The concept of blockchain was envisioned by Stuart Haber and W. Scott Stornetta in 1991. They began working on a cryptographically secured series of blocks where no one could interfere with timestamps. But the biggest turn came in 2008, thanks to Satoshi Nakamoto, who applied this technology in the implementation of Bitcoin.
Blockchain is based on a peer-to-peer network and is a distributed ledger that allows the registering of transactions globally. Every block of the chain contains several transactions, and each time one happens it is recorded on the ledger of all the members.
Everything is very transparent because participants can access and manage the information in real-time, making it really difficult for someone to gain control over the network.
Blockchain and cryptocurrency
It has always been difficult to create digital currency in the past, due to a major issue: trust. Blockchain technology has come past this problem.
There are a few reasons why:
Decentralization
Even though centralized blockchains exist, blockchain purists will always root for decentralized ones. According to them, not having a main entity to control the transactions is the safer way for cryptocurrency to work. If every transaction ever made is stored on the blockchain, and an error is made by someone (or some kind of interference), it can be indicated and corrected by others. To change the information, the majority of the participants need to agree to it.
Security
The technology built by blockchain is a structure of data based on cryptography, decentralization, and consensus. This guarantees trust with transactions that are made. In the majority of blockchains, the data is organized into blocks, and each block contains a transaction or a certain quantity of transactions.
If a new block is created, it will connect to every block made before it, in a cryptographic chain, and it will be vain to interfere with them. Every transaction will be verified by a unanimous structure, and only after that, it will be validated as true and accurate. If someone wants to hack a blockchain of a certain cryptocurrency editing a copy of it, it wouldn’t line up with other people’s copies, and later get deleted as felonious.
Blockchain uses cryptographic algorithms to generate techniques and protocols to avoid a third party from accessing data in the course of a communication process. These algorithms may be asymmetric-key algorithms or hash functions.
- In Asymmetric-key algorithms, the public key is calculated by executing an irreversible algorithm. Meanwhile, the private key is created by a random number algorithm. This has an advantage, because having detached public and private keys, makes the asymmetric key algorithms transferrable over unsecured channels. Digital signatures are a major advantage, ensuring the transparency of the process. Being easily verifiable and unforgeable makes the blockchain valid and trustworthy.
- Hash functions are very important for linking blocks to each other. They preserve the integrity of the data gathered in each block. If the data gets altered, it will bring an irregularity in the blockchain, and make it invalid. This is called the “avalanche effect”. If we make a change to the input of the hash function, the result of the output will be totally unrelated to the original output.
Overview
Blockchain is based on a peer-to-peer network and is a distributed ledger that allows the registering of transactions globally. Every block of the chain contains several transactions, and each time one happens it is recorded on the ledger of all the members. Blockchain does not have a main entity to control the transactions. If an error or an alteration occurs, it can be indicated and corrected by the majority of the participants. The technology built by blockchain is a structure of data based on cryptography, decentralization, and consensus. Cryptographic algorithms generate techniques and protocols that avoid access to third parties.
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