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Blockchain for beginners

You’ve heard the word «Blockchain» many times before, and you seem to understand that it’s something to do with computers, but you don't know the essense of it. Well, it’s time to find out exactly what Blockchain is in the simplest words so that everyone can understand it.

The blockchain is a technology that can be thought of as a set of continuous sequential boxes (blocks) that are connected to each other and contain information.

Blockchain binds the boxes together with the numbering and the fact that each block contains its own and unique name, consisting of different symbols and a unique name consisting of different symbols of the previous block. Changing any information in a block will change its unique name. Copies of these boxes are stored on many different computers independently of each other.

In the case of the most famous Bitcoin blockchain, the following happens:

Inside each box (block) is a list of data about the sale and purchase of Bitcoin, which were held for a certain period of time. If you take all the boxes together, they make up the Bitcoin blockchain and are the confirmation of all transactions on sale and purchase (transactions) that have occurred since its creation.

Today, it is estimated that there are more than 10,000 blockchains.

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Blockchain is a distributed database that contains information about all transactions carried out by system participants. Information is stored as a chain of blocks. Each of them contains a certain number of transactions.

What is a distributed database? The word "distributed" means: there is no centralized organization that would check this process.

About the expert: Artem Genkin, Doctor of Economics, professor, one of the key speakers of online meetings with the authors of the Skillbox online university and the Alpina publishing group - New World, New Man.

According to the Bank of England, blockchain is “a technology that allows people who do not know each other to trust and share a record of events.” It is impossible to covertly forge data inside this system, so it is recognized as corruption-resistant.

The blockchain analogy is a necklace. Each bead is a "block" or record of an action.

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How to use blockchain within a company

To make it immediately clear, I’ll clarify: bitcoin is a cryptocurrency, free and unregulated. Blockchain is a continuous chain of blocks by which information can be tracked. This information most often becomes transactions of crypto-currencies (bitcoin, ether and others). But this is by no means the only application of the technology.

Blockchain, of course, opens up opportunities for the creation of new cryptocurrencies, which, by analogy with physical money, will have their own course and scope. But the very possibility of a serial chain of information storage is of great interest.

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How Blockchain Technologies Work

Blockchain works through a multi-step process that goes like this:

The user conducts a transaction that is authenticated by special technology. This action creates the so-called "block".

The block is sent to the computer network.

The transaction is verified and a block is added to the existing block chain (Miners are usually paid for this task).

The update propagates across the network, which completes the transaction.

These steps take place almost in real time and include a number of elements. The blockchain log consists of two types of records: individual transactions and blocks. The first block consists of a header and data related to transactions occurring within a set period of time. The timestamp of the block is used to create an alphanumeric string called a hash.

After the first block is created, each subsequent block in the ledger uses the hash of the previous block to calculate its own hash.

Before a new block can be added to the chain, its authenticity must be verified through a computational process called verification or consensus. Once a block is added, it can be referenced in subsequent blocks, but it cannot be changed.

If someone tries to replace a block, the hashes for the previous and subsequent blocks will also change and break the overall ledger state.

When consensus is no longer possible, other computers on the network will become aware of the problem and new blocks will not be added to the chain until the problem is resolved. Typically, the block that caused the error is discarded and the negotiation process is repeated.

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Blockchain's advantages

Security is perhaps the most important benefit. It is almost impossible to hack the blockchain because information is being transmitted and constantly reconciled by thousands, even millions of computers. Blockchain also does not have a single point of failure.

Transactions can be more efficient than transactional systems without DLT, although public blockchains can sometimes suffer from slow speeds and inefficiencies.

Trust between network members. Confirmed blocks are very difficult to undo, which means that the data is difficult to delete or change.

It is cost-effective to use blockchain as it reduces the costs associated with transactions by eliminating intermediaries and third parties.

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Blockchain's disadvantages

In public blockchains, there are questions about who is responsible in case of problems.

It is also not very clear whether organizations are able to invest in the infrastructure necessary to create, participate and maintain a blockchain-based network.

Changing data on a blockchain usually requires a lot of work.

Users must store their keys so as not to lose their money, in case of loss of the key, the money will no longer be restored.

bitcoin and altcoins

Article

Now that you know what Blockchain is, be sure to read a short article about Bitcoin and Altcoins