How many times have you nearly hit your computer trying to figure out what blockchain is. In this article, I will help you understand simply about blockchain in 5′.
I know that many people have been trying to learn about this technology for quite some time.
But when typing the phrase “what is blockchain” Google, there are quite a few results returned. Is it from Wikipedia or other sites.
But the difficulty is that they explain too "sublime" with many specialized terms. That makes it impossible for newbies to "swallow".
I used to be like that too!
See also: Top 10+ crypto term that newbies need to know
Therefore in this article I will try to explain so that everyone can understand what the essence of blockchain is.
Let's start together!
What is Blockchain?
To understand blockchain simply, blockchain = block + chain. Blockchain (block chain) is a chain (chain) of many blocks (blocks) connected together.
In an information block, there will be 3 main components as follows:
For example in the blockchain of Bitcoin information about transactions.
However, transaction information is the simplest type of information in blockchain technology.
This type of data can also be medical (recording medical records), education (degrees), agriculture (traceability of agricultural products), finance (decentralized ledger)…
Hash (hash) of the block itself
This is the unique “code” of this block.
It is considered as the digital fingerprint or seal of the block. Cannot be deleted or changed.
Hash of the previous block adjacent to it
This ensures that the position of blocks in the chain cannot be reversed or changed.
The first block in the chain is called Genesis block or Primitive Block.
Blockchain vs Bitcoin
Many people often confuse these two concepts.
In fact, blockchain is technology and Bitcoin (and other coins) is the product created from that technology.
You can imagine blockchain as a piece of land of gold and Bitcoin as a skyscraper built on that land.
What makes Blockchain different?
It is nothing new to say that Blockchain is used to store data.
For thousands of years people have been doing the same. From notes on clay, animal skins, paper and more recently hard drives or the cloud…
So what is in Blockchain that people consider this to be the "invention of the times".
Suppose you open an account at a bank. Then every time you top up your account (or receive money from someone else) the bank will credit you.
If you withdraw (or transfer to someone else) the bank will debit your account.
All these transaction information of you (and others) will be recorded in the bank's computer system.
Thanks to these data, the bank will calculate how much balance you have left.
This is how traditional banking is working. All data is stored in one place (centralized).
So what if this system is hacked or natural incidents such as earthquakes, volcanoes, tsunamis ...
In Blockchain, this data is distributed among peer computers in the network.
Each computer in this network is called a node and stores a copy of the blockchain system.
When a node in the network is attacked, that node can easily replicate the data of one of the remaining nodes.
That is the distributed, non-centralized nature of data. The more nodes in the network, the stronger the Blockchain.
As I said above, any block in the network (except the Primitive Block) contains the hash of the block itself and of the previous block adjacent to it.
If someone wanted to modify the data of any block, they would have to modify the hash of the block immediately following it.
And when the next block hash changes, he will have to recalculate the hash of the next block…and so on…until the last block…
Blockchain works based on consensus mechanism (joint consent).
Any data included in the block must be agreed to by more than 50% nodes in the network.
Thus, if the hacker wants to change the data, he will have to take over the 51% number of nodes in a short period of time.
This is practically impossible.
Remove third party
Back to the bank account opening story above. For each transaction, you have to pay taxes and fees to the bank.
Blockchain is a peer-to-peer distributed network. The nodes in the network all have an equal role, so the role of a third party is eliminated.
As a result, you will save time and money. Of course, that also comes with risks.
When you lose your card or password, the bank will re-issue it to you. But in Blockchain, if you lose your Private Key, it's lost forever.
Distinguish types of Blockchain
Depending on the purpose of the Blockchain, we will have the following 3 types of Blockchain: Public Blockchain (public), Private Blockchain (private), and Consortium Blockchain (a combination of the two above).
Most cryptocurrencies are Blockchains of this type.
Say it's public because anyone has the right to see all the transactions and anyone can join the network.
People often use the word permissionless (no need to be authorized) to refer to this type of Blockchain.
Advantage: Highly resistant to censorship.
Defect: Due to security requirements, performance is reduced. Due to the need for consensus of many different people, it is easy to have a hard fork (chain split).
This network decides who is allowed to join and write data to the chain. Also distributed network but not decentralized.
This blockchain has clear decentralization (not peer to peer) so it is easy to reverse.
The identity of each player is revealed.
Private Blockchain is suitable for companies and organizations that want to take advantage of Blockchain but still keep privacy.
As I said above, this Blockchain is a combination of the two above, so it is also known as Semi-Private Blockchain.
In public Blockchains anyone can confirm blocks.
In a private blockchain, a single organization is assigned who creates blocks.
In the Consortium Blockchain, a number of equal parties act as validators.
This type of Blockchain is suitable for many companies and organizations in the same industry and want to share data with each other.
For example, hospitals and medical centers want to share and use patients' medical information in the system.
So I just went through what Blockchain is and a simple way to understand blockchain.