Blockchain Technology Explained
Blockchain Technology Explained – A BlockChain is the foundation for all CryptoCurrencies & was the first data structure for Bitcoin. Blockchains encrypt digital codes to create & trade CryptoCurrencies. The 1# spot to have Blockchain Technology Explained!
BlockChain Distributed trust
Blockchain Technology Explained - The blockchain is originally the data structure behind the bitcoin network. It is best to compare it with a ledger. Ledgers are the foundation of much of the infrastructure we rely on a daily basis and are nothing more than lists in which all data mutations are recorded among themselves. Many services and software that we use rely on databases that function as ledgers. Money for example is now mainly found in databases; Ledgers at financial institutions in which all balance sheets and transactions are kept.
But other registers also work in a similar way. Identity data, for example, are carefully recorded in databases. Other examples of data that are kept in databases are medical records and the business data of the Chamber of Commerce. Each data is in fact a rule in a database that is maintained by a designated authority.
Nowadays, these BlockChain databases are updated in a central location, closed off from the outside world. For Dutch domain names, for example, that is the SIDN and for patents that is RVO Nederland. There is a good reason that these databases are protected in a central location. The security of these systems is crucial. It is not desirable that secret patents can be viewed or that balances on bank accounts can be adjusted.
As a result, the use of these central Blockchain databases and ledgers requires permission from the administrators. Successively, this again requires a sufficient level of trust in the manager that the data are kept up-to-date and accessible to interested parties.
This not only concerns the trust that the administrator carefully handles with the power to refuse access and processing of the Blockchain data and to allow it, but also to the confidence that the authority is there the next day. Getting access to the Blockchain data or being able to make a transaction sometimes depends on the views or convictions of the administrator of the data. This situation can sometimes lead to unpleasant situations, as it turned out when several people could not unsubscribe from their parish and when a political decision had to give insurers access to the medical files of citizens.
Blockchain Technology Explained - A disadvantage of central closed Blockchain databases is that they do not easily connect with other systems, without jeopardizing security. If we take banking systems, for example, it is not easy to have two parties do a value transaction with this type of general ledger. Usually an intermediary is placed between the various systems that ensure sufficient trust and control so that the transaction can take place properly. This makes these systems expensive, slow and sometimes also sensitive to fraud.
One universal ledger
The blockchain is crucially different. The blockchain is decentralized and open. This means that there is not one body or company owner but that nobody is the exclusive owner. It is a so-called peer-to-peer network where all participants of the network share the ownership equally. And for this reason it is an open network that anyone who wants can participate.
Blockchain Technology Explained: Just like email and the internet is nobody's. Everyone can choose to use email or the Internet and participate in the open and decentralized network by using it. Everyone can also build new applications on top of it, without permission or other barriers to entry.
The advantage of this open device is that, just like the internet, the blockchain ledger cannot be hacked by hackers. If we compare blockchain with the internet then it makes it possible for data in databases what the internet does for information. Data can be securely distributed with blockchain across different databases while improving access.
On the internet there are billions of websites that are easily accessible. The advantage of this decentralized model is that, just like on the web, data no longer needs to be stored in one central database, which makes it a target for thieves, but data can be spread over the internet while accessibility remains the same, the reliability increases and security improves.
What is blockchain?
Blockchain Technology Explained - To easily explain what a blockchain is now, this form of data management can best be compared with a spreadsheet or an Excel sheet. The universal ledger of the blockchain is nothing more than a list like in a spreadsheet or an excel sheet that has been shared with everyone in the world.
Plus, a list of data where everyone who participates receives an exact copy of that list and can see what it says. Anyone with the spreadsheet can then also make changes to the database. And when a change in the spreadsheet is made, this adjustment is immediately taken over to all other copies of the list. The result is that everyone always looks at the same list of Blockchain data everywhere in the world, at any time.
People who use Google drive know that these kinds of spreadsheets already exist with the ability to share the Google sheets. However, there is one feature that makes blockchains unique. And that is that only new rules can be added to a blockchain at the bottom of the list. In fact, the only thing a blockchain does is adding new rows that are automatically shared with everyone. It is not possible to make a change in previously added rules. The cryptographic software ensures this by combining all computing power in the network for the control of the additions and the rejection of mutations.
Distributed universal ledger
For the Bitcoin blockchain, this means that you cannot change the balance but only transfer an amount to someone else. So you can only carry out transactions. A new transaction can only be added with a new line at the bottom of the list. The condition here is that only bitcoins can be sent that originate from an older line in the list. This property ensures confidence. After all, no data, here bitcoins can arise out of nothing, because by this condition an old rule in the list must always be connected to the newer one. Blockchain Technology Explained - Thousands of copies of the ledger, which are continuously compared, ensure that the bitcoin you transfer is demonstrably in your possession and that bitcoin comes from a previously verified line from the general ledger. This makes it possible to make digital information uncorrectable, an important feature for open and distributed ledgers, making them reliable.
If you have a universal ledger such as the blockchain, you no longer need intermediaries that provide this trust. You only need a computer and internet access to the network. With open-source software it is then possible to use the reliability of the general ledger.
Digital transfer of ownership
Blockchain Technology Explained - The special thing about blockchain technology is that it is possible for the first time not only to make a copy of data but to transfer the ownership of certain data. A participant in the network can make copies of all transactions and data in the BlockChain database to their heart's content. But in order to be able to use a bitcoin to pay, he must be able to show that he is the owner and that the bitcoin, according to the rules, has been received from someone else.
The breakthrough is that, thanks to 'distributed trust', digital data cannot be usefully copied, but ownership of Blockchain assets can be transferred digitally reliably without intermediary. This property can hardly be overestimated.
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