It depends on who you ask what is blockchain technology. According to some it is a solution that is looking for a problem, according to others it is the most important technological innovation on the Internet, and why not in the history of mankind?
The original blockchain is the decentralized ledger behind the digital currency bitcoin. The book consists of interconnected packages of transactions known as blocks.
What is blockchain technology?
So, what is blockchain technology?
Blockchain, sometimes called Distributed Ledger Technology (DLT), makes the history of any digital asset immutable and transparent through the use of decentralization and cryptographic hashing.
Blockchain is a particularly promising and revolutionary technology, as it helps limit risk and fraud and provides a front for scaling countless applications.
There are three key components to blockchains: blocks, nodes, and miners
What are blocks?
The bitcoin network has witnessed many transactions. Keeping a record of these transactions helps users keep track of what is paid for and by whom. Transactions made over a period of time are recorded in a file called a block, which is the basis of the blockchain network.
A block represents the “present” and contains information about its past and future. Each time a block is completed, it becomes part of the past and gives way to a new block in the blockchain. The completed block is a permanent record of past transactions, and new transactions are recorded in the current one.
In this way, the whole system works in a cycle and the data is stored constantly. Each block consists of records of some or all recent transactions and a reference to the previous block, which together with Bitcoin’s peer-to-peer verification system makes it virtually impossible for the user to falsify previously recorded transaction data.
Each circuit consists of many blocks, and each block has three main elements:
*Data on the block
*32-bit integer called nonce. The nonce number is generated randomly when creating the block, then a hash is generated for the block title.
*The hash is a 256-bit number associated with a nonce. It starts with a very large number of zeros.
When the first block of the chain is created, nonce generates the cryptographic hash. The data in the block is considered signed and permanently related to nonce and hash.
Nodes
Each blockchain-related device can be defined as a node, examples include servers, computers, laptops, online or desktop wallets, and mobile phones.
All nodes are connected to the blockchain in some way and are constantly updated with each other with the latest information that is added to the blockchain.
Nodes are a critical component of blockchain infrastructure. They act as an additional confirmation of the general ledger and allow everyone to transparently view the transactions or data performed or stored on the network. The main benefits of nodes are to ensure that the data stored in the blockchain is valid, secure, and accessible to authorized parties.
The purpose of the nodes is to maintain the reliability of the data stored in the blockchain. The reality is that the entire history of the blockchain can be stored with a single complete node. The more nodes a blockchain has, the more decentralized it becomes, making it more resilient to threats such as system failures or power outages.
When a new piece of data (block) is added to a blockchain, a node will communicate the block to other nodes in the network. Based on the validity of the new block and the type of node, full nodes may reject or accept the block. Thus, after the new block is received by the node, the information is stored and written on the existing blocks.
In summary, the role of a node is to:
Confirm a new block
Store and save the transaction history of a block
Update other nodes in the blockchain to ensure that all nodes have the latest information
Miners
Miners create new blocks in the chain through a process called bitcoin mining.
In a blockchain, each block has its own unique code and hash, but it also refers to the hash of the previous block in the chain, so getting a block is not easy, especially in large chains.
Miners use special software to solve the incredibly complex mathematical problem of finding a nonce that generates an accepted hash. Since the nonce is only 32 bits and the hash is 256, there are approximately four billion possible combinations of nonce and hash to find the right one. When this happened, the miners were said to have found the “golden nonce” and their block was added to the chain.
Changing any block earlier in the chain requires re-digging not only the block but all subsequent blocks. This is why blockchain technology is extremely difficult to manipulate. Think of it as “safety in math,” because finding gold nonsense requires a tremendous amount of time and computing power.
When the block is successfully excavated, the change is accepted by all nodes in the network and the miner receives a financial reward.
Blockchain types
Bitcoin blockchain
The original bitcoin chain was launched in January 2009. It was open-source software, which means anyone can use and reuse the code. And many did. In the beginning, blockchain enthusiasts simply sought to improve bitcoin. Litecoin, another virtual currency based on bitcoin software, aims to offer faster transactions.
Namecoin blockchain
One of the first projects to use the bitcoin code not only as a currency was Namecoin. The project is a system for registering “.bit” domain names. The traditional domain name management system – one that helps your computer find our website when you type – depends on a central database. Internet freedom activists have long worried that this traditional approach facilitates censorship. This is because governments can take away a domain name by forcing the company responsible for registering it to change the central database. The U.S. government has done so several times to shut down sites accused of violating gambling or intellectual property laws.
Namecoin is trying to solve this problem by storing .bit domain registrations in a blockchain, which theoretically makes it impossible for anyone without the encryption key to change the registration information. In order to confiscate a .bit domain name, the government will have to find the person responsible for the site and force him to hand over his private key.
Ethereum blockchain
In 2013, a startup called Ethereum published a paper outlining an idea to make it easier for programmers to create their own blockchain-based software without having to start from scratch. And without relying on the original bitcoin blockchain. In 2015, the company launched its platform for “smart contracts” – software applications that can require the implementation of an agreement without human intervention.
For example
You can create a smart contract to bet on tomorrow. You and your gambling partner would upload the contract to the Ethereum network and then send some digital currency that the software would essentially keep in escrow. The next day, the software will check the time and then send the winner the winnings. A number of “forecast markets” have been built on the platform, which allows a number of people to bet on more interesting results, such as which team will become the champion.
If the software is written correctly, you do not need to trust anyone in these transactions. However, this is a big trick. In 2016, a hacker stole about $ 50 million worth of Ethereum for a democratized investment scheme in which investors would pool their money and vote on how to invest it. A coding error allowed a still unknown person to obtain the virtual money.
Blockchains have some other limitations. Security protocols allow people to trust blockchain systems without central oversight. On the other hand, they are sometimes slow and cumbersome to scale. Ethereum gives developers tools for writing applications, but the technology still can’t handle the high-definition graphics of a computer game or the number of users needed to have a decentralized social network. Since then, dozens of competing projects have sprung up in crypto labs, each claiming to have new technical solutions to Ethereum’s problems. Ethereum itself is also working to scale up its technology.
Private corporate blockchains
This cumbersomeness has also enabled the development of corporate blockchain systems. Big companies have started their own blockchain experiments. Many corporate experiments involve “private” blockchain chains running on servers within a company and selected partners.
In contrast, anyone can run bitcoin or Ethereum software on their computer and view all transactions recorded in the respective blockchain networks. But large companies prefer to keep the data in their own hands and selectively share it publicly. Private blockchain chains are also significantly faster because they do not require intensive security protocols, such as Bitcoin and Ethereum. Technology companies like IBM and Intel offer private blockchain chains to companies that are interested in things like supply tracking.
What is blockchain technology?
What is blockchain technology?
