directly linked to the answer, the disadvantage is that machine power is required and costs. However, in cryptocurrencies, PoW approves the correct high-speed trading history (block) added throughout and issues new currencies as excavation (mining).Bitcoin requires accurate data recording using PoW, and some people are helping with excavation (mining) to keep the data consistent and secure.
Three typical benefits of blockchain:Now let’s take a look at the benefits that users can gain that directly affect the meaning of using such a complex blockchain.
- The system can be used stably
- High transparency of transactions
- Fees for overseas remittances are low.
Blockchain is a technology used in various places to ensure the ability to respond to failures and ensure safety. In addition, since the records are public, it is a highly transparent technology for transactions. Data stored on the blockchain is stored in individual systems as the same ledger information. In other words, each user can check who did what kind of transaction at any time. And if you change a portion of the block even a little, the hash value will be unhealthy. If there is a data tamper, it will be discovered immediately, so no one can unfairly be benefitted. Blockchains that are transparent in transactions and can store data securely can also help protect your valuable personal information. Since there is no bank or country, the advantage is that the fee is low when sending bitcoins overseas, for example.
This article introduced an overview and examples of blockchain. You should have 100% sure, that you can see that data is protected and managed in a well-protected way. The trust built in banking is also using blockchain, and projects such as information banking services are also underway. For example, With Bitcoin Era, you can check how it was traded and how much interaction was done. Of course, it is not known to third parties other than users, and the high security remains.