What is blockchain?
Blockchain is a digital ledger divided or easier to understand than the database in a network.
The ledger is shared for network participants. This implies that in the entire system there is not only a single location, a document can be the only authority, because duplicates of the same version of the ledger are located at many places.
All of these copies are updated when new data or transactions are written to the blockchain through the consent of all participants.
Miners are responsible for approving transactions and monitoring the network by solving sophisticated formulas with the help of computers.
It is a P2P peer-to-peer system, eliminating all intermediaries, enhancing security, transparency and stability as well as reducing costs and human error.
By allowing the distribution of digital information but not copying, blockchain technology has created the backbone of a new type of Internet.
In the book Blockchain Revolution (2016), Don & Alex Tapscott stated that “Blockchain is an unbreakable digital ledger of economic transactions, which can be programmed to record not only the Financial transactions that can record everything valuable “.
How does blockchain work?
Blockchain technology is probably the best invention from the Internet itself. It allows exchanging values without trust or evidence to believe.
Imagine you and I bet $ 50 for tomorrow’s weather in San Francisco.
I bet it will be sunny, you bet it is rainy. Today we have three options for managing this transaction: We can trust each other. Rain or shine, the loser will pay $ 50 to the winner. If we are friends, this could be a good way to bet.
However, whether it’s friends or strangers, it’s still not easy to pay for the other person. We can turn the bet into a contract.
With an on-site contract, both parties will be more likely to pay, however, if either of them decides not to pay, the winner will have to pay extra to cover legal costs and possible judgments. take a long time.
Especially with a small amount of cash, this does not seem to be the optimal way to manage transactions.
We can resort to a neutral third party.
Each of us gives 50 dollars to a third person, she gives the total amount to the winner. But, she can also escape with all the money.
So we will choose one of the first two options: trust or contract. Neither trust nor contract is the optimal solution. We cannot trust strangers and executing contracts requires time and money.
Blockchain technology is interesting because it gives us a third, safe, fast and cheap option. Blockchain allows writing a few lines of code, the program runs on the blockchain, which we both send $ 50 into.
This program will keep $ 100 safe and check tomorrow’s weather automatically on multiple data sources. Sunny or rainy, it will automatically transfer the full amount to the winner.
Each party can check the logical contract, and because it is running on the blockchain, it cannot be changed or stopped. This effort may be too high for a $ 50 transaction, but imagine selling a home or company.
The goal of this section is to explain how blockchain works without discussing in-depth technical details, but enough for you to have a general idea of the underlying logic and mechanism.
The most known and discussed application of blockchain technology is Bitcoin. A digital currency can be used to exchange products and services, like the US dollar (USD), Euro (EUR), dong (Vietnam) and other national currencies. Use the first application of this blockchain technology to learn how it works.