We Answer 10 Questions About Blockchain
By ROKKEX on Altcoin Academy
This article is the beginning of our new article series “We answer 10 questions about…”. We have checked the list of most commonly Google-searched questions about blockchain and picked 10 of them to answer.
When Was Blockchain Invented?
Blockchain was invented together with bitcoin back in 2008 by a person (or group of people) using the name Satoshi Nakamoto to work as the public ledger of transactions.
Who Owns Blockchain Technology?
No one. Blockchain technology is the concept behind the blockchain operations and their execution, and it can be replicated. So the blockchain technology belongs to nobody, but different chains can have an owner as a person or an organization.
Can Blockchain Exist Without Bitcoin?
Yes. It might be that you became aware of the blockchain technology because of the bitcoin, but bitcoin is just one of the products based on blockchain. There are quite a few other use cases of blockchain outside of cryptocurrencies. You can read more about it in our article Blockchain Use Cases: Cryptocurrency Is Not All That Blockchain Is For.
Are Blockchain Transactions Traceable?
Yes and no. Generally, all transactions can be traced back to the source due to blockchain processes being based on direct peer-to-peer communication that requires trust and transparency. However, transactions are usually related to the account or address that does not reveal the real identity; this way, keeping you anonymous. That being said, it all depends on the chain as some do have higher anonymity and security, which hides information on all transactions and accounts.
What Can Blockchain Be Used For?
The blockchain serves as an incorruptible ledger, that enforces transparency, and bypasses censorship. It can be used (and is used) in many industries such as supply chains, insurance, healthcare, transportation and logistics, voting, contract management, etc.
It is often used to avoid centralized third-party that usually makes the process costly, more complicated, and time-consuming. For example, during the refugee crisis back in 2014, Syrian refugees were given 10 000 cryptocurrency-based vouchers that gave them direct and easy access to donations and food, avoiding bureaucracy and international uncertainty.
How Does Blockchain Technology Work?
- A blockchain node starts a transaction (any action on the blockchain) by creating and then digitally signing it with the private key.
- It is delivered to peer nodes that verify the transaction based on preset criteria.
- The validated transactions are included in a block, which is then hashed and passed onto the network.
- The block becomes part of the ledger that is updated in every node on the network.
- Transactions are then reaffirmed every time a new block is added.
Where Does Blockchain Store Data?
In the decentralized blockchain, there is no single place where data is stored. It is stored in the shape of a transaction, and distributed across the whole network of computers. All information is verified, encrypted, and cannot be edited, once its block is added to the chain. However, in newly appearing centralized chains, data is stored in their local ledger and managed by set parties.
Why Is Blockchain Needed?
Blockchain works as a ledger that helps to maintain a complete and verifiable history of data changes. It brings in transparency and data protection, also removes the middle man that could cause corruption or bureaucracy. Also, many new blockchain applications and use cases are developed every day.
Where Does Blockchain Fail?
Blockchain brought so much good and potential, but there are some downsides that are questionable or need to be sorted.
Complexity
Blockchain created a lot of new processes, highly specialized terms, and technologies. It also made cryptography and decentralization more mainstream.
Functionality
Blockchain involves various challenges in its functionality, such as transactional speeds, verification processes, and data limitations. It all heavily depends on the processing of the nodes and network growth.
Network
For the blockchain to remain stable and to avoid corruption in a network, it needs a huge set of users and nodes connected with a robust network. Also, growing usage raises the demand of powerful mining hardware resources for already very power-hungry infrastructure.
Security
If we skip over the anonymous transactions that require peer-to-peer trust, the growing number of nodes brings out some other security flaws. For example, so-called 51% attack. Blockchain depends on computers that validate the transactions, so if half of the computers in the network verify something, then it is considered to be true. So if half of the nodes confirm a lie to be the truth, the whole blockchain network will know that lie as the truth. To avoid such issues, the process is made to be longer and more complicated, either by raising the number of confirmations needed or enhancing hashing power.
Will Blockchain Replace Banks?
Not in the foreseeable future. It could replace a bank’s internal systems and transform the banking industry, but not remove banks from the system. Blockchain is more likely to supplement traditional financial infrastructure, making it more efficient and secure, instead of replacing it entirely.
Blockchain is still developing, and people are just starting to wrap their minds around it. We hope that this article answered at least a few of the questions you had. If you would like to know more, let us know.
At ROKKEX, we take security extremely seriously, and our crypto exchange is built on ‘Security First’ principle. We want to share our expertise with the broader public for the world to become happy, safe, and wise :)
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