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What is blockchain and how does it work?
In recent years, countless people have been talking about buying and selling Bitcoin and the potential of this digital currency. Everyone from beginners to professionals in the world of digital currency technology is interested in this emerging and unique phenomenon of the present century. But few people have enough research and knowledge about the major bitcoin infrastructure technology, blockchain, which is actually the basis of Bitcoin based on this technology. They also don't know much about the fact that blockchain is not limited to Bitcoin and any other digital currency based on the same technology.
A look at the history of Bitcoin
Satoshi Nakamoto published an article on October 31, 2008. In this article, he discusses the concept of Bitcoin as electronic cash and how it works to send and receive money between two people without intermediaries and anonymously. Since Bitcoin uses cryptography for its operations, a cryptocurrency classification was proposed for it. Of course, the word digital currency has also become popular since then.
What was the purpose of Bitcoin? This was primarily the goal of financial transactions; But then researchers looked at its infrastructure technology and realized its high potential for use in other industries. Ability to create professional applications for modern industry with modern technology approach. And such blockchain was the title used for this functional infrastructure technology
What is a blockchain?
We use an intermediary such as a bank for a financial transaction. But blockchain allows buyers and sellers (senders and receivers of virtual money) to communicate directly with each other, eliminating the need for third parties as intermediaries. This form of transaction is called "peer to peer".
Blockchain uses cryptography to secure exchanges and even buy and sell digital currencies. Unlike the banking system, which operates in a so-called centralized location, the data centers where the blockchains are located are completely decentralized and spread around the world. The Chinese blockchain is called the "Distributed General Office". This simple ledger is available in detail to all members of the network, even accounts, books are transparently available to everyone. This network is actually a chain of computers that verifies the accuracy of the transactions made between you and the other party and after confirming, they add it to the blockchain.
Blockchain structure in simple language
Blockchain Each block contains a digital piece of information with three sections:
1) Information about your transaction: For example, the date, time and amount of your last bitcoin purchase.
2) Transaction Participant Information: Using a digital signature instead of your real name, your purchase will be recorded without any identifying information using a unique "digital signature".
3) Each block has different information from other blocks: as each of us has a fingerprint so that we can differentiate ourselves from each other, each block stores a unique code called a hash which allows us to differentiate it from any other block. . In this way, blocks related to two transactions with the same description can be separated due to their unique codes.
How does blockchain work?
To better understand how the Chinese blockchain works, let's take a look at Bitcoin transactions. Blockchain stores all the information and details of each transaction made with this digital currency and prevents it if a user wants to trade a bitcoin more than twice (i.e. scam).
Each blockchain is added to the block when it stores new data. And so the chain of several blocks that come together, the general title of the blockchain emerges. To add a block to a blockchain, four things need to happen:
1) A transaction must be made.
2) After purchase, you need to confirm the transaction. This is done by computer networks, which have more than a thousand computers and are spread all over the world. This network checks through the computer that the transaction has been made according to your order.
3) The storage space of each transaction must be at the heart of a block. Once your transaction is confirmed, the information will be recorded in a dedicated block. There, your transaction information is placed next to a number of similar transactions.
4) Each block must be given a hash (code): After confirming all the transactions in a block, that block must be given a unique identification code called a hash. After receiving a dedicated hash, that block is added to the blockchain
Why is blockchain important?
Blockchain technology and its applications are unparalleled and can be used in almost anything transferable, including money, goods or property.
Blockchain is the biggest barrier for fraudsters, as each transaction is recorded on a simple ledger with all its details and all parties to the transaction can access these details.
Who is Blockchain available for?
Anyone with internet access anywhere in the world can use it in their transactions.
However, many studies have shown that the use of this technology will increase in the next decade, with increasing interest in blockchain around the world. Insurance companies and technology companies use it as a tool to reduce costs and reduce system errors. Increase the quality of their service.
When you have a copy or updated version of the blockchain with every computer that connects to the China blockchain, the same blockchain version is available to thousands or millions of bitcoin users, and the content of the blockchain is visible to everyone anyway.
This amount of blockchain information on a network of computers makes it even more difficult to manipulate the information, since a hacker has to manipulate any version of the blockchain on the network, which is almost impossible with all available versions.
On the other hand, if you look at the Bitcoin blockchain, you will find that it is virtually impossible to identify users, because even though transactions registered on the blockchain are not completely anonymous, users' personal information is limited to their digital signature or username. . However, the question that arises here is how the China bloc will ensure and trust the safety of users?
How does blockchain ensure user safety?
Blockchain methods to build user safety and confidence:
New blocks are always added linearly and chronologically. So new blocks are always added to the blockchain. Each block of the chain has a position called height.
Once a block is added to the end of the blockchain, the work is done, and it will be very difficult to come back and manipulate to change the content of the block. This is because each block has its own hash marked with the hash of the previous block.
Hash codes are created by a mathematical function that converts digital information into a string of numbers and letters. If this information is manipulated or edited in any way, the hash code will also change. Suppose a hacker tries to manipulate your transaction information so that you have to pay your purchase price. Hash blocks change as your transaction information is edited; The next block of the chain still has the old hash and the hacker also needs to update it; And then the next block at the end like this, it takes a lot of unimaginable computing power to recalculate all these hashes. In other words, once a block is added to a blockchain, it is very difficult to edit and impossible to delete.
What are the problems and limitations of blockchain?
1) Specialized terms: There is a whole new vocabulary due to the rise of blockchain technology. Fortunately, over the years, countless efforts have been made to provide complete and simple dictionaries, definitions, and lists.
2) Network breadth: Users need to have a large network to get the full benefits of blockchain. And whether this limitation is a significant objection to Chinese blockchain projects is still debated.
3) Cost of transactions, network speed: Bitcoin exchanges, which were declared almost free in the first few years of their existence, now have significant costs.
4) Inevitable security flaws: In Bitcoin and other blockchains, there is a significant security flaw: if more than half of the computers that act as nodes in the network lie (note that more than half the computers), the lie becomes true. This error is called "51% attack" and was mentioned by Satoshi Nakamoto when launching Bitcoin. For this reason, bitcoin mining pools are closely monitored by collectors to ensure that no one inadvertently provides such intrusions into the network.
We hope you enjoy this article, which we explained in simple blockchain language and its applications, thanks for your support.
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