In the past couple of years, the name Blockchain can often be heard from various news sources, most often in association with cryptocurrency news. Because of this, many people even think that Blockchain is something related exclusively to Bitcoin.
In fact, although this technology was actually implemented for the first time in the Bitcoin cryptocurrency system, the scope of its application is practically unlimited, which is used not only by the creators of hundreds of other cryptocurrencies, but even by large international banking structures. Many compare the impact on humanity of the invention of Blockchain with the advent of the Internet. So, what is blockchain and how does it work?
What is blockchain?
In general, the Blockchain technology is a chain of blocks that create together a distributed database, where certain information is divided between all the blocks that are separate network participants and are connected according to certain rules into a consistently growing chain.
Due to the fact that during the formation of each new block, the information is marked with a hash, which is a certain unique encrypted key, each chain can only be arranged in a specific order. Each new block of information can be added strictly only at the end of the chain, because the hash math will not allow changing the order of the blocks and such a record will be rejected by the system.
What gives us such architecture? In response to the question of what blockchain is, first of all, we should highlight the fact that this is a very secure database, in which it is impossible to change already recorded information, but you can only add new information and only strictly sequentially.
It is practically impossible to forge each piece of information, such as a separate transaction stored in the blockchain, since for this you need to make changes in all blocks of the system at the same time, and there may be tens of thousands of them.
Hacking the entire system at the same time is not possible, because the main feature of the work of blockchain is the complete decentralization of the system. Blockchain does not have a single main center, such as, for example, the main server, which could be hacked and changed data. This is a peer-to-peer network where all nodes are equal and the only authority on the network is the hash sum math, which is checked by each block.
So, having figured out how Blockchain works, we can immediately see the wonderful unlimited possibilities that it provides. In the system of cryptocurrency and other electronic money, Blockchain technology guarantees security against fraudulent transactions and double spending of funds.
All transactions are transparent to all participants and can always be verified, despite the fact that the identities of the parties to any transaction are not disclosed. In such a system, no reputable or trusted third party intermediaries, such as banks, lawyers or states, are needed. The absence of the possibility of falsifying information is in itself a guarantee of the reliability of all operations in the blockchain system.
Thanks to the listed indisputable advantages of the Blockchain technology, it is already being used by even state structures of many countries to create registries and other databases.
Large traditional banks, having figured out how Blockchain works, also evaluated as the promising technology. Some of the large banks that are merging into consortia interact with each other through this technology to synchronize all ongoing transactions.
In addition, the ability to use smart contracts in conjunction with Blockchain technology allows us to simplify many legal and notarial procedures and other transactions. Electronic notaries have already appeared that use the features of this technology.
Any databases that require verification of the authenticity and reliability of the information stored in them represent a huge scope for using Blockchain technology. Copyrights, the voter register for conducting legitimate electronic voting, trade in various valuable assets, land cadasters and so on.
Blockchain is the ability to create and use distributed shared books. With the possibility of a unique digital signature of each transaction, it ensures its authenticity and integrity in a wide range of business use cases.
Also, as already mentioned, the technology provides for the creation and storage of Bitcoin and other cryptocurrencies, however, companies from various industries are more and more interested in creating a technology of a distributed ledger, especially in business.
A blockchain is a data structure that represents a financial book entry or transaction record. Each transaction has a digital signature to ensure its authenticity and that no one interferes with it, therefore, it is assumed that the ledger itself and existing transactions in it have a high degree of integrity.
Its most interesting feature is that digital book entries are distributed across the entire infrastructure. These additional nodes and levels in the infrastructure serve to ensure a consensus on the status of the transaction; all of them at any second have a part of existing authenticated books, which are distributed among all network participants.
How does the blockchain work?
Most nodes of the blockchain network must execute algorithms to evaluate and verify the history of an individual proposed unit. This happens when a new transaction or editing an existing transaction enters the blockchain.
In the case where most nodes agree that the history and signature are valid, a new block of transactions is accepted into this ledger, and a new block is added to the transaction chain.
If most of the blocks do not come to this opinion, one hundred such a transaction is not accepted by the whole system and is not added to the chain. This is one of the peer-to-peer interactions that does not require a single decision center. This kind of consensus allows the blockchain to operate as a distributed register.
Blockchains use various mechanisms to reach consensus on transactions. The largest example of its use is Bitcoin, which uses an anonymous public book, where anyone can participate.
It is also possible to use the blockchain in private. Many companies implement blockchain for internal use with a smaller number of participants and, thus, control who participates in certain transactions.
What is good about blockchain?
Blockchain does not require a central authority or server in various partnerships, consortia and other associations. In this type of partnership, an arbitrator or another settlement center will not be needed. No other intermediaries in the relationship between the two counterparties are required.
The security of the relationship between the parties to the transaction is ensured by the very essence of Blockchain technology and sophisticated cryptography. You cannot get into the system somewhere in the middle with false transactions, because they will never be accepted by the whole system.
Any transaction, like any entry in this ledger, can be monitored and tracked, while remaining anonymous. Each transaction has its own unique digital signature. Pieces of each transaction are stored in different blocks, but they are there in encrypted form.
What are the problems?
The open source code of almost all blockchain projects does not allow them to combine a huge number of options in order to get maximum functionality and launch one powerful project. Developers who write codes do not obey any authority, but develop codes exclusively in their own interests. Different communities pursue their goals and implement various types of code, as they see fit.
In order to unify, standardize and generally facilitate the interaction between different companies, many large players at different wages thought about creating a common platform for maintaining distributed ledgers.
This is how the Hyperledger project appeared, in the creation of which dozens of large and smaller companies participate, such as Blockchain, SWIFT, Cisco, CME Group, ANZ Bank, Digital Asset Holdings, Fujitsu Limited, Wells Fargo, Hitachi and many others.
IBM brings tens of thousands of lines of code to the Hyperledger project, and it’s clear that he, as a technology giant, believes that open technology is the best way to create a truly applicable blockchain implementation for the corporate market and in general for all modern businesses. Apparently, IBM is considering blockchain technology as a means of raising awareness about commerce on the Internet.
The Hyperledger project will promote the open blockchain standard, being a broad open initiative involving many different blockchain experts in many industries. There are no restrictions for the types of applications and environments, if you focus on the openness of the platform, which one day will be built on its basis. This was expressed by IBM representatives involved in the blockchain.
Practical limitations undoubtedly exist in order to implement such a platform. Not every project will be able to meet the requirements so that it can participate in this platform. Public statements will fit in well, as will normative statements.
Hyperledger is now in the stage when it seeks to integrate three projects into practical blockchain applications. A public distributed register written in C ++ Rippled that processes cross-currency payments using order books.
IBM’s Open Blockchain is a low-level framework that implements intelligent contracts, networks focused on consensus, digital assets, and cryptographic security.
Digital Asset’s Hyperledger poses a blockchain server that works using a transaction log, which is intended only for adding ready for deployment at the present time and intended for use in financial services. This server is designed for replication in several separate organizations.
Some companies have already announced that they are already offering the development of new generations of the blockchain. At The Block Chain Conference, experts in the field of computer technologies, networks, and in particular, the blockchain stated that people and organizations now need a structure that provides a high level of competition in order for development to progress at an accelerated pace.
The use of Blockchain technology in electronic commerce, as an account book, is only a small part of the potential of this technology. Such a fully unifying platform like Hyperledger will allow increasing the possibilities of using this technology. So say the representatives of those many companies that initiated the creation of the next generations of the development of this already revolutionary technology and its development.