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Blockchain: simple about complicated

Blockchain is a way to record and store information so that it cannot be tampered with, deleted or altered without attracting attention. This system consists of a chain of blocks containing information, and each successive block is inextricably linked to the previous one. If you replace or remove even one of them, the whole chain is destroyed.

Blockchain is a universal tool for building various databases. It has the following advantages:

  • Decentralization - This means that blockchain has no main server where all the data can be stored. All logs are kept separately by each participant of the system.
  • Transparency - any participant can track all transactions which took place in the system.
  • Confidentiality and anonymity - all data in the blockchain is stored in an encrypted form. It is possible to look at the history of transactions, but it will be impossible to identify the sender - only if there is no address of his cryptocurrency wallet. 
  • Reliability - blockchain makes cheating impossible, because any attempt to enter unauthorized data is instantly stopped and rejected. To change anything, you first need to get a special code (hash). 

How is blockchain different from a database? 

Blockchain allowed information to be transmitted as it usually is on the Internet, but without copying. It is a unique new system. 

Although blockchain resembles a database in which different devices are stored and synchronized, it differs from it in many ways. For example, blockchain does not store data, but records of transactions, and they are arranged chronologically. Of course, the differences don't end there. For example, in blockchain, all records are authenticated and validated using cryptography. The record must be confirmed by the majority of network participants, and only then will it be entered into the blockchain. This is the essence of decentralization - there is no single authority that controls everything. Records are grouped into blocks that are connected to each other, with each block containing encrypted information about the previous one. Once on the blockchain, the data cannot be changed or deleted without destroying the integrity of the entire chain.

What are the blockchain protocols? 

Every blockchain has its own protocol. It is a set of rules and actions for transmitting data. They vary from blockchain to blockchain and are as follows:

  • PoW (Proof-of-work) - the right to certify a blockchain is given based on doing some work, which must necessarily meet all the criteria.
  • PoS (Proof-of-stake) - the right to certify a block is given to an account holder when the amount of his funds and the term of his possession meet the specified criteria. The formulas for calculating the criteria may vary slightly.
  • PoS + PoW is a hybrid approach where blocks can be certified through both of these protocols. The purpose of this approach is to make it harder to recalculate the entire chain. 
  • PBFT (Practical Byzantine Fault Tolerance), Paxos, RAFT are multi-step network consensus algorithms. Algorithms in this group allow the blockchain to function at low cost. They also have considerable bandwidth, but are weakly resilient to a large number of participants. 
  • Non-BFT (Non Byzantine Fault Tolerance) are consensus algorithms that are unstable to behavior in which some participants start working against the network. Such algorithms are applicable to closed networks with full identity.

Minuses of the blockchain technology

Of course, despite all the breakthrough modernity of blockchain, this technology, like many others, has its disadvantages. Among the main disadvantages are:

  • Low translation speed in case of congestion - the functioning of blockchains requires very high capacity, so it can take a long time to create and verify new blocks. Bitcoin can be given as an example, some transactions using this cryptocurrency can be delayed up to five hours, although it happens quite rarely.
  • Uncertain legal status - blockchain is in a gray area when it comes to legal regulations. If you have any problems with blockchain or cryptocurrency, you will not be able to defend your rights with government assistance from the police or the courts. For the most part, it's all done at your own risk. 
  • High cost of technology - despite the fact that blockchain allows significant savings on the services of middlemen, the very creation of the system and its implementation in any sphere is very costly. 

As you can see, the disadvantages of this technology are not catastrophic at all. But the most important thing is that professional developers from all over the world are racking their brains every day about how to improve blockchain, making it more convenient, faster and cheaper to implement. 

Where is blockchain technology used? 

Blockchain is an innovative technology that is being implemented in various industries. For example, in the energy industry. 

Energy companies use blockchain to create platforms for energy trading and facilitate access to renewable energy. 

Many banks and stock exchanges also use blockchain. They use these technologies to manage online payments, accounts and market trading. 

Multimedia and entertainment companies use blockchain to manage copyright data. Copyright verification plays a key role in determining fair compensation for creators. 

To summarize, blockchain is the new era for the entire Internet community. These technologies have been around for a long time, but they are constantly gaining more and more popularity. Blockchain technology is widely used in commerce, document management, business, etc. At times, they are even used in government institutions.

Blockchain is the future, so investing in this niche is a smart enough option if you plan to generate income in the long term.

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