What You Need to Know About Blockchain Technology

What is Blockchain?

Blockchain is a continuously growing list of records, called blocks, which are linked and secured by cryptography. Blockchain is mainly famous as technology behind bitcoin, but, in fact, blockchain can be used for a much broader range of purposes than just cryptocurrency. Some experts even consider, that blockchain is a major technological breakthrough since the invention of the Internet. Undoubtedly, the world can no longer ignore this unique technology.

What is Unique About Blockchain Technology?

At first glance, it seems that the principle of operation of blockchain technology can be compared to work of Wikipedia. Both Wikipedia and blockchain entries are not a product of a single person. In the cases of both Wikipedia and blockchain, many people can write entries into a record of information, and a community of users can control how a record of information is changed. But on closer inspection, there are significant differences that make blockchain a revolutionary invention. Let's consider this issue in more detail.

Wikipedia entries are stored on a centralized server. They can be amended by users with permissions associated with accounts. Control of the database, including the management of all changes and updates, remains with Wikipedia administrators. In this way Wikipedia digital backbone is similar to the centralized databases that governments or banks keep today. In other words, if you want to edit a Wikipedia page as well as send some money to somebody across the world, you need an intermediary: administrators in case of Wikipedia and bank and government in case of money transfers. Unlike Wikipedia and financial banks, the blockchain is a type of decentralized database. To put it simply, the complete absence of an intermediary is a most distinct feature of blockchain technology. Why is it so important? Because a distributed network significantly reduces the risk of centralized corruption or failure.

How Does Blockchain Technology Work?

In the case of blockchain there is no the main server on which a database is stored. Technically a database is stored in multiple computers connected to the same network. For a blockchain database, each participant maintains, calculates and updates new entries into a database. All nodes work together to ensure they all comes to the same conclusions, providing infallible security for the network. A digital thief will have to replace the data from more than half of the system participants. But it is almost impossible because the network contains more than a million of participants. So everyone knows about each update and nobody can cancel it. As Adam Draper, founder of Boost VC said, the blockchain “replaces third-party trust with mathematical proof that something happened”.

Private Key on the Blockchain

Blockchain allows you to send any information (values) to anywhere in the world where a blockchain file is available. But you need a private key, which allows you to access the information. Private key is a large set of numbers and letters symbols. You private key confirms, that you are who you say you are and you have the right to do what you are trying to do. Possession of a private key is ownership. Giving your private key to someone means transferring your money or other values stored in the blockchain. Nobody can change blockchain entries without private keys. Changes not confirmed by private keys are rejected. Of course, private keys can be stolen, but protecting computer code is easier and cheaper than, for example, the protecting the gold reserve.

Blockchain Potential

When the internet came into being, it was a revolutionary, game-changing force for many industries. Blockchain technology holds the same potential! Blockchain could have huge implications for any business that requires the verification of payments. Distributed databases could enhance entrepreneurship in developed and developing countries, breaking down barriers of bureaucracy and corruptions. Moreover, in the future blockchain could exclude a possibility of unfairness in elections and implement many other bold undertakings. Who knows, maybe blockchain will soon give rise to a new era of the Internet more disruptive and transformative than the current one.