You’ve probably heard the term “blockchain” before, but maybe you didn’t pay much attention to it, considering it a frivolous buzzword or technical jargon. But we believe that blockchain technology is a breakthrough with very large-scale consequences that will affect not only the financial sector but many other industries as well. In this article, we will explain what blockchain is in simple terms.
Blockchain (from the English blockchain or blockchain – a chain of blocks) is a digital database (distributed ledger), which is a chain of transactions (contracts, deals).
In other words, this is a peculiar way of storing data, in which at the same time, on many computers, an online journal is kept with records of an asset and transactions with this asset in chronological order without the involvement of an intermediary. Records in the blockchain are combined with each other into a special structure – a block. The information contained in the blocks is not encrypted, it can be rechecked, but it cannot be changed or deleted.
In addition to transactions, each block contains its own sequence number and the result of processing the data contained in the previous block (a special cryptographic hash function), with which it will then be possible to check the integrity of the information.
Assets that are recorded in the transaction register are:
Operations within the network are recorded and processed autonomously, without the involvement of third–party services. Distributed ledger technology assumes that the current state of the blockchain at a specific point in time is loaded, synchronized and provided by hundreds of thousands of computers around the world – nodes or “nodes” (from the English node). When a new block appears in the network, all nodes update their blockchain. Nodes store the complete current version of the blockchain, and other computers access them if it is necessary to verify any data.
In the blockchain, each subsequent block is linked to the previous one through its content – a set of records. Moreover, each block stores all the information in the chain, starting from the very first block, and new blocks are added to the very end of the chain. So the entire content of the blockchain gradually grows like a snowball. All blocks are in strict chronological order and are linked by a cryptographic signature created using complex mathematical algorithms. Any change to the system is accompanied by a cryptographic signature, i.e. after the transaction is completed and written to the chain, all network nodes will know about it.
Only verified data gets into the blockchain. Verified, valid information is written into the block and remains in the blockchain forever, and anyone can make sure of its authenticity. In this case, a transaction will be considered valid if it is confirmed by several independent sources – nodes.
Security in blockchain technology is provided through a decentralized time-stamping server and peer-to peer network connections. As a result, a database is formed, which is managed autonomously, without a single center. This makes blockchains very convenient for event logging (eg, medical records) and data manipulation, identity management, and source authentication.
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