To put it simply, blockchain is a blockchain-based technology that allows the transmission of data securely based on a complex cryptographic system, similar to a ledger.
What is blockchain: Simplest definition in 2022
The definition of blockchain has been updated many times on technology websites. I will summarize the latest blockchain definition in a way that is simple and easy to understand for you or your business.
The scientific understanding of blockchain
Blockchain is a special kind of database. It is a technology for storing and transmitting information by linking blocks with each other, each block contains information about the creation time and is associated with previous blocks. We can understand the operation of blockchain like a ledger of a company (a ledger is “a book or other collection of financial accounts of a particular type).
With blockchain, this ledger works in a digital, encrypted form to record and track financial transactions with absolute precision. All participants in the network, at any time or in any geographical area, can track the information in the copies. And of course, this copy is updated every minute, even every second.
The closeness understanding in blockchain application to modern society
I will take a practical example, which almost everyone knows when applying blockchain technology. It is the Bitcoin digital currency.
Blockchain technologies allow Bitcoin transactions to be aggregated in blocks and added to a chain of existing blocks using cryptographic signatures. Bitcoin’s operation is distributed and transmission less, so it does not need to go through an intermediary financial institution. This means that blockchain technology makes every transaction of Bitcoin currency transparent, not manipulated or changed by a third party, helping to prevent counterfeiting and saving a lot of costs for other users.
Imagine we use Google Docs to save all the articles, which are constantly updated as we edit them, can be easily shared via links, and everyone who receives the links holds them a copy.
To hack information in a specific block of the blockchain, the hacker will have to hack not only that block but all the blocks that precede it (remember, they are closely linked) on millions of ledgers in the network at the same time.
How does blockchain work and its prominent characters?
How does blockchain work?
Information is stored in blocks on the blockchain. These bricks are connected in a logical order to produce a continuous line.
Each block resembles a ledger or a record book page.
Each block mainly has 3 elements:
* Data: The type of data depends on the purpose of the blockchain. A block’s data in Bitcoin, for example, comprise information about the transaction, such as the sender, receiver, number of coins, and so on.
* Hash: A hash in the blockchain is something like a fingerprint or signature. It identifies a block and all its content, and it’s always unique. Hash is used for the purpose of encrypting data, bringing in its irreversible characteristics. This means, when you have the hash value in hand, you don’t know what the original value was. This characteristic is extremely important for the high security of blockchain technology.
* Hash of the previous block: This is exactly what a blockchain is made up of! The chain becomes extremely safe since each block contains the information from the previous block.
To understand in a simple way, I take the below example:
|Block 1 contains this stuff:||Block 2 contains this stuff:||Block 3 contains this stuff:|
Data: 10 Bitcoins from Fred to Jack
Hash (simplified): 12A
Previous hash (simplified): 000
Data: 5 Bitcoins from Jack to Mary
Hash (simplified): 3B4
Previous hash: 12A
Data: 4 Bitcoins from Mary to Sally
Hash (simplified): C74
Previous hash: 3B4
As you can see in the following figure, each block has its own hash and a hash of the previous block. So, block 3 points to block 2, and block 2 points to block 1. (Note: The first block is a bit special because it can’t point to a previous block. This block is the genesis block (it’s like buying a brand new, limited edition bag and not having a second bag like that, and it’s tagged with genesis to let people know how your bag is scarce)).
After looking at the activities of each block in the blockchain chain, you should understand that it is almost impossible to interfere with blocks.
The blockchain is an aggregated link of blocks. The blocks are in a peer-to-peer (P2P) network, without using a central entity to manage the chain. So anyone can join and those who have joined the network will receive a copy of the blockchain. It’s extreme transparency.
A proof of work is a mechanism that adds security to the blockchain. When attacking this network, we need a lot of resources such as computing power, time to solve problems … making the attack extremely expensive.
Blockchain prominent characters
I have also incorporated the characteristics of blockchain in the above analysis. To summarize, blockchain has the following characteristics:
* Inviolability: Can’t be tampered with and destroyed blockchain chains, unless there’s no internet left.
* Immutable: Data on blockchain chain is irreparable
* Data security: Only the person who holds the private key has the right to access information and data about blockchain
* Transparency: Anyone can access to see a copy of the entire blockchain history statistics
* Smart contract: The integration of a smart contract into the cryptocurrency ecosystem is one of the most recent advances. A smart contract is a blockchain-based digital computer program. It has the ability to directly govern the transfer of bitcoins or other digital assets if specific circumstances are met.
Types and versions of blockchain technology
Blockchain technology systems are divided into 3 main categories:
* Public: Anyone has the right to read and write data on the blockchain.
* Private: Users are only allowed to read data, not write because this belongs to an absolutely trusted third party. This organization may or may not allow users to read data in some cases.
* Permissioned: Also known as Consortium, a form of Private but a combination of trust when participating in Public and absolute trust when participating in Private. For example, banks or joint venture financial institutions will use their own Blockchain.
How does blockchain transform society?
With the outstanding features and extremely secure and transparent operation of blockchain technology, modern society is facing a technological revolution as the Internet did.
Applications of blockchain for many different fields in life such as finance, logistics, games, entertainment, and more. Think about the explosion of NFT games and digital currencies.
Thanks to the application of blockchain technology, digital currencies were born. It will most likely become a legal payment method in the world in the not too distant future, because of its immutability, decentralization, transparency, and not “relying” on an intermediary financial institution. This is evident in the conflict between Russia and Ukraine. The Ukrainian government has even called on the world to donate cryptocurrency with the amount received reaching hundreds of millions of dollars.
Or else the application of blockchain has changed the face of the traditional gaming industry. Blockchain technology allows players to have permanent ownership and arbitrarily buy and sell their assets in the game. By linking in-game item data to tokens, gamers can trade assets between different games. This completely overwhelms the existing disadvantages of traditional games such as lack of transparency, vulnerability to hacking, etc.
The future of the blockchain technology revolution will be even more powerful in many fields. Read in detail the applications of blockchain in life here for the best overview.
To sum up, a shared, distributed, and immutable ledger that records the history of transactions starting with transaction number one. It establishes trust, accountability, and transparency. With the emergence of blockchain technology, people will receive an exciting and potential new technological revolution.
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