The word “blockchain” has recently become very popular, many people have heard about it, but not everyone understands what it means. We will try to explain the following things in simple words within the framework of this article:
- How blockchain works?
- Why is this technology considered a miracle of the 21st century?
- Where can it be applied?
- What problems are still to be solved?
So, let’s discuss everything step-by-step.
(please click the topic to scroll down to it)
- What is blockchain in simple words?
- What is the blockchain system and how does it work?
- Where can you apply the technology of blockchain?
- Pitfalls of blockchain
Etymologically, a blockchain system is a clearly-sequenced chain of blocks constructed according to predetermined rules that contain certain information.
If we do not dive deep into cryptographic terms, then there is nothing complicated in the algorithm of the operation of the blockchain technology. For the sake of simplicity, the system of blockchain can be compared with the accounting journal, which is found in the possession of tens of thousands of users simultaneously. This journal is constantly updated and does this in all its copies, each page refers to the previous ones. In order to fool the system and fake at least one record, you will need a titanic amount of processing power, since you will have to replace all copies. Theoretically it is possible, but practically, one substitution will cost its organizers trillions of dollars, so we will consider it impossible.
The blockchain platform is a large number of blocks that are constantly updated and linked. These blocks are distributed among all participants through peers (similar to torrent, which is used by millions of people to distribute and download files).
Each unit has its own individual hash sum. This is a timestamp, it can be compared with the biometric data of a person (retina, fingerprints, etc.). The blocks are connected with great precision into a certain chain. Attempts to change the sequence of blocks will not succeed. The system detects it immediately, because the hash sums will not correspond to the original registry. There are several methods of protection against such interference in the technology of blockchain:
- PoW, Proof of Work.
- PoS, Proof of Stake.
By and large, everything can be recorded in the blockchain.The scope of this technology is potentially much broader than just a payment network.There is a large number of blockchain projects, which are used in various spheres of life. For example, the UAE government decided to transfer 50% of the document circulation to blockchain until 2022. Using this technology, you can store any data. You can conduct voting, polls in blockchain. The issue of falsification disappears by itself.
Another unique feature, which was born together with Ethereum, is smart contracts. With their help, you can get rid of legal paperwork and intermediaries. There is a virtual notary (Stampery project) that certifies contracts through the technology of blockchain.
We already know of several working cases of how blockchain has been successfully applied in the field of copyright protection (the Ascribe project). If we start to list all the things which can benefit due to blockchain, we will have to write the third volume of “War and Peace.”
Like everything else in this world, blockchain has two sides of the coin. The first one, revolutionary and promising, has already been reviewed by us. It’s time to talk about the flaws and problems that are in the arsenal of this technology.
- In order to implement the technology of blockchain everywhere, it is necessary to completely rebuild huge established systems that have a lot of interested parties, and they will hinder innovations in every way. You will need a couple of years to fully switch to blockchain.
- This technology is not yet very friendly with regulators. In order for the broad masses to begin implementing it everywhere, the trust is required that is provided by the legislative framework. So far, there is no single scenario for solving this problem.
- Miners use a lot of energy to confirm blockchain transactions. In the future, when the blockchain system is implemented in a large number of spheres, the powers to maintain it will have to be many times bigger.
The blockchain technology is unique and has a good technological support. It can store a large amount of data that can not be compromised, destroyed or replaced. The help of smart contract technology makes it possible for the agreements between two or more persons to happen without the presence of an intermediary, the algorithm itself will monitor the fulfillment of the obligations of all parties.
In the nearest future, blockchain has every chance to become a new paradigm for the mankind, but it is still necessary to do a lot of work and solve some problems to make it happen.
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