🖥️TECH
What is a blockchain, and how does it work?
A blockchain is made up of a series of ‘blocks’. The term ‘block’ refers to a data storage unit within the blockchain code. Each block contains a unique number from the previous block, which forms a ‘chain’ of blocks.
How blockchains work
The first block created on a particular blockchain is called the genesis block. This first block forms the first line of the database. On its own, it's just a small collection of data, but it contains a unique numerical symbol, such as 0001. When a second block is added, it's identified as block 0002 and contains the information that follows block 0001. This is how the chain is formed.
Protocols in blockchains
It refers to the different types of blockchain platforms used to develop individual applications. Each blockchain protocol adapts the basic blockchain principles to a specific industry or application.
Decentralisation of blockchain
Unlike regular databases, which are stored on a single server, blockchains are decentralised and distributed across a peer-to-peer network. Each node on the network (usually a device or server) has a copy of the blockchain. Before a new block is added, it must be verified and validated by most of the node operators in the network. This helps limit the threat of an unspecified number of people tampering with the chain's integrity or missing important information (e.g., adding a block that doesn't connect correctly to previous blocks). For example, the blockchain of Bitcoin, the most famous cryptocurrency, already reportedly has more than 13,000 nodes - this is what people mean when they describe cryptocurrencies and blockchains as decentralised.
Because of this blockchain economy and the way blocks are coded, once information is added, removing it from the chain is very difficult.
Benefits of Blockchain
1. Data Integrity
Due to the decentralised network system, no specific person has the power to manipulate data. This makes it difficult for anyone to tamper with data stored on the blockchain. Once information is included in the chain, you can be confident of its integrity and accuracy, even if you review it years after it was added.
2. Higher transparency
Most blockchains are highly transparent, allowing outside observers to see the data stored on the chain. This is especially important for cryptocurrencies. Tracking the flow of funds through a blockchain wallet is much easier than tracking them through a personal bank account. This transparency makes it easier to identify and track down fraudsters.
Decentralised control
Blockchain technology is based on decentralisation: it doesn't rely on large organisations like banks or credit card companies to handle your data and money. The peer-to-peer ledger system prevents any person or organisation from having too much control over the blockchain.
Disadvantages of blockchain
1. Lack of regulation
Because blockchain technology is less regulated, recovering your losses is much more complicated if the data you store on a blockchain is stolen. If you have cryptocurrency in a blockchain wallet and someone gains access to it, no bank or central authority can help you get your money back. This is a major factor in why many people don't trust cryptocurrencies and their technology.
2. Excessive transparency
Transparency has its downsides. Most data on the blockchain is accessible to most people, making it a poor place to store sensitive information. Hashing techniques hide the owner of the data, but the data itself is still public, which is why you should be sceptical of proposals to use blockchain for government record-keeping or medical data.
Despite these problems with blockchain, this revolutionary technology is already being used in many places.
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