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For many people, blockchain is complex and not an easy concept to grasp. In this article, we will answer the following questions.
- What is blockchain technology?
- How does the blockchain work?
- What are the benefits of blockchain?
- How can companies use blockchain?
- How does blockchain disrupt industries ranging from finance to healthcare?
What is blockchain technology?
Simply put, blockchain technology is a new architecture that stores and tracks data more securely by distributing and verifying it through a network of computers, as a kind of connective organization between different distributed data stores. Using blockchain can do a lot of fun. The general features of blockchain are you can also do exciting things by using blockchain and distributed ledgers as a kind of connected organization between various distributed data stores.
The general features of the blockchain are roughly classified into the following five.
- Transactions are recorded in the digital ledger
- Blockchain can record and encrypt various types of transactions, including exchanges, such as transfer of funds and transfer of ownership of property.
- A distributed ledger that maintains its transaction list
- The list of transactions is replicated to many computers in near real-time, rather than being stored on one central server.
- Transaction records are maintained in peer-to-peer networks.
The ledger is only accessible from the network of partners who work together to update and maintain it.
There are no intermediaries in P2P networks. There is no central control or control body and no third-party arbitrator’s lawyers, banks, etc. involved. In a private or consortium blockchain network, there is an organization that manages it.
Identity is verified by encryption and digital signature. Cryptography and digital signatures verify the uniqueness of the participants. They are also used to authenticate transactions.
Blockchains are roughly classified into public type public chain and private type single chain, and each has different characteristics.
Public type of public chain
As the name implies, public networks are open to everyone, where millions of people are always available to join. These public ledgers do not require identity information, and most user’s trade using pseudonyms.
Bitcoin was a first public blockchain network and is still one of the largest. Also, there are platforms such as Ethereum that can perform transactions, including smart contracts.
Private type of private chain
A blockchain managed by a centralized organization is called a private type. Existing users invite non-users to conduct transactions and interactions. In these networks, transactions on the ledger are generally invisible, and the network’s existence may be hidden.
Permissionless type/Permission type
The types of blockchain can be roughly classified into the public kind and private class, and can also be classified into the permissionless type and permission type. Permissionless type refers to a blockchain like the public type that does not require permission to join the network. On the other hand, a blockchain like a private type that requires permission to participate in the network is called a permission type.
Verification by consensus
All changes on the ledger, whether public or private, are made by consensus. In other words, the record change on the ledger cannot be done unless the majority of the network agrees. Network participants usually agree in advance on what the changes mean. For example, in the case of Bitcoin, participants must follow subtle rules in making valid transactions or blocks.
Most blockchain networks provide a separate mechanism to make it very difficult for malicious participants to tamper with their records. When you deal with suppliers, business partners, and customers, it’s about being able to innovate, not only knowing the paperwork, products, and payments but also knowing that your business partners are in order.
As an example, let’s take a look at how a bank transfer works using a blockchain database. When Simon transfers money to Sue, all participants in the network, not just one institution on the blockchain, need to verify that the transferor transaction took place.