What is blockchain?
What is blockchain, how does it work and what are its uses? These are the frequently asked questions that are always asked about this revolutionary technology, and it may not be easy for newcomers to the world of digital currencies to understand this innovation. Join us to answer all these questions in simple language.
What is blockchain? A simple explanation for a complex concept
Very simply and briefly, blockchain is a kind of information recording and reporting system. The difference between blockchain and traditional systems is that the information stored on it is shared among all members connected to the system. With the help of data encryption and distribution, the possibility of hacking, deleting and manipulating recorded information is almost eliminated. The concept of blockchain was first introduced with the emergence of Bitcoin, and the king of digital currencies used this solution to store transaction information. For better understanding, consider the following example: In a group of 100 people, we hold up a paper that says “Mohammed sent one bitcoin to Reza”.
Everyone takes a picture of that sheet with their cell phone. Now if we destroy that sheet or change the information, it is not accepted for that sum; because they have a copy of the original; Unless we take everyone’s phone and delete that version from all devices. In fact, data is not stored on just one particular computer or server; Rather, every computer or system connected to the network receives a copy of the information. Every computer that connects to the network and receives a copy of the blockchain is called a node. This group we talked about can be several millions of people that we see in Bitcoin and Ethereum and other blockchain digital currencies, or it can be a small and private group. Blockchains are not only used in digital currencies and may be used privately and for specific purposes in an institution or organization, which is also called an enterprise blockchain. Of course, according to many experts, enterprise blockchains cannot bring the main purpose of this technology, i.e. “decentralization”.
How does blockchain work?
The word Blockchain is a combination of two words Block and Chain. This technology is actually a chain of blocks. In each block, any information can be recorded; From the crimes of an individual to the details of the transactions of a monetary network like Bitcoin. In digital currencies, blockchain is a safe and secure place to store transaction records; Where it is not possible to manipulate information.
Information is recorded in blocks and blocks are linked together in a chain. This chain forms the blockchain.
There is one more thing. Each of these blocks has something called a hash. Hash is a text identifier that is generated from a special mathematical function and its use is to prevent fraud in the system. The hash of a data or input is always fixed. The slightest change in the data recorded in the block will change the hash of the block completely, rendering the block invalid. In addition to the hash of the block itself, the blocks also contain the hash of the previous block. Therefore, with the slightest change in the block data, in addition to the block itself, other blocks also become invalid.
In addition to the distribution of data and hash in the block, the consensus algorithm is another obstacle to change in the blockchain. A consensus algorithm, in simple terms, is a set of rules that determine how each block is added to the blockchain. For example, in Bitcoin, anyone who wants to add a block to the blockchain must be a miner (miner) in the network and solve mathematical equations by consuming electricity and processing power of computer hardware. In this way, if someone wants to make a change to the Bitcoin blockchain, they must have more than half of the processing power of the Bitcoin network, which is almost impossible.
Do not forget that blockchain is not only used in digital currencies. Blockchain can be used wherever we want to decentralize processes, increase trust or eliminate the need for trust. Also, don’t forget that according to many experts, blockchain technology is not a fundamental technology in itself; Rather, it is a set of hashing, encryption, mass distribution, etc. processes that have created this idea. Let’s close the discussion of what blockchain is with this sentence: Blockchain is a type of distributed ledger, and there are other distributed ledgers that have a different architecture and structure. In fact, every blockchain is a distributed ledger; But not every distributed ledger is a blockchain.
Some frequently asked questions about blockchain
What is blockchain? In its simplest definition, blockchain is a place to store data and information in a secure and transparent manner. Information is shared among all members, and with the help of the block structure, the risk of data manipulation or deletion is minimized. What is the main advantage of blockchain? The main advantage of blockchain is to store information in a distributed manner; In such a way that the need to trust intermediaries is eliminated. Does blockchain have software? Blockchain is not a software by itself; Rather, it is an infrastructure technology that may be used in software. What is the difference between blockchain wallet and blockchain? Blockchain.com Wallet (Blockchain.com) is the only digital currency wallet software that has used the name of blockchain technology for its brand.
Blockchain applications
As we said, Bitcoin and decentralized digital currencies are the most important and successful application of blockchain technology. For example, with this technology in Bitcoin, the possibility of fraud, double spending and reversal of transactions is eliminated. But this technology can have many other applications besides digital currencies, and it can be used wherever there is a need to store data and remove the need for trust. For example, electronic and fraud-free elections can be one of the applications of blockchain. By using this innovation, the risk of election fraud and the need for manpower can be greatly reduced. Or another example: we can mention the use of blockchain in the supply chain and transportation. Brands, factories, and manufacturing companies can record information about their goods and transportation from the beginning until they reach the customer on the blockchain database, which guarantees the authenticity and quality of the product for the customer. With this technology, it is possible to create a kind of governance in a system, just like a society or an organization, so that everyone can contribute to the advancement of that system according to their shares and the powers they have.
So far we have learned that: Blockchain is a new technology that provides the possibility of recording information permanently and without the possibility of change. This technology is actually a type of database or database that is not located on one or more specific servers, but distributed on all computers that connect to the network. Due to the use of encryption and its registration in all network computers, the recorded records cannot be hacked or deleted. Bitcoin was the first application of this technology; But this revolutionary system can be used for any system that needs to reduce the need to trust intermediaries and third parties.
