Blockchain explained — what do you need to know before investing
Blockchain itself it’s a topic that if discussed properly, would cover at least one entire book. We will not get into so many details, but we have to cover the basics here to understand the concept.
So what is actually blockchain at its core? At the very beginning, let’s just imagine the regular database that is used by banks or other entities. For every transaction that you make, there must be information stored. But that’s where the problem appears. It’s very easy to edit or erase the record of the transaction without anyone knowing. Transactions aren’t connected to each other meaning that if you edit one transaction, it will not have any effect on transactions made afterwards. And that’s where we come to the blockchain itself.
In a shortcut, blockchain is a digitally distributed and decentralized public database that exists across the network. This network of computers is linked together (peer-to-peer technology, shortly P2P) — that’s why we call it blockchain. It’s records are structured into blocks and each block is cryptographically linked to the following block. Data stored in the blockchain can’t be changed without changing a hash in the following transaction — therefore is nearly impossible to edit or delete anything without being noticed and that’s also what makes the data secured.
Another huge advantage of using blockchain ledger is that it is publicly available. Therefore any data stored on the blockchain is available for anyone to check. This is a big deal, because it means you can track literally anything — from supplies, simple transactions to pretty much any type of information. At the same time, the identity of its participants is anonymous — as long as there is no connection between your wallet number and your identity.
While in the regular financial system, whenever you want to make transactions, you always have a middle man (again — bank would be a perfect example). We call this centralized system. Blockchain technology is decentralized. It means that there is no need for a third party to participate.Transaction goes straight from point A to point B.
It all started very simply. First use of blockchain was mainly for digital currency. To be able to transfer or receive money from anywhere in the world. Then we progressed and started building (smart) contracts on top of that. Smart contracts enabled us to deploy financial applications on top of the basic layer, that bring to use more functions of blockchain like being able to lend and borrow money. And we didn’t stop there — the amount of applications and use cases built on top has been increasing since then. We go from digital art all the way to gaming and even further, because this is still just the beginning of something revolutionary and disruptive that will change the way we look at the modern world.
