What is blockchain and how does it work?

About the blockchain technology on which Bitcoin is built, in simple words

Blockchain is a technology based on which Bitcoin is built. But there are, perhaps, dozens of other ways of using blockchain not connected with crypto-currencies. There is an opinion that the blockade is the main technological breakthrough since the invention of the Internet.

What is blockchain technology?

If you do not go into the technical nuances, then the principle of the blockchain is quite simple. It can be represented as a ledger, which has every member of the system and which is constantly updated. In fact, any event can be inscribed in this ledger – from financial transactions with crypto-currencies Bitcoin, Etherum, etc. to the results of voting in presidential elections or identification data. The blockchain feature is that the pages (that is, blocks) of this book are simultaneously stored by all users of the network, are constantly updated and refer to the old pages. And if someone tries to deceive the system by tearing or pasting a page into the ledger, then the system immediately turns to tens of thousands of other versions of this book and discovers a discrepancy in the structure of the blocks.

How it works?

The basic blockchain system is a constantly growing sequence of blocks that are shared between participants using peer-to-peer networks that most people use to download and distribute torrents.

A time stamp (hash sum) is added to each block, which is the easiest to imagine, as a unique fingerprint. These blocks are strictly in a certain order added to the chain (“blockchain” – literally “chain of blocks”). If you try to rearrange the sequence of blocks, the system will reject the chain due to a mismatch between the structure and the hash sum.

So that no one can change the time stamp and recalculate the hash sum, which will be correct from the point of view of the system, the block system uses several methods of protection: Proof of Work (PoW) and Proof of Stake (PoS). More about them you can read in the material on Habr.com.

 

How does blockchain work (using electronic money as an example)

 

Why all the hype?

All these tricks give a lot of buns for the users of the system. Participants in the transaction can not deceive each other. It does not need intermediaries like a bank. There is no central node in it, destroying which you can knock down the entire system. All operations are transparent to its participants since all data is entered into one database.

How to explain the interest in blockchain platforms

In addition to crypto-currency, blocking technology attracts financial institutions. To date, the use of blocking in fintech leads in popularity.

But this is not the only area where blockchain software finds application. The attractiveness of this technology is explained by a number of significant factors:

  • full availability of information about transactions in conjunction with the anonymity of users;
  • the perfect impossibility of hacking or falsifying data due to decentralization;
  • no third party is required to complete the transaction, all issues are regulated by only two parties;
  • records of transactions are stored in the registry for all users and are updated for all at the same time.

Thus, the blockchain is used in the field of copyright and personal data, to confirm the right of possession and to establish the authenticity of any creation or object. Various companies have already developed products that allow people with blocking and biometric protection to create digital IDs that can not be forged and that in the future can replace conventional ID cards. Blokchain helps in the field of trade in logistics and operations with goods and raw materials, while controlling the origin of products and organizing loyalty programs. The scope of the block is distributed in the gambling business and video games, in electronic voting, in the organization of private and public management, in the creation of energy distribution systems.

Is blockchain so promising?

Although many experts compare the revolutionary nature of the blockbuster on the level with the creation of the Internet itself, it has bags and bags problems.

Firstly, for the implementation of the blockchain, it is necessary to rebuild large systems with a large number of participants. Each system seeks to retain its properties and structure, resisting change. Therefore, it is easier to start implementing a detachment from a small one. As the government of Sweden does, which transferred the land cadastre to the blockchain.

Secondly, the blockchain is not regulated by the legislative base and is still far from it. For technology to gain trust, it must meet standards. If there are no standards there is no conformity.

Thirdly, to support the technology of the block, you need a large amount of processing power and energy. Experts predict that electricity costs to support bitcoin could by 2020 reach the level of Denmark’s consumption.

Why use New Line Technologies for my blockchain based project needs?

New Line Technologies company is moving with the trends and provides its customers only high-quality products based on the most modern and efficient technologies. The company talents have already developed a number of successful projects using blockchain technology. Our goal is to provide you with the most relevant solutions for your ideas.

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