March 21, 2018

Blockchain explained - why you should care

Blockchain is one of the most promising technologies for the future. It is becoming the link between business and technology. Blockchain can be used for documentation, tracking of tangible & digital goods and many other applications because it’s transparent, democratic, decentralized, efficient and secure.


What is blockchain?

A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a cryptographic hash of the previous block, a timestamp and transaction data. By this mechanism, there are thousands of identical copies of the blockchain possible in order to create a decentralized transaction network without third parties. A blockchain without decentralization is a simple and expensive transaction database. Moreover, a blockchain is just one technological component in order to create a decentralized cryptocurrency.

By design, a blockchain is inherently resistant to modification of the data.
Blocks hold batches of valid transactions that are hashed and encoded into a Merkle tree. Each block includes the cryptographic hash of the prior block in the blockchain, linking the two. The linked blocks form a chain.This iterative process confirms the integrity of the previous block, all the way back to the original genesis block.



What is blockchain used for?


The primary use of blockchains today is as a distributed ledger for cryptocurrencies, most notably bitcoin.


A blockchain is a decentralized, distributed and the public digital ledger that is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network.

When you write data to a blockchain, it’s like etching the data into stone. This could be used for education credentials, land registries, and more.











How does blockchain work?


 Each entity on a blockchain can access records on the entire database, but no single entity controls the data or the information.

Communication is not through a central node but occurs directly between peers. Each node stores and forwards information to all other nodes.

Once a transaction is entered, the records cannot be altered as they are linked to every transaction record that came before them in the “chain”.

Due to its digital nature, blockchain transactions can be tied to computational logic and in essence, programmed. Users can set up algorithms and rules that automatically trigger transactions between nodes.


What are advantages?


The blockchain technology is almost always open source, that means other users or developers have the opportunity to modify it as they see fit.

Blockchain allows peer-to-peer and business-to-business transactions to be completed without the need for a third party, which is often a bank (By removing third-party intermediaries and overhead costs for exchanging assets, blockchains have the potential to greatly reduce transaction fees).

Instead of running a massive data center and verifying transactions through that hub, blockchain actually allows individual transactions to have their own proof of validity and the authorization to enforce those constraints.

Blockchain has a core characteristic of being decentralized and trustless. Data can be shared across the network without the need of an intermediary to validate or authorize it. These constraints can, therefore, be enforced directly by the nodes on the blockchain with a consensus mechanism to ensure that the nodes stay in sync.

Every node on a blockchain process every transaction, so no individual node is crucial to the database as a whole, so it has extreme fault tolerance capabilities.

Public blockchains can offer full transparency of the transactions carried out on the network while safeguarding the privacy of its users through pseudonymity since only the transacting addresses are shown.

All transactions and associated values are visible to anyone with access to the system. However, each user can choose to provide their identity to others or remain anonymous.

What is the blockchain history?


The first work on a cryptographically secured chain of blocks was described in 1991 by Stuart Haber and W. Scott Stornetta. In 1992, Bayer, Haber, and Stornetta incorporated Merkle trees to the design, which improved its efficiency by allowing several documents to be collected into one block.

The first blockchain was conceptualized by a person known as Satoshi Nakamoto in 2008. It was implemented the following year by Nakamoto as a core component of the cryptocurrency bitcoin, where it serves as the public ledger for all transactions on the network. Through the use of a blockchain, bitcoin became the first digital currency to solve the double spending problem without requiring a trusted authority and has been the inspiration for many additional applications.

The term blockchain 2.0 refers to new applications of the distributed blockchain database, first emerging in 2014. The Economist described one implementation of this second-generation programmable blockchain as coming with "a programming language that allows users to write more sophisticated smart contracts, thus creating invoices that pay themselves when a shipment arrives or share certificates which automatically send their owners dividends if profits reach a certain level." Blockchain 2.0 technologies go beyond transactions and enable "exchange of value without powerful intermediaries acting as arbiters of money and information." They are expected to enable excluded people to enter the global economy, protect the privacy of participants, allow people to "monetize their own information," and provide the capability to ensure creators are compensated for their intellectual property. Second-generation blockchain technology makes it possible to store an individual's "persistent digital ID and persona" and provides an avenue to help solve the problem of social inequality by "potentially changing the way wealth is distributed". As of 2016, blockchain 2.0 implementations continue to require an off-chain oracle to access any "external data or events based on time or market conditions to interact with the blockchain."

No comments: