What is Blockchain Technology?
By Tofiq Aliyev
On Nov 03, 2020
Table of Contents
Recently, most of the internet users are looking for answers to the “What is a Blockchain?” question. A blockchain is a decentralized database. You may first hear of the blockchain technology through cryptocurrencies, especially Bitcoin(BTC). Although blockchain and bitcoin are closely linked, we shouldn’t think of it as bitcoin equals blockchain. They are different terms. You can learn more about why bitcoin is a different term if you take a look at our blog about bitcoin.
Blockchain is the underlying technology behind Bitcoin(BTC) which enables the transaction of digital coins or assets from peer to peer(P2P). This technology got this name because it looks like a chain. Blockchain is a type of technology that allows you to keep track of a set of transactions, in a decentralized, secure, and transparent way.
Now, we will help you better understand what blockchain technology is and how it works. Having basic knowledge about this innovative technology will help you realize how revolutionary it is.
Bitcoin technology originated in 1991 when research scientists Stuart Haber and W. Scott Stornetta described the first work on a cryptographically secure chain of blocks. It wasn’t noticeable until 2008 when a mysterious person or group of people named Satoshi Nakamoto published a Bitcoin white paper that introduces a peer-to-peer cash system called Bitcoin. The paper stated that bitcoin(BTC) completely based on blockchain technology.
Why Blockchain is revolutionary?
We live in a highly centralized society. We rely on “trusted third parties” to process the transfer of money from person A to person B. For example banks, government officials, logistics companies, notaries, etc. The blockchain network has no central authority. This technology radically changes the world as we know it and create a network that makes it possible to reach an agreement without the need for a third party to verify the transaction. In addition, the blockchain enables transactions to be made faster and cheaper(without fees from a third party).
How does Blockchain work?
Understanding blockchain operations can be complex if we dig into the inner details of its implementation. But it will be enough to follow the basic idea.
Any blockchain works with a coin or token. For example Bitcoin(BTC). The main difference between coin and token is coin has its own blockchain while token uses other blockchains.
As a user, everybody can upload data to the blockchain. Then you publish your data to the entire peer-to-peer network of connected computers called “nodes”. A node can be an active electronic device such as a computer or a telephone, as long as it is connected to the internet and IP address. The role of a node is to support the network and check the validity of the transaction.
All of the transactions are then grouped into blocks on the blockchain. Miners, owners of computers that store blockchain information are responsible for detecting transaction requests from users, combining them, verifying, and adding them to the blockchain as new blocks. The first miner complete a new block will earn some cryptocurrency as a reward. In the end, the completed blocks are linked together to form a chain, and a new block is added to this chain over time.
In short, we hope that if in the future you are faced with the question “what is blockchain?”, you would have a general idea about this technology and what opportunities it opens up. Because in today’s digitalizing world, understanding the concept of blockchain and knowing that this is a technology that can be applied to all areas of our lives is very important for everyone.