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Blockchain: Everything You Need to Know


Blockchain: Everything You Need to Know

Blockchain has transformed the way information can be shared on the internet because the data can’t be modified or deleted. Blockchain is also the foundation technology that manages the transaction entries for bitcoin.

Blockchain technology hasn’t yet been universally adopted, but it can be used to reduce expenses, speed up transactions, and improve safety for financial institutions, health care providers, companies, and more. It has the potential to dramatically change the way we do business by offering a trusted system for exchanging information.

Bitcoin is probably the most widely known application of blockchain, however, we can call that just the beginning.

But What Is Blockchain?

From the way the Blockchain stores transaction data – the name came in. Blockchain and bitcoin were first introduced in 2008.

Blockchain technology might as well be called a “book” that contains a list of transactions that should be viewed by a group of people of a network. This way, every member of the network or group has a copy of the book. Each page of this book could be called a “block” of data, and “hash” is what you could call a whole page of that book. “Hash” is a unique number. So, the “chain” links all the pages of transactions together.

But Bitcoin currency and Blockchain technology are two different things. The first one is a type of digital currency that is still uncontrolled – and those transactions are maintained by blockchain technology.

But How Does Blockchain Work?

-Every copy of the blockchain is the same or must be the same – that means members have the same information.

-New information can be added if all the network members agree that the block that is shared is valid. ‘Consensus mechanism’ is what this is often called.

-Once a new copy of the blockchain is added, all the members can see whether it matches with the old copy. If it happens that the old blocks don’t match, the current members won’t accept the new copy.

The members constantly process transactions into new sections of data. When a new section is filled, each member in the network has to verify if the block is valid by using a mathematical formula. Only when all the members agree that a certain block is valid via a consensus mechanism, then the new block is added to the chain. This process, which by the way is very complex, is the reason why blockchain transactions cannot be changed.

This complex process is the reason why blockchain transactions can’t be changed.

Blockchain technology prevents what is called “double-spending”. This is one of the reasons why it is used by most cryptocurrencies, and especially Bitcoin. No one can keep a bitcoin once they have spent it; The hackers can’t change the data blocks – as the transaction can’t be changed too.

To make data more useful, Blockchain works with protocols. The protocols are used to automate the transactions, like payments and invoices.

To reduce transactions possible errors and processing time is used a tool called ‘Smart Contracts’. That means lower costs and higher profits.

Types of Blockchain 

There is one important thing for public blockchains: anyone can join the network and can process their transactions anonymously. So, the data will be visible to all members of a public blockchain.

Using the ‘miners’ mechanism is the thing that characterizes members of a public blockchain network. The so-called miners are members who constantly validate data blocks on the public networks. They are always competing with each other to validate data blocks.

Public networks are used for cryptocurrency because transactions are direct between individuals without needing a financial bank. But since the transactions are anonymous, they are a subject of attracting criminal activity.

Once they have validated the transactions, Blockchain miners are awarded in bitcoin of another relevant cryptocurrency.

On the other hand, a private blockchain requires members to be identified. Credentials are what they need in order to validate data blocks and submit transactions. Data might be limited by a private blockchain. But this only will occur to some users and at times it could give access to other members. Private blockchains are proven to be more suitable for an individual business.

Can Blockchains Be Hacked?

Since every member has a copy of transactions, it’s proven that Blockchains are very difficult to hack, but they are still not completely secure.

To create false transactions and having them accepted – hackers should have access to multiple members – that is why is so difficult to hack.

One thing that is considered a flaw: protocols. Hackers can potentially use a weakness in the way protocols are operating, and ‘hack’ the system, but still, it is very difficult.