Blockchain, the technology behind cryptocurrencies, is undoubtedly has captured many people’s attention. Even those who are skeptical about cryptocurrencies usually still embrace the blockchaintechnology, calling it marvelous invention of our time. So, what exactly is blockchain? Let’s find out
Blockchain is an immutable record of data that is stored and managed by a decentralized network of devices. The advantage of a blockchain system is that it eliminates the need of trust. Unlike centralized database where you will always need to trust the information provided by one party, with blockchain you simply don’t have to. Every record inside each block is secured cryptographically and shared with different devices, and usually these devices are owned by different people.
If you are still confused, basically it’s the opposite of centralization. With centralization, all records are stored and managed by servers of one central authority. It’s called ‘centralization’ because one entity can always manage or edit all the records and you have to trust whatever information they want to show you. With blockchain, supposedly the computers that store and manage these records are not owned by one single entity. The more decentralized it is, the more trusted the data.
Imagine when you want to go to a specific restaurant. Let’s just call it Restaurant AmazingBroccoli. You do not have your phone with you and you do not have a map with you. Then, you ask one random person on street “Hello. Do you know where is this restaurant called AmazingBrocolli?”, and then he tells you where it is. Do you trust his information about the restaurant you are looking for? Maybe you do.
But, imagine when 100 different random people tell you the direction to that restaurant and all of them tell you the same thing. The information suddenly becomes much more trust-able because the chance they are all wrong would be really minimal as compared to the information from just one source.
That is the difference between blockchain (different random people giving the same information) and centralized system (just one guy providing the information). With blockchain, it basically eliminates the problem of ‘trust’. In blockchain, no central authority telling you what is right and what is wrong.
So, the idea of blockchain is that everybody who participates in the network has the same copy of the records. The network is managed by database replication without central authority. The goal is to provide a trustless yet transparent network that anyone can see and participate.
Let’s use blockchain biggest use case as our example so you can understand better. The biggest use case of a blockchain right now is obviously to support a cryptocurrency (After all, public blockchain is always about cryptocurrency). So, when one person creates a cryptocurrency transaction, he ‘process’ it by initiating one block. This block will be confirmed by computers and/or other devices that participate in the blockchain. The confirmed block will be added to the blockchain and distributed to the entire network.
This ‘record’ of a transaction is immutable because you have to edit the records and convince the other nodes to edit the same record if you want the network to ‘say’ the same thing about this transaction record. Meanwhile, with centralized network (i.e.: one entity controlling all transaction records) the same entity can just edit and even falsify the record and you have to believe whatever that same entity say to you, because other entities do not have any record of the database.
This is why blockchain has big potential to transform basically anything that you can upload to the digital world. And considering everything is going digital nowadays, the potential is limitless.
After you finish this article, you can learn how and where to trade crypto assets. We can start with best cryptocurrency exchanges. It’s important to learn more about crypto assets because I see they are integral part of the technology itself.
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