What is Blockchain?

What Is Blockchain?

by DailyCryptoInfo 158 Views

What is Blockchain?

What Is Blockchain?

by DailyCryptoInfo 158 Views

The blockchain network lives in a state of consensus, one that automatically checks in with itself every ten minutes. A kind of self-auditing ecosystem of a digital value, the network reconciles every transaction that happens in ten-minute intervals. Each group of these transactions is referred to as a “block”.


The distributed database created by blockchain technology has a fundamentally different digital backbone. This is also the most distinct and important feature of blockchain technology.

Transactions are broadcast, and every node is creating their own updated version of events.

It is this difference that makes blockchain technology so useful – It represents an innovation in information registration and distribution that eliminates the need for a trusted party to facilitate digital relationships.

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The very primitive form of the blockchain was the hash tree, also known as a Merkle tree. This data structure was patented by Ralph Merkle in 1979, and functioned by verifying and handling data between computer systems. In a peer-to-peer network of computers, validating data was important to make sure nothing was altered or changed during transfer. It also helped to ensure that false data was not sent. In essence, it is used to maintain and prove the integrity of data being shared.


How Does Blockchain Work?

The Three Primary Components of Blockchain
Blockchain can actually be thought of as the combination of several different existing technologies. While these technologies themselves aren't new, it is the ways in which they are combined and applied which brought about blockchain. According to CoinDesk, these three component technologies are:

  • Private key cryptography
    • Blockchain keeps a record of all data exchanges — this record is referred to as a “ledger” in the cryptocurrency world, and each data exchange is a “transaction“. Every verified transaction is added to the ledger as a “block
  • A distributed network that includes a shared ledger
    • It utilizes a distributed system to verify each transaction — a peer-to-peer network of nodes
  • Means of accounting for the transactions and records related to the network
    • Once signed and verified, the new transaction is added to the blockchain and can not be altered


Digital Trust: Process of Confirmation

Put more simply, we want to know, ‘Are you who you say you are?’ and ‘Should you be able to do what you are trying to do?’

In the case of blockchain technology, private key cryptography provides a powerful ownership tool that fulfills authentication requirements. Possession of a private key is ownership.

One of the most important aspects of blockchain technology is the way that it confirms and validates transactions. In the example above, in which two individuals wish to conduct a transaction online, each with a private and a public key, blockchain allows the first person (person A) to use their private key to attach information regarding the transaction to the public key of the second person (person B).

This also spares a person from having to share more personal information than they would need to for an exchange, leaving them exposed to hackers.

Authentication and authorization supplied in this way allow for interactions in the digital world without relying on (expensive) trust. Today, entrepreneurs in industries around the world have woken up to the implications of this development – unimagined, new and powerful digital relationshionships are possible.

Put simply, this concept summarizes a situation in which individuals who each act independently in their own self interests tend to behave in ways contrary to the common good of all users as a result of depleting a resource through their action at a collective level.

Blockchain technology is often described as the backbone for a transaction layer for the Internet, the foundation of the Internet of Value.

Trust is a risk judgement between different parties, and in the digital world, determining trust often boils down to proving identity (authentication) and proving permissions (authorization).

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