What is Blockchain Technology? What you need to know about Blockchain technology

June 20, 2021
What is Blockchain Technology?

Despite being known as a new technology, Blockchain has also managed to buy itself some interesting history. In 2008, the pseudonym Satoshi Nakamoto published “Bitcoin: the electronic cash system”. A year later, a Bitcoin transaction was successfully executed. In 2011, 1 unit of Bitcoin was worth 1 USD. From this foundation, in 2012, Blockchain and Crypto officially entered popular culture by appearing on popular TV shows.

In 2016, IBM announced its strategic use of Blockchain for cloud-based business solutions. The Japanese government also recognizes the legitimacy of Blockchain and Crypto. Since then, Blockchain technology is being strongly applied to life. So what really is Blockchain?

As the name implies, block means blocks, chain means chain, so what is Blockchain? It is simply defined as a chain of blocks, which contains information about financial transactions, property ownership, etc. Blockchain 4.0 technology is considered a kind of database, a collection of information stored electronically on a computerized system programmed with the ability to record and track valuable information, such as ownership of land, real estate, or financial transactions.

Blockchain consists of 3 main components: Block, Node, Miner. In it, each block will contain three basic components including data, a 32bit integer named nonce and a hash function.

When the first block of the chain is generated, a nonce builds a hash. This means that the data is "stamped" and cannot be modified.

What is blockchain used for?

The purpose of blockchain is to allow people, especially strangers, who do not trust each other to share valuable data securely, accurately and without impersonation. Basically, Blockchain can be understood as the ability to extend trust through technology.

We can simply understand that information about financial activities, asset transactions will be recorded in a ledger. The difference of Blockchain with a paper book is that instead of a keeper, this technology will help publicize information for related people to jointly manage as well as ensure the accuracy and transparency of information.

Key Features of Blockchain

A distributed database

Most Blockchains are designed as a decentralized database. Digital “assets” are distributed rather than copied or transferred on the Blockchain. As a result, everyone in the same chain can control the information and data contained in the block.

Sustainability and enhanced security

In a Blockchain, each block has its own unique hash as well as a reference to the hash of the block that precedes it. So mining a chain is quite complicated, especially on large chains.

Miners of this chain will use specialized software to solve extremely complex arithmetic problems, when wanting to find a nonce that produces an acceptable hash. Since each nonce is only 32bit while each hash is 256bit, there are approximately four billion combinations of nonce and hash functions that need to be searched before finding the “golden nonce” for their block to be added to the chain.

Also, a change to any one block in the chain affects not only itself, but all other blocks behind it. Therefore, manipulating Blockchain technology is extremely difficult. Not everyone has the information technology capabilities nor the time to find a golden nounce. Therefore, Blockchain 4.0 technology is guaranteed for its sustainability and security.

Transparent and unbreakable

Blocks are chained together to form a chain, once a block has been updated, you will not be able to delete the information in it. Blockchain works based on the common record in finance that it is not allowed to delete updated data, instead update new blocks, with the content to be edited and the name of the editor. This helps both the clarity of the information and the integrity of the generated data.

A network of nodes

Node is the link between the blocks in the chain. They have two basic tasks of sharing information and keeping up-to-date copies of transactions and data. Each node in the network acts independently as authoritative verifiers.

This is considered one of the important concepts when it comes to Blockchain technology. With this technology, no single computer or organization can unilaterally own the chain. Instead, the Blockchain acts as a ledger connected to each other through nodes. These nodes can be any type of electronic device, capable of maintaining a copy of the Blockchain and ensuring the operability of the chain.

Blockchain functions like Google Docs

This is a simple understanding of Blockchain. In fact, Blockchain and Google Docs are both tools and technologies for storing data and allowing mining documents to be shared with a group of other people. This creates a decentralized distributed chain that allows multiple people to access the document at the same time. In addition, changes in Google Docs and Blockchain are recorded in real time, ensuring the publicity of information.

What are the advantages and disadvantages of Blockchain?

The advent of Blockchain technology brings many advantages in various fields, providing greater security in trustless environments.

Three outstanding advantages of Blockchain

Distribution

Since data is often stored in thousands of devices on the same distributed network of nodes, the system as well as the data on the blockchain are resistant to outside attack. Each network node can replicate and store a copy of the database, thus ensuring no single point of failure.

Stability

Once the data has been updated to the Blockchain, it is impossible to delete or change it. This makes Blockchain an optimal technology to store financial records or any other data when tracking is required because every change is tracked and recorded permanently on the system.

Trusted system

In traditional payment systems, transactions depend not only on the two parties involved, but also an intermediary such as a bank, credit company or payment service provider. When using Blockchain technology, this is no longer necessary because the system can verify transactions by itself through the activity of “Mining” – “mining” coins. Therefore, Blockchain has the ability to eliminate risks from third parties as well as reduce transaction costs.

Disadvantages of blockchain

Private Key

Each user will be given a corresponding private key to access the data. If they lose this private key, their data, information and assets will also be lost.

Storage

Blockchain's growth in storage capacity is outpacing the capacity of a single hard drive to download. This means that the possibility of losing nodes is quite possible.

What is the difference between Bitcoin and Blockchain?

Blockchain was developed to facilitate the use of the new currency because no bank or government can participate in monitoring transactions through Crypto.

The first difference between Bitcoin in particular as well as Crypto in general and Blockchain is that Bitcoin is a type of Crypto and Blockchain is a distributed database.

The second difference is that Bitcoin works on Blockchain, while Blockchain can use many other assets, not only Bitcoin.

Third point, Bitcoin works anonymously while Blockchain works on a clear mechanism. To be used in sectors, Blockchain must meet the strict rules set by the other party.

Ultimately, Bitcoin can only transfer currency between users while Blockchain can transact all mediums including currency, property ownership, etc.

Blockchain, on the other hand, is a public “digital ledger” between people who need to transact with each other, and one of the means of exchange in that network is Crypto.

Some knowledge hope it is useful to you. Start learning and investing here.

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