Hello, dear reader! In today’s text, I will answer the question: what is Blockchain?
Blockchain is a worldwide ledger, distributed, trustworthy and immutable. It serves to record data and transactions, track assets and execute smart contracts. The records are […]
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What is Blockchain?
Blockchain is a worldwide ledger, distributed, transparent and immutable. It serves to record data and transactions, track assets and execute smart contracts. Records are made in chronological order, forming a chain of blocks. And that’s where the name Blockchain comes from: block chain!
Blockchain is the mother of Bitcoin and all Altcoins. It exists without Bitcoin, however, Bitcoin does not exist without Blockchain. Got it? If you don’t know what Bitcoin is, you can understand here: “What is Bitcoin? Complete guide 2020“.
Have you seen a ledger? It is a notebook, where the most diverse types of records are made. Then you can have a ledger for several things, such as:
- Employee timesheet;
- Entry and exit of people in one place;
- Cash inflows and outflows;
- Product withdrawals in a store;
- Registration of orders; etc.
It should be noted that these records are made in order of time. That is, in the first line, there is the first record. In line 2, the second record. So on.
Blockchain is a global ledger
I am comparing it with a handwritten ledger, because after registering, there is no way to delete or change the registration. Unless you corrupt it.
Blockchain works just like the ledger, only virtual. However, it is impossible to change a record. It is immutable, incorruptible! There is no way to counterfeit or hacker the Blockchain.
Before being written on the Blockchain, the data has to be validated. This validation takes place through various calculations. So, you need a computer that stays with that mission. It does a lot of calculations to prove that the transaction is true. Only after validation, that registration is made.
That’s why we say that Blockchain is trustworthy, so much so that its nickname is “trust protocol”. Everything that is registered there, is true! Anyone in the world can read and check the Blockchain, as it is distributed to everyone!
Characteristics of the Trust Protocol
- Decentralized, that is, no one controls or is its “owner”;
- Distributed, then each user has a copy of the ledger;
- Protected by advanced encryption. What prevents data and records from being deleted, revised or modified;
- Maintains the privacy of users.
Remember that each cryptocurrency has its own Blockchain. That is, the Ethereum currency has its own Blockchain, which is different from Bitcoin. I’m not talking about tokens here, just cryptocurrencies.
That is, there are many Blockchains, but each one has a specific cryptocurrency.
How does Blockchain works?
Each block is like a ledger sheet. When you are finished making records on a sheet, you need to start a new sheet. In Blockchain, each block is as if it were a part of that ledger. Only at the end of each block, a signature is required.
This signature places the date, time and the block number. Ensuring that it will be attached to the previous block. At the same time, it ensures that the next block will be attached to it. This keeps each block in its respective place.
Block chain example
To explain the chain of blocks, let’s use the example of the train below.
Every Blockchain has its genesis block. This is where the rules of the system are written. On our train, this block is responsible for loading all other blocks. In addition to defining the direction they are going. In this block there is information such as:
- Maximum amount of cryptocurrencies that will be issued in this system;
- What is the reward for mining each block;
- The code;
- How will it work;
- And other more complex parameters.
After the source block, comes the first block, block 1. The first transactions will be written to it. And when all the space is filled, this block will be closed and signed.
The hash is an encrypted key, but for us, it is enough to know that it is the signature that encloses a block. It is the last information for each block, as it is only signed when it is complete. This signature links this new block to the previous and the next block. Some of the information it contains in a hash:
- Date and time;
- How many transactions are validated in the block;
- Current and next block number.
Block being written
There is a wagonn that has not yet been attached to the train. This wagon represents the block that is currently being used. It is the incomplete block, where transactions are still being recorded.
When all the space in this block is filled, it will then be signed with the hash and then yes, it will be attached to the Blockchain. In our example, it represents the future block 3.
When we talk about digital currency technology, we always mention the terms:
Now let’s explain what they mean. See the image below, where we have 3 different types of systems.
In a network that is centralized, we have an “owner” of the network. That is, all information and data are passed through the owner. And only after this mediation, they are distributed to other users.
A bank’s system, for example, is centralized. After all, you have your account inside, but the transactions go through the owner. That may or may not refuse or reverse its operations.
What is decentralized Blockchain?
In short, it is the opposite of the first. It has several aggregation centers, but which distribute the flow of information and data. It does not have an owner. Data goes through these centers and everyone’s ledger is updated simultaneously.
In a distributed network, in addition to being decentralized, each user on the network is a node. And each node has a copy of the ledger. Each user (or node) is like a center in that system. In this way, everyone owns it. And each user is their own Blockchain infrastructure.
If a node enters the network, the information is automatically copied and delivered to it. And if another node leaves, all other users already have a copy of all the shared data. This is all excellent so that there is no point of failure in the network.
Advantages of Blockchain
Now that you’ve understood what Blockchain is
Let’s talk about the advantages of using it and what can it bring us to improve?
- There is no intermediary in negotiations between two parties;
- Users have complete control over their data and transactions;
- All transactions are executed as the protocol determines, eliminating the need for supervision;
- The cost of a transaction is less, as fees are not necessary for an intermediary or a regulatory entity;
- Resistance to attacks: the network is distributed, so the data is protected and copied on each node;
- Transactions must be validated, therefore, all information is complete, true, accurate and is always available to network users;
- Clean and organized environment: within a blockchain, there is only one database, where everything is organized in chronological order with no chance of frauds;
- There will still be the use of Blockchain in an incredible way and environments, as there are a multitude of applications of this technology in real life, since any document or asset can be translated into code and inserted in the ledger.
Challenges of using Blockchain
Not everything is a bed of roses, dear reader. Blockchain is the future and you need to accept that. There is no escape. But we still have a series of challenges and obstacles to achieving this reality.
Main Challenges of Blockchain Deployment
- As it is a new technology, there are challenges to reduce the time of transactions and data validation. In addition, the limit of data inserted in a blockchain is fundamental for its use to be widely accepted;
- Although it helps to save time and money between transactions, there is a high initial cost for its implementation;
- As there is no regulatory entity, nor third parties supervising the network, there may be great resistance from banks and other financial entities to accept the global use of Blockchain;
- Although it is one of the most secure systems, with advanced encryption and inability to track information, there are still cybersecurity issues that must be resolved and enforced before the world population trusts their data on the network;
- Mining, or validating network data, requires great computational power and electricity consumption. Which shows us a new environmental threat and separation from those who have technical and computational resources (miners) from ordinary users.
- The technology behind Blockchain is very different from the reality in the world today. For it to become fully implemented, it would be necessary to adapt all the systems in the world. That is, for Blockchain to be adopted, there would be a need for a global transition period.
- In addition to a system transition period, a revolution in culture would also be necessary. Breaking paradigms. It is a completely decentralized service, where the participation of each node would be essential.
A revolução já começou!
On these last 2 points of challenges, I say: it is already happening. So, read the article: “Do you know what the future of Bitcoin is?“. And you will understand that that vision that we had of digital currencies for the future, is already happening!
Did you already know Blockchain? If so, do you believe in its use globally, as common as we use the Internet today?
If you still didn’t know what Blockchain is, did you have any questions? What did you think of this explanatory article?
Leave your opinion here in the comments or on our social media! And don’t forget: share with your colleague who still thinks Bitcoin is a bubble! 🤦🏻♀️🙄
This article was written with a lot of love and devotion! ❤️