Blockchain technology: what is it and who needs it

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Blockchain is a public database of transactions made in the Bitcoin system. With its help, each user can find out how much Bitcoin was at a particular address in a given period. Read more about what Blockchain technology is.

Purpose

Blockchain can be used wherever there is distrust between participants. For example, in sales transactions there is always a risk that the seller will not receive the money, and the buyer will not receive the service / product. Using the system, you can check the authenticity of documents, goods, services or companies.

Blockchain technology description

Blockchain is a kind of accounting database that stores information about events from real life. But at the same time, it differs from analogues in a high level of openness and reliability. It cannot be faked or deleted, but all recorded events can be verified. Let's take a closer look at the essence of the technology.

Blockchain is a method of recording all public data (deals, agreements, contracts). Its peculiarity is thatinformation on all transactions is not stored in one place, but scattered across thousands of computers. So any user can access the materials.

All data is combined using mathematical algorithms into blocks, and the latter form a chain. Each block contains the hash of the previous one. This chain starts from the first block in the system and is valid until the last one. Editing information that is online for a long time is impractical. All blocks need to be rewritten. The length of the chain is determined by the complexity, not the number of elements.

The hashing method does not leave detailed information about the transaction, but only confirms the very fact of its existence. Once the data is updated, it cannot be changed. You can only add new information.

Benefits

The distributed nature of the database makes it resistant to hacker attacks and ensures data confidentiality. Information from the hash cannot be copied. But even if the data is changed at some stage, it will not match the digital signature. The system will immediately give an error.

Scope of application

Blockchain is anti-theft technology. If credit records were kept in the system, fraudulent lending, mortgage scams, and auto loans could be prevented. In some countries, the introduction of a system for these purposes is already being considered.

Today, Blockchain technology is used mainly in cryptocurrencies (bitcoin, litecoin,nxt). In these examples, the full power of the system and its limitations became clear. In some countries, the system is used to fix the rights when buying works of art.

Already 42 of the world's largest banks (in particular, Bank of America, Morgan Stanley and others) have created the R3 consortium. They are developing a new direction Blockchain (technology for mobile payments and other financial flows). A similar company DAM has already been created by 13 organizations (ABN AMRO, BNP Paribas, JPMorgan, etc.). She is also involved in the implementation of the platform in the financial industry. R3 is already experimenting with the exchange of bitcoins through the worldwide network, without the participation of third parties.

In 2015, Goldman Sachs and IDG Capital Partners invested $50 million in Circle Internet Financial, a startup focused on using Blockchain to improve the quality of Bitcoin and USD transfers.

Blockchain technology has been successfully used by Everledger to develop a guarantee system for diamond mining enterprises. Buyers will be able to learn the history of any diamond. For this purpose, Everledger has invested $850 million in the database.

Estonian firm Guartime, which is at the forefront of the country's digital data processing, has created a Keyless Signature Infrastructure built on bitcoin. Thanks to this innovation, the government can protect the information of the citizens of the country in 1000 Internet services.

That is, the demand for technology is constantly growing. There is no such activity in Russia yet.

Where does this demand come from?

In the banking system, all transactions are monitored by one powerful machine. Implementing a large number of computers is resource intensive. The Blockchain system, the technology description of which is presented above, makes it possible to get rid of intermediaries, manual data processing, speed up processing, and reduce costs. Open access to information is useful for the regulator. The state will be able to levy taxes more easily. If banks speed up the transaction process and reduce costs, this will make the service more efficient and cheaper. International transfer will be instant.

Other projects

There are some more interesting startups using Blockchain:

• tØ - CB trading platform;
• BoardRoom - corporate governance system;
• UjoMusic - art rights management;
• Provenance - origin control system;
• BitProof - document certification technology;
• EverLedger is a diamond tracking system.

This is not the whole list of startups using Blockchain and Bitshares technologies.

Qiwi Implements Blockchain

In the Qiwi system, information was previously transmitted centrally. This led to a high load and a large number of failures. The introduction of Blockchain will improve technical security and reduce processing costs.

The wallet of the Qiwi payment system contains "block chains". The checksum of the previous one is embedded in each subsequent link. As a result, the blocks forma chain in which it is impossible to change or remove something.

The next payment system that Blockchain will be implemented into is the WebMoney wallet. It plans that the identification of clients will take place on the blockchain. This will allow new members of the system to verify their identity without visiting the office.

Sberbank implements Blockchain

The largest bank in Russia intends to join the R3 consortium to integrate services based on crypto technology. This will increase the level of transaction security and reduce dependence on the SWIFT system in the future. The system's database protection methods virtually eliminate the possibility of records being spoofed. At the same time, the database is characterized by a high level of distribution and openness of information.

Sberbank plans to use the new system to make transfers between subsidiaries and other banks. We are not talking about the introduction of our own cryptocurrency. In addition, the Central Bank has a negative position on all surrogate money.

Theoretically, Blockchain technology can mitigate some of the political risks. When the sanctions were first introduced, banks were afraid that they could be disconnected from SWIFT. The use of Blockchain increases the stability of operations, since the system does not have a single regulator.

Obstacles

The introduction of Blockchain interferes with the legal uncertainty of using the system. Venture investors see Russia as a supplier of managers and labor. According to opinion polls, only 1 out of 5 Russians knows about the existence of Bitcoin. Of these, two thirdspeople consider cryptocurrencies something illegal. These problems are already being actively addressed in other countries

Blockchain technology: "for dummies"

Startup Blockstrap will host a series of free blockchain seminars for residents of Turkey, Germany, Australia, the Czech Republic and England. The course is designed for people who want to learn more about public registries, software developers, people interested in the digital economy.

As part of the program, students will learn about distributed systems, circuit technology and learn how to create their own applications. Participants are only required to have a basic knowledge of creating websites and developing applications in general.

Cryptographic keys

Cryptographic keys are the foundation on which Blockchain technology is based. What it is? The key is a very long number. For example, this: 1731695423709850868. It can only be decrypted through a set of hash functions. Only one key is suitable for each entry. Another important feature: when replacing at least one element in the block, the set of numbers changes completely.

Network

Information about blocks is stored on users' computers. All of them are equal. Once on the network, the user connects to all other computers. It is important that this network is not tied to geography.

After receiving the data, the user checks it and, making sure that it is correct, saves it on the network, and then transfers it further. Participants are divided into groups: users who create new records, and miners who createblocks.

Information is distributed over the network in this way: "the user with the key B transfers 300 monetary units to the user with the key A". The data is open, but at the same time encrypted. Knowing the key of the car, you can check whether it is pledged, but you will not be able to find out the name of the owner. Same here.

Miners collect records, then they are verified and written into blocks distributed over the network. Ordinary users get access to these blocks in order to store them for themselves, generate correct data and check others.

While an entry is not registered, it is considered invalid. The user may use it at his own risk. This entry can be canceled at any time if it is found to be fake.

Key mining

A miner is a user who creates new blocks. It collects records from the network, generates a header, and generates a key. Consider a short example.

Suppose that after the first calculation the key looks like: "311630826946518243738". According to the rules of the system, it must start with zeros. You need to edit the original data. For these purposes, the nonce field is provided in the block header. After making adjustments, its value changes from 0 to 1. Recalculation will occur several million times until the generated key meets the requirements. Only after that, the generated block will be sent to other Blockchain users. The description of the technology is quite simplified, but allows you to convey the principles of the system.

The trick of mining is thatthe probability of finding the key is always the same. That is, it cannot be bought. Each block has only one key. He must be found. This is what miners do. They get paid for their work. The procedure for generating keys, on the one hand, complicates the work, and on the other hand, it makes attempts to form a fake block almost impossible.

Recommendations for beginners

• Despite the great potential of the technology, you should not strive to tie it to every Blockchain. The fifth wheel hasn't helped anyone yet.
• There is no need to develop "your" Blockchain. It is better to modify the current scheme for the needs of your project.
• If you decide to implement Blockchain, then you need to focus on the whole world at once. Only then can the full potential of the project be revealed.

Conclusion

In a few years, Blockchain technology will become as commonplace as the Internet. What does it mean? Regular services and goods can be received using the system: to issue a passport, register a car, receive a loan, buy tickets, etc. A person will only need to provide a key to the system in order to receive or check the service. This will improve the quality of life.