Blockchain

(9 minutes reading)


Surely you have heard or read about blockchain in the media. The subject is very popular nowadays and much is said that the blockchain came to revolutionize the world and our way of making transactions.

Despite all the fuss around digital currencies, many people still don't really understand how this universe works.

The concept of Blockchain is associated with a ledger, which records transactions and asset tracking on a network and/or bitcoins. It is shared and immutable, thus facilitating the process of recording these transactions. This creates consensus and trust in direct communication between two parties, that is, without the intermediary of third parties.

Blockchain is constantly growing as new complete blocks are added to it by a new set of records. Blocks are added to the blockchain in a linear and chronological fashion. Each block obtains a copy of the blockchain upon joining the network and any computer that is connected to that network is tasked with validating and forwarding these transactions.

Blockchain is seen as the main technological innovation of bitcoin, as it is the proof of all transactions on the network. Its original design has served as an inspiration for the emergence of new cryptocurrencies.


WHAT IS BLOCKCHAIN?

As stated earlier, blockchain technology is a public ledger that records a virtual currency transaction (the most popular virtual currency is Bitcoin), so that this record is reliable and immutable.

With the blockchain we have the record of information such as the amount in bitcoins (or other cryptocurrency) transacted, who sent it, who received it, when this transaction was made and where in the book it is registered. This shows that transparency is one of the main attributes of blockchain.

Blockchain is a concept, that is, a database architecture. There is no single blockchain, there are several. The best known is the blockchain that supports bitcoin transactions. But there are many others, and you can create a blockchain yourself if you want.

But before we continue talking about blockchain, do you know what bitcoin is?

Bitcoin is an asset that can be tangible or intangible, for example a house, money, cars are tangible assets. Patents, copyrights, and intellectual property, for example, are intangible assets. Satoshi Nakamoto, the pseudonym of the person who created the Bitcoin currency, was also the first person to develop a blockchain database.

Backing to our main topic: Blockchain, which, as already said, is a kind of database, where all the information about the transactions of bitcoins and other virtual currencies are stored and this database is accessible to all users, so we can access this database from the computer and see a negotiation that took place between two people anywhere in the world.

As this is an encrypted transaction, we are not able to know who is involved, but it is known that that transaction took place and that it is recorded on the blockchain.

In short, blockchain is a chain of blocks that are part of a collective system of record. This means that the information is not stored in one place, because instead of being stored on a single computer, all the information on the blockchain is distributed among the various computers connected to it.


HOW DOES BLOCKCHAIN WORK?

Blockchain technology is innovative, and it is thanks to it that Bitcoin gained worldwide fame.

As previously mentioned, blockchain is a chain of blocks where each block is formed by various information about the various transactions and has a unique digital signature, called a hash or proof of work. This signature works as a fingerprint of the block and helps to give more security to the process, since everything is encrypted.

The hash works as a connecting link between blocks, as a block carries its own hash and the hash of the previous block. With this, the chain is formed, which links several blocks of information to each other.

Those responsible for gathering information into blocks and joining one block to another are miners who gather transactions that have not yet been entered into a block and add them to the blockchain with the correct hash.

To be able to do this nowadays, it is necessary to do complex calculations, which are only performed by state-of-the-art computers. Upon accomplishing this, these miners receive a reward in bitcoins validating the information.

Each block has a maximum capacity and is created in a constant rhythm, like a beat of a song or a heart. In the case of bitcoin, new blocks are added to the network approximately every 10 minutes. That is, at that time, several transactions of purchase or sale of bitcoins between users are verified and added to the blockchain. It is only after an entire block has been filled and verified that an amount of the currency can leave the virtual wallet of the user who sold it and pass to the wallet of the person who bought it.

As these blocks are sealed by very complex cryptographic codes, it is practically impossible to tamper with them and tamper with the information contained in them.

Anyone who is logged in to the network can see the encryption for a transaction. However, without being able to see the identity of those involved or change this process.


MAIN ELEMENTS

There are 3 main elements of blockchain. They are:

Ledger technology: This allows all users to be able to access the ledger, where transactions appear. In addition, the ledger eliminates any chance of duplicate records, for example.

Immutable records: once a transaction is recorded in the ledger, it cannot be changed or corrupted.

Smart contracts: is a set of rules that can be stored and thus automatically executed on the blockchain. This is done to make transactions faster.


WHY IS BLOCKCHAIN IMPORTANT?

Blockchain is important because it helps in updating, reliability and especially security of information on that blockchain. Blockchain allows data to be accessed only by authorized people.


HOW IS DATA STORAGE DONE?

It stores the information of a group of transactions in blocks, marking each block with a timestamp. Every 10 minutes, a new block of transactions is formed, which is linked to the previous block.


HOW IS THE NETWORK FORMED?

Blocks are dependent on each other and form a chain of blocks (hence the name blockchain). This makes the technology perfect for recording information that needs to be trusted, such as in the case of a transaction of bitcoin and other cryptocurrencies.

The blockchain network is made up of miners who verify and record transactions on the block. To make this possible, miners lend their computers to the network. For this they receive a reward in cryptocurrencies.


HOW IS THE TRANSACTION VALIDATED?

A miner can only add a transaction to the block if a simple majority of the network agrees that that transaction is legitimate and correct, called the blockchain network consensus.

Two blockchains can be formed at the same time, the deadlock will be resolved when the network needs to choose one of them and in the end, the one with the most work wins.


SECURITY, SECRECY AND PRIVACY OF DATA

Another essential feature of blockchain is data secrecy and privacy, that is, no one can know who the people involved in the transaction are. And this is done through encryption.

Regarding security, each of the transactions carried out has a unique code, that is, a digital signature. This code is verified by the users themselves and the transaction needs to be approved to then be incorporated into the blockchain through a block.

The surveillance and verification of all this information is done by the miners and this verification is an extremely important step to prevent fraud. Another important factor for the security of this process is the hash. Each block has its own hash, that is, a specific cryptographic signature.

To access the information contained in a block, it is necessary to decrypt the hash of the block and the previous block. As everything is connected as a chain, this process would have to be done successively and would have practically no end.

To defraud the blockchain, it would be necessary to change the data recorded on each of the various computers connected to the network. This would require the hacker's computer to have a greater processing power than the total of all computers in existence today.

The security that the blockchain system offers is so relevant that companies and even government institutions are showing interest in using the technology. This is because the idea allows not only to protect data, but also to share it with whoever wants to without relinquish control over that information.


BLOCKCHAIN BEYOND BITCOINS

Today, blockchain is directly linked to bitcoins, now, despite the strong link, it does not mean that blockchains will only be used with this cryptocurrency.

It is believed that this technology could be the key to a new way of storing and accessing information.

If today we consider the internet the most efficient way to share information with people around the world in a matter of seconds, blockchain can offer a new proposal.

In the financial system, we see blockchain changing the landscape, as this technology can help simplify operating systems and maintain a more secure and fraud-free environment.

Not to mention that we don't have to be stuck only with financial transactions. It is believed that this new system can be used to archive and share other things, such as music, art, votes, and documents.

In addition to practicality and security, blockchain offers the advantage of dispensing with intermediaries. With this, it is believed that it will be possible to catalog, track, certify and authenticate information and valuables in a whole new way and without being at the mercy of fees and bureaucracy.


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