Blockchain is a secure technology that enables to transfer digital data through a sophisticated encoding information system.
In other words, blockchain is a ledger that provides a way for information to be recorded and shared by a community. That is why it is usually compared to a ledger of digital transactions.
One of the newest characteristics of blockchain is that it is a non-centralized system. That is to say, there is no need for intermediaries to identify and certify transactions. On the contrary, data is distributed through independent nodes –computers or servers– that register and approve the information, without the need for a relationship of trust between them.
All the members of the chain must validate any updates collectively. Said another way, the information is only validated when the majority of the parts agrees to do it. Moreover, once the information is introduced it cannot be deleted.
In this sense, the big advantage of blockchain is that, in case any node of the chain changes the register, it is automatically synchronized with the rest of the parts. Additionally, if the network of any of the computers or servers crashes, the information is not in danger, it remains intact provided that, at least, one of the parts keeps on working.
How does blockchain work?
The running of the blockchain depends on the interaction of all nodes that are part of the chain. It works in the following way:
- Transaction. Two parties exchange data, such as money, contracts, medical records, customer details or any other asset that can be described in digital form.
- Verification. Depending on the network’s parameters, the transaction is either verified instantly or placed in a queue of pending transactions. In this case, nodes must determine if the transactions are valid.
- Structure. Each block is identified by a hash, an algorithm agreed upon the network. The sequence of linked hashes creates a secure, independent chain.
- Validation. Blocks must be first validated to be added to the blockchain. One of the most validation accepted forms is proof of work, a system that prevents attacks and other service abuses such as spam on a network by requiring some work from the service requester.
- Blockchain mining. This step consists of aggregating the transaction registers to the ledge.
- Chain. Each node adds the block on the chain, which is distributed all along the network.
- Protection. The structure of the chain is secure. For instance, if a malicious miner tries to submit an altered block to the chain, the other nodes detect these changes and reject the block from the chain.
What applications does it have?
Blockchain is the technology underpinning Bitcoin, and it works as its database and backup copy.
Over the time, blockchain has gained other uses, for instance smart contracts. Thanks to this technology, agreements and transactions can be done without any intermediates needed.
Blockchain also works with IoT, because it allows the devices to interact in a secure way. For example, the fridge can interact with the online supermarket when yogurts are finished.
These are only a few examples of the applications of blockchain. Do you know anyone else? Write your comments here!