Navigaweb would not be a respectable technology blog if it did not talk about blockchain, a somewhat difficult concept to understand, which at first glance may seem something vague but which is actually having more and more practical applications, so much so that experts predict, in coming years, its daily use almost everywhere. Looking for information and guides on the internet, in this article we try to be brief, to give a concise and simple explanation of what blockchain means, what it is and what it is used for.
In one sentence, the Blockchain is a distributed ledger (the ledger is a "Ledger which contains all the accounts, called mastrini, which make up the accounting system") and to explain what it is exactly let's talk about its possible application practice in a bank.
Distributed or blockchain ledgers, on the other hand, are not controlled by a person or company that has sole responsibility for the ledger, but is owned by many people, who have copies of a distributed ledger.
Each user (which takes the name of " node ") stores a copy of the data from the beginning to the end of the entire ledger so far. When a transaction occurs, many nodes check it and then all nodes update their records so that they all have the same copy of the register, updated and synchronized.
Each new transaction is grouped, with many other transactions, into a block or "block". There is no centralized authority capable of manipulating the record. If a hacker or a scammer node started changing records in a registry, all other nodes would reject it because the new records would not match the data stored by everyone else. The only way to manipulate the data would be to organize a collaboration of many nodes, which is however very difficult since the number of nodes can be very high (in the case of Bitcoins, there are about 10, 000 different nodes scattered all over the world and who don't know each other).
Now we can therefore have a clearer idea of what a blockchain is and what it is for : a decentralized archive of data whose main application, at the moment, is to store data represented by money transactions (such as Bitcoin or other virtual currencies ), but which can be used in any other field.
Speaking of BitCoin and cryptocurrencies, the blockchain works like this: If I send a BTC, I am telling each node what I am doing and everyone records the transaction if it is allowed. By checking the ledgers, the nodes can reject the transaction in case I don't have enough Bitcoins to send, or if I'm not the account holder. Every transaction has to go through validation, and that's where blockchain technology gets a little more complicated. Each blockchain " wallet " (the wallet is a bank account in the blockchain) has a public key and a private key . The public key is not sensitive, but the private key must be known only and only by the account holder (who has the private key, in fact owns the account). When I send a Bitcoin, my wallet presents the public key along with a digital signature. This digital signature is unique and is generated with the private key. Using private signature and public key, the other nodes can verify that it is a legitimate transaction, all without ever revealing what this private key is. Public and private keys are not easily remembered numbers like bank accounts, but they use Secure Hash Algorithm 256 (SHA-256) and RACE Integrity Primitives Evaluation Message Digest 160 (RIPEMD-160) algorithms . It is not necessary to understand what these algorithms are to use cryptocurrencies but it is interesting to note that these algorithms are the basis of the encryption of websites in https, where the traffic is encrypted via SSL, TLS and more. In the future, other encryption algorithms could be used for the blockchain.
Now, all this encryption and transaction verification comes at a cost . Each node needs a lot of computing power to check all the transactions that take place and update the log.
This is where mining comes in: users can earn small commissions as compensation in the transaction verification process. The miners who manage the nodes are paid and every transaction is verified.
I had explained this in another article, on how to create (undermine) Bitcoins.
The problem with this elegant and fluid cryptocurrency transaction verification process is that during times of high demand, rates can increase and if there are not enough nodes, users can actually pay more to get confirmation of their transactions. first of all, with the miners giving priority to those who pay higher commissions. Those who pay lower commissions will still be processed, but at a much slower rate, unless the commission is too low, in which case no one will bother to verify the transaction.
This video below is one of the best to understand how blockchain works in Bitcoin
READ ALSO: What are Cryptocurrencies, Bitcoins and other digital currencies
An example of a blockchain that is not strictly linked to digital currencies is that of the Steemit website, a social space that can only be accessed by generating a private key inside its Blockchain. This social network is structured in a completely new way compared to the others, where each user can share written texts or videos (on the DTube site) and earn money depending on how successful they are. The payments are in cryptocurrency and the registration process with a private key is based on Blockchain.
Hoping that the explanation was clear enough, the main source of this post is the Blockdecoded site.
In one sentence, the Blockchain is a distributed ledger (the ledger is a "Ledger which contains all the accounts, called mastrini, which make up the accounting system") and to explain what it is exactly let's talk about its possible application practice in a bank.
What Blockchain is and what it is used for
So let's take a regular bank, which manages a central database (a "ledger") of all customer details. Account numbers, balances, transactions and all other personal information are marked in this large register. Whenever you use the bank account, for example by withdrawing money or making a transfer, the bank register updates its records. Only the bank, as the central control entity, has access to its ledger and can manage it as it wishes.Distributed or blockchain ledgers, on the other hand, are not controlled by a person or company that has sole responsibility for the ledger, but is owned by many people, who have copies of a distributed ledger.
Each user (which takes the name of " node ") stores a copy of the data from the beginning to the end of the entire ledger so far. When a transaction occurs, many nodes check it and then all nodes update their records so that they all have the same copy of the register, updated and synchronized.
Each new transaction is grouped, with many other transactions, into a block or "block". There is no centralized authority capable of manipulating the record. If a hacker or a scammer node started changing records in a registry, all other nodes would reject it because the new records would not match the data stored by everyone else. The only way to manipulate the data would be to organize a collaboration of many nodes, which is however very difficult since the number of nodes can be very high (in the case of Bitcoins, there are about 10, 000 different nodes scattered all over the world and who don't know each other).
Now we can therefore have a clearer idea of what a blockchain is and what it is for : a decentralized archive of data whose main application, at the moment, is to store data represented by money transactions (such as Bitcoin or other virtual currencies ), but which can be used in any other field.
The blockchain in cryptocurrencies
Speaking of BitCoin and cryptocurrencies, the blockchain works like this: If I send a BTC, I am telling each node what I am doing and everyone records the transaction if it is allowed. By checking the ledgers, the nodes can reject the transaction in case I don't have enough Bitcoins to send, or if I'm not the account holder. Every transaction has to go through validation, and that's where blockchain technology gets a little more complicated. Each blockchain " wallet " (the wallet is a bank account in the blockchain) has a public key and a private key . The public key is not sensitive, but the private key must be known only and only by the account holder (who has the private key, in fact owns the account). When I send a Bitcoin, my wallet presents the public key along with a digital signature. This digital signature is unique and is generated with the private key. Using private signature and public key, the other nodes can verify that it is a legitimate transaction, all without ever revealing what this private key is. Public and private keys are not easily remembered numbers like bank accounts, but they use Secure Hash Algorithm 256 (SHA-256) and RACE Integrity Primitives Evaluation Message Digest 160 (RIPEMD-160) algorithms . It is not necessary to understand what these algorithms are to use cryptocurrencies but it is interesting to note that these algorithms are the basis of the encryption of websites in https, where the traffic is encrypted via SSL, TLS and more. In the future, other encryption algorithms could be used for the blockchain.
Now, all this encryption and transaction verification comes at a cost . Each node needs a lot of computing power to check all the transactions that take place and update the log.
This is where mining comes in: users can earn small commissions as compensation in the transaction verification process. The miners who manage the nodes are paid and every transaction is verified.
I had explained this in another article, on how to create (undermine) Bitcoins.
The problem with this elegant and fluid cryptocurrency transaction verification process is that during times of high demand, rates can increase and if there are not enough nodes, users can actually pay more to get confirmation of their transactions. first of all, with the miners giving priority to those who pay higher commissions. Those who pay lower commissions will still be processed, but at a much slower rate, unless the commission is too low, in which case no one will bother to verify the transaction.
This video below is one of the best to understand how blockchain works in Bitcoin
READ ALSO: What are Cryptocurrencies, Bitcoins and other digital currencies
Other ways to use blockchain
While many blockchains store only the details of cryptocurrency transactions, it is still possible to store all types of data on a blockchain : medical records, protected messages, contracts and any other list or database. Anyone can create their own blockchain with the data they want, even privately, as long as you have enough nodes to run it. You can remove the encryption, edit the rules or decentralize it or manage it as you wish. In the end, for now, there are no formal specifications or definitions of "blockchain", so there is full freedom to do so. There are big company projects like Facebook, Amazon and Microsoft, then even blockchains that exist only to defraud people.An example of a blockchain that is not strictly linked to digital currencies is that of the Steemit website, a social space that can only be accessed by generating a private key inside its Blockchain. This social network is structured in a completely new way compared to the others, where each user can share written texts or videos (on the DTube site) and earn money depending on how successful they are. The payments are in cryptocurrency and the registration process with a private key is based on Blockchain.
Hoping that the explanation was clear enough, the main source of this post is the Blockdecoded site.
