Blockchain’s Definition and Role
Precium will use this blog to introduce its hybrid blockchain currently under development, the “Onyx Chain”, and share a variety of related information. We aim to clear up any misconceptions or misinformation about blockchain that many readers may have encountered. Ultimately, our goal is to contribute to the development of the blockchain industry.
The term blockchain became familiar to the general public after the bitcoin craze of 2017. However, among those not deeply interested in the technology, there is a widespread misconception that “blockchain = bitcoin”. This article will describe the conceptual principles of blockchain with concrete examples and explain the relationship between bitcoin and blockchain.
In this technology, the blocks, which contain transaction details, are all connected like a chain, thus creating the term blockchain; it is also referred to as “distributed ledger technology”. To help understand this concept, let’s look at a simple example.
“Satoshi and his friends make up a group of 10 people. Each person has a ledger containing all the financial transactions they’ve made amongst each other since they were 8 years old. For example, if Satoshi lends $10 to Vitalik, one of the friends in the group, then not only the transaction parties (Satoshi and Vitalik) but also the other 8 friends will add the same entry to their ledger stating that Satoshi lent $10 to Vitalik. Therefore, these 10 people all share the same financial transaction details.”
Let’s assume that Vitalik tries to fool Satoshi by claiming that he borrowed $5 instead of $10, so Vitalik forges his own ledger to change $10 to $5. In this case, in order for a majority of the people to have the same modified ledger, then at least 4 people among the remaining 8 must also secretly modify their ledgers. Thus, the more people who share the ledger, the more people are required to successfully forge it, which gives the distributed ledger better security.
Applying the above example to blockchain technology, each person’s ledger would represent the distributed ledger of the blockchain, and the 10 people altogether would represent the members of the blockchain. In addition, to record new transactions in the ledger, the blockchain members verify the new block containing the transaction details and record the same information in their own ledgers through a consensus. In a blockchain, new blocks are connected and recorded in the order they are created. The structure of the bitcoin blockchain, a representative example, is shown below.
As shown above, each block is connected through information called a hash value, which represents the previously created block. The blocks can store a variety of information in addition to the information linking them together; the kinds of data they store depends on the purpose for which the blockchain was developed. However, the basic concept of connecting blocks is a fundamental trait shared among all blockchains. Therefore, unlike traditional centralized bank ledgers, a blockchain’s distributed ledger is shared among many participants, ensuring safety without the need for robust security technology for a single member. Moreover, the blockchain is transparent because the participants can freely view each other’s ledgers.
Our next article will introduce bitcoin as well as smart contracts, the core technology of Ethereum, another representative blockchain. Through this, we will describe the role that Precium will play in building its own independent blockchain.