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What is Blockchain Technology?

Some call it the new internet while others simply associate it with Bitcoin. Anyway, a blockchain is a significant, wonderful invention. Initially, Satoshi Nakamoto created blockchain for the digital currency known as Bitcoin, but there are other ways to benefit from this unique technology.

To make it short, the blockchain refers to the incorruptible digital ledger of transactions. It can be programmed to keep track of financial transactions as well as everything that has value. The data saved on a blockchain is a shared database. It is not kept in a specific location. That is why the stored records are public and viewable by everyone. No hackers are able to corrupt this system.

What about the durability and robustness? By saving blocks of data identical across the network, the blockchain is not able to:

  • Fail at a particular point.
  • Be monitored and modified by any entity.

How Can One Claim It Is Incorruptible?

Every 10 minutes, the system scans itself for any possible interventions or bugs. It works as some kind of self-auditing mechanism. Every group of the transactions is called a block, and there 2 critical factors that result from it:

  • There is no way to corrupt the blockchain meaning any piece of data on the blockchain stands for applying a large number of computing power to override the whole network.
  • Transparency information is embedded within the network – it is public.

In other words, it seems impossible to destroy the value of any cryptocurrency that has blockchains.

Three Technologies That Build Blockchains

The first one is private key cryptography (cash vs. plastic and identity). The second one is a peer-to-peer network (tree falls in the woods and System of Record). The third technology is a program (a.k.a. the blockchain’s protocol).

The outcome is the digital trust – a system for interactions that needs no credible third party. The elegant yet robust architecture of blockchain technology supplies the work of securing digital deals.

A Few Words about the Nodes

Each node serves as an admin of the blockchain. It joins the network on purpose – that is how it is decentralized. Every node has an opportunity to obtain the desired Bitcoins.

The nodes are like the miners. To get rewarded with the Bitcoins, it is necessary to solve tricky puzzles that get more complicated over time. Overall, 700 cryptocurrencies similar to Bitcoin are there in the world.

Who May Need the Blockchain?

International remittances are one of the usage examples when it comes to who may need blockchain. The World Bank reports that more than $430 billion US were submitted in 2015, and a high demand for blockchain creators exist now.

Thanks to the Graphical User Interface (GUI)< it is possible to access personal computing. The most typical GUI associated with blockchain is the wallet applications that make it possible to purchase goods/services using various cryptocurrencies. Online transactions are related to the processes of identity confirmation.

Why is Blockchain Needed?

Everyone needs blockchain in Bitcoin as far as:

  1. Untrusted nodes recording transactions on the ledger exist
  2. Bitcoin is a public ledger
  3. Bitcoin refuses any third parties who wish to manage the ledger

Bitcoin needs a blockchain to decentralize payments. There are several other situations, in which everybody may need a record of ownership without involving a third party.

The first case is the land title. It might be helpful to acquire access to a decentralized source of record specifying who owns a particular parcel of land. Why might it be beneficial? Well. The coups/wars frequently redistribute land unfairly. After the sides agree on the proper land distribution, it may appear as a distributed ledger. It means it is no longer a subject of continuous debate.

It is possible to apply blockchain to establish ownership over any amount of physical assets such as pieces of art, vehicles, etc.

The next point to discuss is identity. Social security numbers are not applied for identification. Blockchain offers a better means of establishing identity. It is possible to verify it on an open, international blockchain monitored by no one. It is a much reliable option.

Some of the Basic Blockchain Pitfalls

It is not secret blockchains are not perfect at everything. One of the issues is scaling blockchains. In order to make it function, plenty of participants should hold the most recent copies. It means that the same database belongs/is shared by thousands of nodes. It is not effective at all!

At the same time, cloud computing trends toward just one database that numerous nodes can access. There is no need for them to keep their private duplicate of this database. Nodes that keep duplicates of the blockchain obtain permanent updates. As the nodes are distributed around the globe, blockchains possess high latency. That is why blockchains experience problems with scaling. Example: while Bitcoin can process up to 4 transactions per second, Ethereum can deal with 20 transactions for the same amount of time, and Visa is able to process 1,500 transactions per second!