What is Blockchain Technology? What you need to know about Blockchain technology
If you are interested in the field of investment, banking, and cryptocurrencies in recent years, you must have heard the term “Blockchain”. In the 4.0 era, the concept of Blockchain technology becomes familiar to many people. However, not everyone fully understands the characteristics and how this technology works. Our article today will provide a clear look and learn what Blockchain technology is.
What is Blockchain Technology?
Despite being known as a new technology, Blockchain has also managed to buy itself some interesting history. In 2008, the pseudonym Satoshi Nakamoto published “Bitcoin: the electronic cash system”. A year later, a Bitcoin transaction was successfully executed. In 2011, 1 unit of Bitcoin was worth 1 USD. From this foundation, in 2012, Blockchain and Crypto officially entered popular culture by appearing on popular TV shows.
In 2016, IBM announced its strategic use of Blockchain for cloud-based business solutions. The Japanese government also recognizes the legitimacy of Blockchain and Crypto. Since then, Blockchain technology is being strongly applied to life. So what really is Blockchain?
As the name implies, block means blocks, chain means chain, so what is Blockchain? It is simply defined as a chain of blocks, which contains information about financial transactions, property ownership, etc. Blockchain 4.0 technology is considered a kind of database, a collection of information stored electronically on a computerized system programmed with the ability to record and track valuable information, such as ownership of land, real estate, or financial transactions.
Blockchain consists of 3 main components: Block, Node, Miner. In it, each block will contain three basic components including data, a 32bit integer named nonce and a hash function.
When the first block of the chain is generated, a nonce builds a hash. This means that the data is "stamped" and cannot be modified.
What is blockchain used for?
The purpose of blockchain is to allow people, especially strangers, who do not trust each other to share valuable data securely, accurately and without impersonation. Basically, Blockchain can be understood as the ability to extend trust through technology.
We can simply understand that information about financial activities, asset transactions will be recorded in a ledger. The difference of Blockchain with a paper book is that instead of a keeper, this technology will help publicize information for related people to jointly manage as well as ensure the accuracy and transparency of information.
Key Features of Blockchain
A distributed database
Most Blockchain technologies are designed as a decentralized database. Digital “assets” are distributed rather than copied or transferred on the Blockchain. As a result, everyone in the same chain can control the information and data contained in the block.
Sustainability and security enhancement of blockchain technology
In a Blockchain, each block has its own unique hash as well as a reference to the hash of the block that precedes it. So mining a chain is quite complicated, especially on large chains.
Miners of this chain will use specialized software to solve extremely complex arithmetic problems, when wanting to find a nonce that produces an acceptable hash. Since each nonce is only 32bit while each hash is 256bit, there are approximately four billion combinations of nonce and hash functions that need to be searched before finding the “golden nonce” for their block to be added to the chain.
Also, a change to any one block in the chain affects not only itself, but all other blocks behind it. Therefore, manipulating Blockchain technology is extremely difficult. Not everyone has the information technology capabilities nor the time to find a golden nounce. Therefore, Blockchain 4.0 technology is guaranteed for its sustainability and security.
Transparent and unbreakable
Blocks are concatenated to form a chain, once a block has been updated, you will not be able to delete the information in it. Blockchain works based on the common record in finance that it is not allowed to delete updated data, instead update new blocks, with the content to be edited and the name of the editor. This helps both the clarity of the information and the integrity of the generated data.
A network of nodes
Node is the link between the blocks in the chain. They have two basic tasks of sharing information and keeping up-to-date copies of transactions and data. Each node in the network acts independently as authoritative verifiers.
This is considered one of the important concepts when it comes to Blockchain technology. With this technology, no single computer or organization can unilaterally own the chain. Instead, the Blockchain acts as a ledger connected to each other through nodes. These nodes can be any type of electronic device, capable of maintaining a copy of the Blockchain and ensuring the operability of the chain.
Blockchain functions like Google Docs
This is a simple understanding of Blockchain. In fact, Blockchain and Google Docs are both tools and technologies for storing data and allowing mining documents to be shared with a group of other people. This creates a decentralized distributed chain that allows multiple people to access the document at the same time. In addition, modifications in Google Docs and Blockchain are recorded in real time, ensuring the publicity of information.
What are the advantages and disadvantages of Blockchain?
The advent of Blockchain technology brings many advantages in various fields, providing greater security in trustless environments.
Three outstanding advantages of Blockchain
Distribution
Since data is often stored in thousands of devices on the same distributed network of nodes, the system as well as the data on the blockchain are resistant to outside attack. Each network node can replicate and store a copy of the database, thus ensuring no single point of failure.
Stability
Once the data has been updated to the Blockchain, it is impossible to delete or change it. This makes Blockchain an optimal technology to store financial records or any other data when tracking is required because every change is tracked and recorded permanently on the system.
Trusted system
In traditional payment systems, transactions depend not only on the two parties involved, but also an intermediary such as a bank, credit company or payment service provider. When using Blockchain technology, this is no longer necessary because the system can verify transactions by itself through the activity of “Mining” – “mining” coins. Therefore, Blockchain has the ability to eliminate risks from third parties as well as reduce transaction costs.
Disadvantages of blockchain
Private Key
Each user will be given a corresponding private key to access the data. If they lose this private key, their data, information and assets will also be lost.
Storage
Blockchain's growth in storage capacity is outpacing the capacity of a single hard drive to download. This means that the possibility of losing nodes is quite possible.
How does Blockchain technology work?
Blockchain's operating mechanism is based on consensus from the majority and without intermediaries. A block to be included in the chain must meet the following requirements:
- All transaction information must be recorded and verified by individuals who have the right to manage the data in the block.
- Next, after the conversion to a hash, the block is closed and chained.
Why is it impossible to edit data on Blockchain?
As mentioned above, the data stored in a block comes with a corresponding hash. When we modify the data in the block, the next five blocks in the chain will become invalid. Therefore, when we want to change a block, we must also ensure the validity of the following blocks.
Blockchain, on the other hand, works on a peer-to-peer network architecture, allowing everyone to have access to the network. Each recipient will own a copy of the Blockchain, and only when 50% of the nodes agree, a new block is considered valid and added to the chain.
Therefore, you will not be able to arbitrarily modify the content contained in a Block located in the Blockchain.
How many types of blockchain are there?
Based on several criteria, Blockchain systems are classified into 3 main categories:
Public Blockchain:
Public blockchain provides an open platform for people from many organizations or individuals to participate in trading and mining. An important point is that there are no restrictions on this public system. Therefore, this is also known as a “no-stakes” Blockchain as everyone is empowered to learn, record transactions and perform audits or review blocks in the chain regardless of time. This system is considered an open platform and operates on a decentralized consensus mechanism.
Private Blockchain
This is a Blockchain system set up to facilitate the sharing and exchange of private data between a group of individuals belonging to an organization or between multiple organizations. Private Blockchain is understood as a licensed chain, and only authorized people can access the chain and blocks. This system operates under a centralized mechanism.
Consortium Blockchain – Permissioned Blockchain
It is understood as a federated Blockchain consisting of a predefined set of nodes that are responsible for consensus as well as block validation. This partially centralized system is under the control of a select number of validating nodes, capable of deciding whether the block's data is public or restricted.
What are Consensus Algorithms in Blockchain?
The consensus algorithm is a procedure through which all members of the Blockchain network agree to reach a common agreement. Basically, the consensus algorithm ensures that every new block added to the chain is a unique version and is accepted by the nodes.
The consensus protocol in the Blockchain includes specific goals such as agreement, equal cooperation, and mandatory participation for each node. Therefore, each consensus algorithm aims to find a common agreement that benefits the entire system.
Blockchain consensus algorithms:
PoW
This is the algorithm that Bitcoin used. The main idea of this algorithm is that nodes will have a chance to solve a "math puzzle", the sooner the node solves it, the next block in the chain will be mined.
PoS
This is considered an alternative of PoW. For this algorithm, instead of investing in hardware, participants will use their invested money as a base to place blocks that they think will be the next element of the chain. Based on the actual blocks added to the Blockchain, all validators will receive a reward corresponding to the amount they staked.
PoB
This algorithm allows miners to send coins to an address they cannot access, in order to find a chance to enjoy mining privileges on the system by a random selection process. Depending on the implementations, the “miners” can use the coins contained in the Blockchain application or the alternative chain currency, such as Bitcoin coins. The amount invested is proportional to the probability of being chosen to mine the next block.
PoC
This algorithm focuses on the space investment of the hard drive. As more hard drive validators appear, they will have the added advantage of being able to choose blocks to mine and receive rewards.
PoET
PoET is one of the fairest consensus algorithms in choosing the next block based on reasonable means. In this algorithm, every validator on the network has a reasonable chance of generating their own block. All nodes through a random interval, to receive information about generated blocks. The straight winner is the validator with the lowest timer value. The chain then adds the block from that person's node.
Where can blockchain be used?
Blockchain will be used in the following areas:
Smart contract
These are digital embedded by the IFTTT code in the system, providing the parties with detailed content as well as the terms of the contract will be executed automatically according to what has been programmed. available.
Sharing economy
Blockchain will eliminate the disparities that appear in the economy by maintaining decentralized, peer-to-peer platforms so that all transactions can proceed transparently, without the influence of intermediaries. . As a result, it will be easier for businesses to build a sharing economy market.
Expanding capital mobilization market
As mentioned above, Blockchain has the ability to ensure transparency and safety between information exchange between parties. As a result, customers and businesses can reach each other more easily, quickly and reliably.
Supply chain check
Blockchain is used in supply chain management in the fields of Logistics, origin of agricultural products, and food. This technology brings many benefits to the supply chain with the ability to quickly and accurately update, encrypted information to ensure safety and transparency, reduce management costs and increase trust. of consumers.
Along with some other applications in:
- Administration
- File Storage
- Protecting intellectual property rights
- Internet of Things (IoT)
- Identity management
- AML and KYC (AML is anti-money laundering and KYC is identity verification)
- Neighborhood Microgrid
- Save data
- Stock trading
What are the applications of Blockchain in real life?
Blockchain is currently being applied in many areas of life.
What is Blockchain Asset Management?
Assets here can be tangible assets such as computers, laptops or intangible assets such as software and services. Blockchain provides its storage and sharing capabilities to business networks. Management activities include sequential production of asset blocks, asset validation, asset capitalization, warranty activation, and asset installation.
What is the application in Real Estate of blockchain
Transactions in real estate are often cumbersome, less transparent and expensive due to the involvement of many different intermediaries. Therefore, many people look to Blockchain as a smart way to encode all data about real estate assets and their properties into a corresponding digital address. The information stored includes usage, financial, legal, building performance, physical properties, transaction history.
What is the Application in Finance of Blockchain?
This process is extremely important but also quite time consuming because of many factors such as intermediaries, banks and currencies. Fortunately, Blockchain can speed up and simplify this process by eliminating the role of intermediaries. At the same time, making money transfer more efficient. To date, Blockchain has helped reduce remittance costs from 5-20% to 2-3% of total funds, as well as providing guaranteed real-time transactions globally.
Help in other things
Not only related to property and economy, Blockchain is also active in the field of love. Specifically, the system can search online for a random bride and groom, giving them the opportunity to meet and get to know each other. The ultimate goal is to get married. In 2014, a couple named Joyce and David Mondrus became successful with this method,
What is Blockchain's Healthcare Application?
Instead of being stored on paper records or a computer's hard drive, the patient's medical records have been pushed into each block in the chain for decentralized storage, while allowing doctors and companies to Access insurance to capture the patient's disease situation. In the event that a patient needs to be transferred, they simply move the information on-chain instead of complicated paper records.
Summary
Above is comprehensive and remarkable information about Blockchain, the technology of the new era, especially 4.0. It is used globally to maintain a decentralized peer-to-peer infrastructure. Fox Crypto News hope article What is Blockchain? This is useful for those who are looking to learn and operate on Blockchain.
The content in this article is not considered investment advice, you should fully understand and equip yourself with financial and Crypto knowledge to be able to make decisions and choices. most correct. Good luck!
Reference sources:
2. What is Blockchain Technology? - IBM Blockchain | IBM
Fox Crypto News - Aug 18, 2022
