What are Blockchain Solutions?
Blockchain means “chain of blocks”. In other words, it is a database, which in the literal sense of the word, is a continuous chain of blocks that are stored simultaneously on many computers. New blocks in this database-chain are created constantly. Each newly created block contains a group of recently accumulated and ordered records (transactions), as well as a header. Transactions are any actions that users perform in the network, whether it is sending funds, registering property rights, buying a game, an item, etc.
When a block is formed, it is checked by other network members and then, if everyone agrees, connected to the end of the chain. Once this has happened, it is no longer possible to make changes to it. In addition to new information, the block also stores encrypted data about previous blocks. The database is updated on all computers connected to the system, and miners (validators) start forming the next block.
The main principles of blockchain solutions are:
- decentralization and distribution;
- openness and transparency;
- immutability of what has already been recorded.
According to these principles, this technology has some significant advantages.
Why use blockchain over other solutions?
Any important information related to a particular area of people’s lives is stored somewhere. Buying a house or car, taking a loan, registering a marriage, transferring money – all data about these operations is recorded and stored centrally on the servers of state institutions or private companies. This often leads to abuse, when someone wants to get into any database and make adjustments to it.
Blockchain technology fundamentally changes this approach. Its essence is that the database is stored not in one place, but distributed on thousands, and even tens of thousands, and sometimes millions of computers scattered around the world. The probability that all of them will be disabled is negligible and looks fantastic. While at least one computer of the network is working, a system based on the blockchain exists. Now, you can see why use blockchain over other solutions.
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As already mentioned, any centralized database can be hacked and modified. This trick will not work with blockchain. It makes no sense to hack one of the blocks and change the information in it because you will have to hack all the blocks, which requires huge computing power – as we remember, the new blocks contain encrypted data about the previous blocks. That’s why other members of the network will notice the hacking attempt. Also, a powerful encryption algorithm using hash functions, as well as a digital signature, will become an obstacle to fraud.
The signature uses two keys — public and private. The first is necessary to verify the signature itself; the second is used when creating it and is secret. Keys provide participants with access to certain information. The hash function looks, at first glances, like a sequence of random numbers and letters. It ensures that all recorded data remains unchanged.
The entire database is in the public domain so that anyone can view the data of a particular block. For example, one user transferred another 10 thousand dollars – if anyone wants to know about it, they can. The information about who and to whom transferred the money remains a mystery. This information is available to the direct participants of the exchange if they do not wish to make it public.
As you can see, the blockchain platform is a distributed database for general use, which mostly lacks centralized supervision over the process. With the help of blockchain solutions, you can keep records, store data, and make transactions in any sphere of life:
- financial transactions;
- real estate transactions;
- traffic violations;
- marriage registration, and much more.
The first application of blockchain in practice occurred in 2009 when it was based on the cryptocurrency Bitcoin. Later, a great variety of such cryptocurrencies appeared for different goals. Now, you know an answer to the question, “What are blockchain solutions?”.
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