In this lecture, we talk about what blockchain is.
Blockchain is:
1. Continuous sequential chain of blocks containing information.
2. Copies of block chains are stored on many different computers independently of each other.
3. The chain is constantly growing as new blocks are added.
4. Each block contains a timestamp and a link to the previous block, so they actually form a chain.
5. When a new block is formed, it is verified by other network participants and attached to the end of the chain. The common database is automatically updated on all computers.
6. Once the update has occurred, it is impossible to make changes to the database, which makes it impossible to further falsify information.
Blockchain is often compared to a regular diary, where records are made in sequential chronological order about what has been done.
For example:
— slept
— ate
— met with friends and so on.
So that no outsider can make changes to the diary, all information is encrypted in a special way.
If there is only one copy of a diary, anything can happen to it. Therefore, for reliability, it is better to keep copies of the diary. When new information is written into the diary, it is automatically updated on all copies. In this case, in order to forge a record, you will have to not only suffer with the cipher, but look for all existing diaries.
Let’s look at the basic principles of blockchain technology:
Decentralization
Immutability
Consensus
Decentralization in blockchain means the transfer of control and decision making from a centralized entity to a distributed network. The transparency of a decentralized blockchain allows leveling the trust of participants in each other. These networks restrain their power or control over each other, which preserves the functionality of the network.
Immutability means that the data cannot be changed. No participant can intervene in a transaction once it has been entered into the ledger. If the entry contains an error, then a new transaction must be added to correct it. Both transactions will be displayed online.
The blockchain system establishes a set of rules by which participants approve transactions. New transactions can be registered only with the consent of the majority of network participants.
The blockchain network is formed by its participants who are interested in receiving and using information.
Participants are divided into two types:
1. simple users
2. block builders or miners
Miners task is to add digital blocks to a common chain — blockchain. If a new block in the blockchain is made according to all the rules, it is added to the end of the chain, and the miner receives a reward for this.
For now, two algorithms for confirming the result, for which a reward is paid to miners, are common in the cryptocurrency community:
Proof of Work (PoW). Translated as proof of work done. To receive a reward, you need to solve a complex cryptographic problem. The one who finds the solution first will receive coins for the added block.
Proof-of-Stake (PoS). Translated as proof of ownership. To access the reward, you need to have coins on your balance that are not used. The more frozen assets are held in a crypto wallet, the higher the chances of receiving a reward.
Blockchain networks are either public or private.
Public type of blockchain, if you want as many users as possible in your system.
A private type of blockchain with different levels of access for users, if information within the network should not be available to everyone.
The difference between public and private blockchains lies in the technology of the consensus algorithm. A blockchain consensus algorithm is a mechanism that checks the correctness of certain rules, that is, it checks that the transaction is correct and the protocol is followed.
For public gatherings, the algorithms have come to think more about protecting external visibility, as there are many nodes in the network.
For private observations, the consensus algorithm focuses on high network throughput at the expense of fewer nodes.
In which countries can you rely on a share?
Banking sector, investments and exchanges
Land registry
Identification
payment instrument
Game industry
Online voting
The medicine
Logistics
Marriage registration
Blockchain has many applications and these are just small examples that have already begun to be implemented or are planned in the near future.
The downside of technology is throughput. Today, the number of transactions has not increased in a short time. The weight base that is found on computers on the network is also growing.
Blockchain provides many opportunities and expands the boundaries in trade, services, automation, while transferring control to people, not to central authorities.