What is a blockchain is a question you’ll find yourself asking a lot if you’re just now learning about Web3.
The technology was first drafted in 1991 by Stuart Haber and W. Scott Stornetta. Both mathematicians wanted to implement a system where document timestamps could not be tampered with.
Years later, in 2008, it was created by the unknown persons behind the online cash currency Bitcoin, under the pseudonym of Satoshi Nakamoto.
What is a Blockchain?
It is a distributed ledger shared among the nodes of a computer network. It electronically stores digital information. Blockchains came to our knowledge due to their crucial role in cryptocurrency systems: maintaining a secure and decentralized record of transactions. The revolution of it is the guarantee of fidelity and security of a record of data; it generates trust without the need for a trusted third party.
Difference between a blockchain and a database.
The main difference between a blockchain and a typical database is the structure of data. In a blockchain, information is collected in groups, or blocks. Blocks hold a set of information but have a specific storage capacity. Once full, they are closed and then linked to the previous filled block. This forms a chain of data, or a blockchain.
On the other hand, a database stores its data in tables, not chunks. This makes it vulnerable and easily edited. When implemented in a decentralized nature, a blockchain makes an irreversible timeline of data. Meaning, each block in the chain, has an exact timestamp of when it went live.
How does it work
The main objective of having a blockchain is to record digital information and distribute it, but not edit it. In other words, these records cannot be altered, deleted, or destroyed. Hence, the name “distributed ledger technology” (DLT).
Blockchain technology first saw the light with the reveal of Bitcoin. After that, it exploded with cryptocurrencies, DeFi applications, NFTs, and smart contracts.
What is Blockchain Decentralization?
A blockchain allows data held in a database to be spread out among several network nodes at varied locations. This creates redundancy, but it also maintains the adherence of the data stored. For example, if a user tries to meddle with Ethereum’s transaction records, all other nodes would cross-reference each other and easily pinpoint the node with the misinformation.
Such records could be a list of transactions (like with cryptocurrency), but it also is possible for a blockchain to hold a variety of other information like legal contracts or product inventory.
Transparency and Security
Decentralization allows you to view all transactions through a personal node or using blockchain explorers. Which allows anyone to witness transactions live. So, if you wanted to, you could track Bitcoin wherever it goes.
As for security, a blockchain achieves it in several means. First, new blocks are always stored chronologically and at the end of the chain. So unless the majority of a network agrees to go back and alter the contents of a block, it won’t work. Think of a hacker who runs a node on the blockchain. He’s trying to change the blockchain and steal cryptocurrency from everyone else on the network. If the hacker were to alter his own single copy, it would no longer align with everyone else’s copy, resulting in his version of the chain being illegitimate.
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What Do We Need a Blockchain For?
Despite having more than 10,000 cryptocurrency systems running on the blockchain, the technology has proven reliable in storing data for various other types of transactions. Walmart, Pfizer, and Unilever are some of the companies incorporating blockchain.
For example, IBM created its Food Trust blockchain to trace the journey food products take to get to their locations. Why do so? It’s a very easy way to track if the food contracted any hazardous materials along the route.
This technology has made a huge name for itself around the globe mainly due to cryptocurrencies. But it also stands to make business and government operations more accurate, efficient, secure, and cheap, with fewer middlemen.
Today, with the exponential outbreak in NFTs and asset tokenization, it’s no longer a question of if most companies will catch up on the technology, but a question of when.