Blockchain technology is the heart of Bitcoin and many other cryptocurrencies. It is a distributed ledger technology that brings many advantages and helps us to build decentralized finance. Learn the basics of blockchain technology in our blog post or watch a video How does a blockchain work: Simply Explained.
What is Blockchain Technology
Blockchain is a technology for recording information in a way that makes it almost impossible to change or hack. Blockchain is a type of database that stores its data in blocks that are chained together. The storage is referred to as a digital ledger.
Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data.
Key Elements of Blockchain
Blockchain is a type of Distributed Ledger Technology (DLT).
- Distributed ledger
- Immutable records
- Smart contracts
Smart contracts are an integral part of blockchain technology. They are build to execute transactions and record information onto the ledger without human intervention.
Benefits of Blockchain
- Greater trust
- Greater security
- More efficiencies
Types of Blockchain Networks
- Public blockchain networks
- Private blockchain networks
- Permissioned blockchain networks
- Consortium blockchains
How Blockchain Works
Each transaction that occurs is recorded as a “block” of data. The data block can record any information you want (e.g. who, what, when, where, how much, or some condition such as the temperature, shape, or size).
Each block is connected to the ones before and after it. The blocks form a chain and together they prevent being altered or a block being inserted between two existing blocks. Each block confirms the exact time of a new block and the sequence of transactions.
Transactions are blocked together in an irreversible chain: a blockchain. Each additional block confirms and strengthens the verification of the previous block. This renders the blockchain tamper-evident and very hard to hack.
Who invented Blockchain
Blockchain technology was implemented for the first time when Satoshi Nakamoto invented Bitcoin. The first decentralized digital currency based on blockchain was born in 2008.
What’s the Difference Between Bitcoin and Blockchain
Bitcoin is a digital currency that uses blockchain technology as its transaction ledger. Bitcoins can’t be faked, hacked, or double-spent because of Blockchain.
What is Blockchain Good For?
Blockchain is different because nobody is in charge. The technology and people who use it are in fact in charge.
Blockchain is good for providing and delivering information. It provides immediate, shared, and completely transparent information stored on an immutable ledger that can be accessed only by permissioned network members.
A blockchain network can track:
Blockchain Use Cases and Applications
- Tracing fresh seafood
- Improving security in financial services
- Internet of Things
- Supply chain
- Innovation in the oil and gas industry
- Increasing trust in retailer-supplier relationships
Can Blockchain be Hacked?
Decentralized blockchain hacks are very rare, the technology was built to stay strong and resistant against hacking. Hacking blockchain is almost impossible, but it can be hacked with a 51% attack.
What is a 51% attack
A 51% attack refers to a malicious actor (or group acting in concert), controlling over 50% of the total mining power of the blockchain network and disrupting the integrity of the blockchain.
An example of a 51% attack happened in January 2019 on the altcoin Ethereum Classic blockchain.
Is Blockchain the Future?
Blockchain technology has many advantages but it also has some disadvantages too. It works for many cryptocurrencies and for many services in a decentralized economy. But it would be a mistake to implement blockchain in every company.
Blockchain is great for its transparency and decentralization, but on the other hand, the database is very slow and hard to scale.