With blockchain like a car, you don’t have to understand the intricacies of the device to use it. The main thing is to understand how it can be useful, and for this basic knowledge is enough. Let’s figure out what blockchain is and why it is needed at all.
Why blockchain is compared to the Internet
The Internet is a decentralized network, that is, there is no place from where it can be completely “turned off” and from where it can be controlled. It is convenient to exchange information on the Internet – send messages, music, pictures, presentations, and so on. But you need to understand that when transmitting information on the network, you send only a copy of it every time. When you send a funny picture to a friend, you do not lose it, the original remains with you. If this were the case, for example, with money, then they would quickly lose value. You could “send” 100 rubles to your friend, but they would still remain in your account. There is very little sense from such money.
Therefore, when it comes to the exchange of value on the Internet, intermediaries are often involved. For example, an online bank that guarantees that if you transfer money to someone, it will be debited from your wallet. For this, you pay a commission to the intermediary, trust control over your account and, in general, over the exchange rules. At the same time, the intermediary is often centralized and “attached” to a specific state that regulates its activities.
Blockchain helps to get rid of middlemen and exchange value on the Web directly. For this it is called the “Internet of values” or simply the new Internet.
What is blockchain in general and what else can it give
“The blockchain is an immutable digital ledger of economic transactions that can be programmed to record transactions with almost any value,” – this is the definition of technology given by the authors of the book “The Blockchain Revolution”, Don and Alex Topscott.
The blockchain is decentralized – it is not supported by the intermediary’s servers, but by the clients of the entire network. There is no chief administrator or regulator here. Anonymity is not required to conduct transactions. All network participants have access to all records in the blockchain. The blockchain is almost impossible to hack, and everything written into it will remain unchanged.
But you need to understand that here, as elsewhere, there are nuances. There are different blockchains. Sometimes, in order to get the right to support the network, you still need to go through verification or even registration, which stands out from the original concept of openness and decentralization. To maintain your anonymity, you need to avoid associating your offline identity with “you” on the blockchain network. If more than half of the blockchain network capacity is in the hands of an attacker, then it can be hacked. But it will be very expensive, and most importantly – in front of everyone, because the entire history of operations on the blockchain is stored on the computer of each network node.
How to protect yourself from hidden mining?
When someone performs an operation on the blockchain, it is propagated throughout his network to be confirmed. The verification and confirmation of operations using powerful computers is carried out by miners who are rewarded for this. You need confirmation from at least 51% of miners to approve the operation.
The set of all confirmed operations is combined into a block and sent to all network nodes. Nodes, or nodes, are participants who store the entire history of operations (the entire blockchain) on their computers. The block is written to the blockchain and linked to the previous block using complex mathematical encryption.
This is if it is very generalized and simple, without delving into “proof of work” and “proof of stake” network protection methods. In fact, there are blockchains where you don’t need to mine. But this is a completely different story, with its own characteristics and disadvantages.
Why blockchain is needed
Blockchain can be useful where you need to securely store information, get rid of intermediaries, guarantee transparency and the absence of corruption, protect data from forgery, and secure ownership. Below are a few examples of technology applications
On the blockchain, contracts can be programmed that are executed when the necessary conditions occur. The scope of their application is practically unlimited. For example, the fact that you park your car can be programmed as a prerequisite for debiting money from your wallet. No need to rush around with coupons – everything is simple, safe and fast. A smart water system can be programmed to pay bills every time a certain amount of water is used. Blockchain smart contracts can help register and sell intellectual property. For example, musicians can receive money from fans directly, without intermediaries.