The technology Blockchain (Distributed recording technology) is called the technology of the future. The criptomonedas are currently a large market that is valued at more than USD 300 billion.
With its appearance on the market, the blockchain technology on which they are based also began to emerge . Blockchain (block-block, chain-chain) is, according to the simplest definition, a distributed record of operations performed on a given network, to which users have access.
Blockchain started entering the mainstream in 2016, right after almost two years of depression caused by the Mount Gox scandal. The storm caused the suspension of its activities after revealing the theft of almost 850 thousand Bitcoins that were worth more than $ 450 million at that time.
The reason for its “evaporation”, as we know from the information disclosed by WizSec in April 2015, was mainly mismanagement, theft, and fraud, and most (if not all) of lost Bitcoins were stolen from the wallet of the Mount Gox since 2011.
Serious security vulnerabilities, and especially a series of oversights, meant that the process of removing Bitcoins from Mount Gox had gone unnoticed for years.
At a time when it became clear that this Japanese stock exchange (and with it a multitude of clients) was the victim of theft, the world of cryptocurrencies was facing a serious problem. How can you adequately protect yourself against such practice in the future?
Here, the answer has become what blockchain technology is , which in all this situation was the only reliable and stable element of the security system of the stock exchange.
But what does this really mean? What changes this and why is blockchain so revolutionary? To better understand the possibilities offered by this technology , let’s first think about what blockchain is and how it really works.
Blockchain what is it?
Many of the new cryptocurrency investors have come across various neologisms that they don’t fully understand. One of those terms is blockchain .
The technology Blockchain is a chain block which is a database decentralized and distributed.
In general terms, blockchain can be reduced to the decentralization of processes, that is, exclusion from the central unit scheme. The blockchain name is not accidental. In fact, it illustrates quite accurately what this technology is .
The record based on it consists of blocks of data. Each of them has the “end” of the previous one, which allows them to connect in a chain. Blockchain consists of two groups of participants.
- The first : they are the parties to the transaction / operation, for example the consumer and the borrower.
- The second : consists of other participants in the peer-to-peer network that certify the operation of the other.
The idea of this type of database is based on the principle that it occurs in many computers and is treated as a logical whole. So changes in one computer are reflected in the following.
The blockchain is designed to publish transactions that occur within the network. This is possible thanks to the technology used in blockchain that is based on the peer-to-peer (P2P) architecture, which dates back to the beginning of the creation of the Internet.
At that time, the P2P network of all users on the network was on an equal footing, as it had no parent or administrator. With the development of the network, this situation has changed.
Blockchain is a decentralized trading platform that has a publicly available transaction log .
Each participant in the “network” that has the appropriate authentication key ( technology that uses cryptography) knows what stage the process is in, what changes have occurred, who made them, etc. Without any intermediary in the form of a central platform.
All operations are sometimes marked with their execution, which is an element of authentication. The blockchain allows you to locate and access every transaction that has been completed.
At the same time, each of the network users has complete anonymity, because the data recorded by the blockchain refers only to information about the transactions themselves.
Blockchain is characterized by reliability : even if one user fails, the others retain the correct data. Furthermore, it is a transparent and durable system.
Due to these features and the practical impossibility of unnoticed interference, this technology is ideal for removing paper documents from business transactions.
It allows you to eliminate unnecessary intermediaries, perform immediate billing and authentication. The possibilities of its use are practically limitless, currently there are three basic applications: payments, contracts and customer verification .
After asking the crypto speculator question, which says: what is blockchain ? The next question is: how does blockchain technology work ?
Blockchain or chain blocks are organized in the form of blocks of data that follow one after another.
Each of these blocks contains information on the number of transactions made , and once completed, another is created, etc. Statistically, a new block appears every 10 minutes, full of information about the transactions made.
Blockchain is like keeping a ledger for transactions, in digital form that is scattered throughout the network. Each computer of a network user can participate in the transmission and authentication of transactions.
The cryptographic tools are designed to ensure the safety of all transactions taking place. Because coding using cryptographic algorithms , fake cryptocurrency of Bitcoin , for example, is virtually impossible.
Saving the transaction in a blockchain block is irreversible. Any attempt to change the order or size of the transaction would affect the entire blockchain , leading to incompatibility in the blockchain database .
Transactions are digitally signed using asymmetric cryptography. They are processed by computers on the network, which are called nodes, and after confirming the correction, they are added to the blockchain .
All transactions are public while maintaining complete anonymity of users.
Cryptography, advanced mathematical methods, as well as the lack of privileged administrators and the ability to verify all transactions made ( blockchain ) directly affect users’ trust in blockchain technology .
The criptomonedas operate on the principle of digital recording. The difference is that registration in the electronic bank account is recognized by the banking system, which plays a fundamental role in the modern economy.
The cryptocurrency , in turn, operates in the chain of blocks blockchain , thanks to the cryptographic encryption. In the online payments, the code is transferred from a wallet criptomonedas to another. A single code is a token .
What does blockchain do?
Currently, the blockchain can be used to handle multiple transactions, but work is underway to use the blockchain as:
- A bank ledger.
- A document authentication system.
- A digital signature in the state administration.
- A notarial record.
All of these transactions can take place outside of the system that has been operating for centuries, without the participation of publicly trusted institutions, directly between the parties to the transaction.
You can store any type of transaction in data blocks on the blockchain network . One of the applications is the mentioned cryptocurrencies (for example, Bitcoin – BTC).
What are smart contracts?
Smart contracts are nothing more than digital contracts in the form of self-service applications . Does it sound abstract? We will explain how they work in a specific example.
The intelligent contracts operate on a simple principle: “if X happens, then Y”. Referring this principle to a situation that can happen to us in daily life, suppose:
You are buying a flat. When a smart contract is used , upon payment of an apartment, an appropriate entry is automatically made to change ownership of the property in the “virtual land and mortgage registry .”
That is, it is registered in a specific transaction in the registry stored in the blockchain , and at the same time an access code to the apartment is obtained and without unnecessary procedures in any office, you can enter. As simple as that.
So, as you can see (in simplified terms), smart contracts are applications that can have the same causal power as traditional legal contracts.
However, they have the great advantage of being verified immediately, thanks to which we save a lot of time , effort and formalities and, above all, we skip the entire process of bureaucracy.
How do smart contracts work?
We can compare them to the back-end for web applications , for which a separate interface is also created (usually as a single-page application).
In combination with the smart contract code , this provides a complete application called DApp ( Decentralized Application ). The intelligent contracts use the technology blockchain to save and store data.
In a broader context, they give society a comprehensive tool for building decentralized applications that are widely used.
From the resolution of the bureaucracy problem mentioned above, to the rationalization of many issues, such as property rights, the creation of permanent and distributed registers or even voting systems.
Blockchain , despite its strictly technological pedigree, brings a fresh breeze to the fossilized bureaucracy and outdated data storage systems .
Thanks to platforms like Ethereum , you can realistically increase the level of innovation of solutions that are used by crowds of consumers today. One thing is for sure: the most interesting is yet to come.
What is cryptocurrency mining?
The distinctive features of blockchain of criptomonedas are:
Decentralized and distributed database
This means that there is no unit to control the data that appears on the blockchain . In addition, all the data and the complete history of the blockchain can be downloaded by any user on the network.
The data (transactions) stored in the block are immutable and irreversible
The transaction log offered by blockchain cannot be edited, once saved, the data remains in the block and cannot be changed.
Transactions are encrypted by cryptographic tools
This guarantees the security of the data contained in the blocks .
The transaction log is public
Everyone has access to all transaction history.
The characteristics described above do not necessarily have to be the distinguishing characteristic of each blockchain .
Similarly, access to the database stored on the blockchain may be restricted only to authorized users. You can also create a blockchain with the ability to edit previously saved data.
It all depends on the needs of the blockchain creator and what will be written to the protocol.
Is this technology safe?
Currently, blockchain technology has matured enough to outperform the tech industry . The tech giants , who don’t have much in common with the cryptocurrency industry , are turning boldly towards it.
Its main advantages, and also the reasons why it is gaining popularity, are decentralization , smart contracts, and resource ownership .
According to Don Tapscott (founder of the international group of experts New Paradigm, and a great defender of the changes that Bitcoin and blockchain bring ), it is blockchain that drives the second generation of the digital revolution, which will result in the Internet of values.
The blockchain like, a transaction ledger with current technology and the computing power of computers, cannot be faked. It is estimated that it takes half the computing power of the Internet to break a blockchain network .
However, the introduction of quantum computers will require the implementation of a new cryptographic security.
Transactions stored on the blockchain are irreversible. Trying to change a block implies changing the entire subsequent chain. In the event that someone tries to cheat, change or carry out an unauthorized transaction:
The nodes blockchain in the process of verification and reconciliation will discover that one of the copies of the book contains a transaction that does not match the records on the network and will refuse to include it in the chain.
The data, transactions and their order are resistant to falsification and all kinds of manipulations.
The blockchain philosophy itself, advanced mathematical methods, and cryptographic security allow us to trust the data contained in the transaction ledgers.
Extensive use of blockchain technology
Interest in blockchain issues and their use in the modern world goes far beyond cryptocurrencies . As already mentioned, the block chain ethereum uses chains blocks to create various applications.
Very often, people dealing with cyber security point to blockchain as a technology practically impossible to decipher. The sources of this vision can be found in the dispersion of data that results from its total decentralization.
Currently blockchain technology is used, among others, in the information technology (IT) industry, as well as in data protection.
Although only a few years ago, many institutions scornfully asked: “… and this blockchain , what is this invention really? … ”, They admit today that it may be the future of the traditional financial system .
The FinTech industry was even created, whose name comes from the combination of finance and technology .
When will blockchain go to business?
Giant financial institutions like Citi, Bank of America, Goldman Sachs and Morgan Stanley set the goal of developing blockchain technology because they saw its enormous potential.
Widespread use is unlikely to occur as soon as we think about it, because there are regulatory issues at stake.
It is often the case that a given technology first takes the market by storm and is relatively parallel, but with a slight delay, the legislator regulates it (if necessary).
In this case, the situation is a little different, because blockchain is, in principle, dedicated to the financial sector.
Banks are not in the habit of taking risks because they are under supervision. In addition, they earn money on many products, so they have a lot to lose, and sometimes they are not attracted to the risk of being pioneers.
However, the banking sector is interested in the blockchain issue , as we mentioned earlier.
Seeing it as a solution to various problems , for example, keeping the document form in correspondence with the client (the so-called durable media problem), etc.
It gives hope that the first implementations of a purely practical nature will appear relatively quickly. Then there will be a long, long time until the revolution begins.
Even the famous billionaire Elon Musk, creator of, among others: SpaceX and Tesla, based on the assumption that your company SolarCity, will not only produce and store electricity, but will also invest in the settlement and distribution of transactions, based on the technology blockchain .
Who will be the first to use blockchain commercially?
The financial industry was the first to recognize the potential of this technology , but also the risk to its status .
Since 2014, we have seen a large influx of new companies that are developing technologies to criptomonedas based on blockchain .
A new industry is created called FinTech (from the combination of finance and technology ), and insurance Insurance Tech (or InsurTech).
Many things are also happening in the traditional financial industry. The energy industry is another industry that has noticed the potential of blockchain . And these are just examples of the most obvious applications.
This technology is excellent for solving energy purchase and sale transactions between your small producers, for example, households and your customers, energy consumers, also dispersed, for example, electric cars.
In the past year, blockchain has become one of the most popular concepts in the technology and business sectors .
According to CB Insights, this technology is mentioned (when publishing financial reports) by large corporations, but also by countless startups.
The latter claim that blockchain will allow them to introduce more transparent and secure solutions in healthcare, publishing and legal regulations.
Blockchain views: what future technology awaits you
Opinions about this technology are divided among people who know what blockchain exactly or how it works .
One group points to the enormous potential it faces based on blockchain technology , while others point to the dangers associated with it.
The basic one is decentralization , which is ideal for any hacker attack. In addition, the point-to-point architecture , which places all users equally, certainly contributes to the democratization of the network.
When it comes to blockchain what it is all about, crypto tools that are used for encryption have been mentioned .
The fact that it works thanks to cryptographic tools is another point that is mentioned as an advantage, because it makes it much more difficult to fake the code .
Concerns about the blockchain issue and how it works online are primarily counter arguments to the above issues. Therefore, opinions on blockchain vary.
The main argument against decentralization is, above all, that the decentralized connection is always slower than the centralized one. Furthermore, maintaining a blockchain network consumes large amounts of energy.
Maintaining a blockchain network is impossible without thousands of servers connected to it. Lack of supervision, while being treated as a great advantage on the one hand, also creates fears for opponents.
Trust in the creators of the code is the basis for the effective use of blockchain , which in some settings is treated as a manifestation of naivete.
The cryptographic encryption is only a very effective tool, but it has its obvious drawbacks. The main disadvantage is that the code must be of the best possible quality.
Let’s quickly summarize
The technology Blockchain creates a series of new solutions that will undoubtedly develop as information technology advances.
After explaining what exactly blockchain is and what it is based on, this is certainly not the end of this state of affairs. We can be sure that, in the near future, blockchain will be thoroughly analyzed and subject to a series of modifications.
Bringing blockchain closer to what it is and how it works is the basis for future big profits in the information technology industry. This is the end of this article, but only the beginning of your adventure with the financial markets.
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