Beginner’s guide to blockchain technology

    Blockchain technology

    A blockchain is a distributed database, which means that the database’s storage devices aren’t all connected to the same processor. It keeps track of a growing list of organized records known as blocks. Each block includes a timestamp and a link to the previous block.

    By owning the private keys required to write to the file, users can only alter the areas of the blockchain that they “own.” “Cryptography keeps everyone’s copy of the distributed blockchain up to date.” By definition, blockchains are secure databases. Satoshi Nakamoto first proposed the concept in 2008. It was first implemented in 2009 as part of the digital bitcoin currency; the blockchain acts as the public ledger for all bitcoin transactions. Bitcoin was the first digital money to address the double-spending problem (in contrast to real coins or tokens, electronic files can be duplicated and spent twice) without relying on a central authority or server.

    The distributed timestamping server and peer-to-peer network provide security to a blockchain system, resulting in a database that is controlled independently and decentralized. This makes blockchains ideal for logging events (such as medical data), transacting, managing identities, and verifying provenance. It essentially offers the possibility of widespread commerce and transaction processing disintermediation.

    How does blockchain technology work?

    Some have dubbed blockchain the “internet of value,” which I believe is an appropriate metaphor. Anyone can publish information on the internet, and others can access it from anywhere in the world. Anyone can send value anywhere in the world where the blockchain file can be accessed via a blockchain. To edit only the blocks you “own,” you’ll need a private, cryptographically generated key.

    You can transfer the value of whatever is stored in that portion of the blockchain using your private key and someone else’s public key. To use bitcoin as an example, keys are used to transfer blocks, which contain currency units with monetary value. This eliminates the need to record the transfer, as is normally done.

    Because no one can change a blockchain without the accompanying keys, it also serves a secondary purpose of establishing trust and identification. The network rejects edits that are not validated by those keys. Of course, the keys could theoretically be stolen, much like physical currency, but a few lines of computer code can usually be kept secure for relatively little money. (Unlike, for instance, the cost of holding a gold stash in a metaphorical Fort Knox.)

    This means that a blockchain can perform the primary activities banks perform more rapidly and precisely, such as confirming identities to prevent fraud and then recording valid transactions.

    Why is blockchain technology important?

    We’ve all become accustomed to exchanging information over a decentralized online platform: the internet. However, when it comes to transferring value – such as money, ownership rights, intellectual property, and so on – we are often obliged to rely on antiquated, centralized institutions or enterprises such as banks or government agencies. Even payment systems that have sprouted up since the internet’s inception – PayPal being the most obvious example – require interaction with a bank account or credit card to be useful.

    The exciting option of eliminating this “middleman” is offered by blockchain technology. This is accomplished by performing three key tasks historically performed by the financial services sector: recording transactions, establishing identity, and establishing contracts.

    This has major ramifications because the financial services business is the world’s largest by market capitalization. Even a fraction of this might be replaced with a blockchain system, causing tremendous disruption in the financial services industry while also significantly increasing efficiencies.

    Establishing contacts, the third duty, opens up a world of possibilities. A blockchain can be used to store any type of digital information, including computer code, aside from a unit of value (like a bitcoin).

    That snippet of code may be set to run once selected parties enter their keys, indicating that they have agreed to a contract. The same code might analyze external data feeds — stock prices, weather forecasts, news headlines, or anything else that a computer can parse — to generate automatically filed contracts when specific circumstances are satisfied. Smart contracts are what they’re called, and the applications are nearly unlimited.

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