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What is blockchain?
From a bird’s-eye perspective, blockchain technology may not look much different from things you are already familiar with.
So, what is a blockchain? Using blockchain, people can write entries into information records, and users can control how the information records are updated and modified. Like Wikipedia, an item is not a product of a publisher. In fact, no one controls the information posted.
But as you get closer to the bottom, the differences that make blockchain technology so unique and special become more apparent. Even though both run on a distributed network, Wikipedia is still built into the World Wide Web by using a client-server network model.
Users with permissions associated with their accounts (otherwise called clients) are eligible to change Wikipedia entries stored on a centralized server.
Whenever a customer visits a Wikipedia page, they will be alerted to an updated version of the Wikipedia entry “master copy”. As for the control of the database, this is left to Wikipedia administrators.
source: coindesk.com
Wikipedia’s digital backbone is very similar to the highly protected centralized databases that banks and governments maintain today. The centralized database is controlled by its owner, which includes managing updates and protecting the database from cyber threats.
On the other hand, the distributed database created by blockchain technology has a completely different digital backbone. Not only that, it is also the most important feature that makes blockchain technology stand out.
This “distributed database” does not rely on a single server to approve its transactions, but instead verifies and updates all data on the blockchain by each computer running this ledger. These computers are called nodes. They are responsible for verifying each transaction and maintaining overall consensus rules, but not all nodes actually process transactions and create data blocks.
There, mining computers come into play every ten minutes or so, and miners collect hundreds of pending transactions and turn them into mathematical puzzles. The reward for finding the cryptographic equation is an incentive for others to maintain the blockchain. Which mining node calculates the equation fastest is the one who gets the reward and gets the node that adds the new “block” to the blockchain. Once a transaction is approved by all nodes on the network and updated individually, it cannot be undone.
Let me try to simplify it using a simple Bitcoin transaction example. Assuming that Bob wants to send two bitcoins to Alice, Bob will broadcast a request to send two bitcoins to Alice to all nodes of the Bitcoin blockchain peer-to-peer network. These computers then use the previous block to verify the new block, basically checking whether there are enough “bitcoins” in Bob’s wallet, and then all the computers start competing for computationally difficult cryptographic puzzles. After the first computer has solved the equation, the computer broadcasts it to the entire network for inspection. After confirmation, the computer will update its system with the new information and begin processing the new modules formed. Alice received her bitcoin in the wallet, and the bitcoin sent by Bob was taken out of his wallet. Now, each computer on the blockchain network stores this data in its own independent database.
The “master copy” of Wikipedia is edited on a single server, so all users can see the new updated version. Regarding the blockchain, each node in the network comes to the same conclusion, and each node updates its records on its own. The most popular and newest records will be converted into actual official records instead of having a master copy.
source: coindesk.com
This is the difference that makes blockchain technology so useful-it represents new ideas in the registration and distribution of information, without the need for a trusted third party to promote digital relationships.
The results of it? A system for digital interaction that does not require a trusted party to monitor these relationships. The work to strictly protect digital relationships is implicit.
Digital trust?
Trust is a risk judgment between independent parties. For the digital world, determining trust can often be boiled down to proving identity verification and proving authorization.
For the sake of simplicity, people want to know, “Are you talking about you?” with “Should you be authorized to do what you want?”
Regarding blockchain technology, private key encryption technology helps provide a powerful ownership tool that meets the requirements of identity verification. As mentioned earlier, in a transaction between Bob and Alice, a cryptocurrency wallet holds your digital “currency”, but in fact it only contains two separate keys. Your private key shows the ownership of anything you own and the public key stored on the blockchain network. Together, they form a digital signature, which also saves one person from sharing more personal information than one wants. In order to make a transaction, both of these keys must match.
Having said that, certification is not enough. Authorization is something that requires a distributed peer-to-peer network. why? Because the distributed network reduces the chance of centralized failure or data corruption. If there are hundreds of nodes on the network verifying whether the transaction is correct, a lot of computing power and money are needed to actually change and destroy the data.
In addition, the distributed network must be dedicated to record keeping and security of the transaction network. If the transaction is authorized, it means that the entire network has applied the rules on which the transaction was designed.
Essentially, when providing authentication and authorization in this way, interactions in the digital world do not have to rely on ethical trust.
To learn more about blockchain View this infographic!
Featured image: Twitter
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