8 Oct, 2019

What is Blockchain Technology? A Step-by-Step Guide For Learners

Blockchain is an undeniably clever invention – the spiritual child of a person or group of people known by the nickname Satoshi Nakamoto. But since then, it has evolved into something bigger, and the main question every person is asking is: What is Blockchain?

By allowing digital information to be distributed and not copied, blockchain technology has created the backbone of a new type of internet. Originally devised for the digital currency, Bitcoin, (Buy Bitcoin) the tech community has now found other potential uses for technology.

In this guide, we will explain what blockchain technology is and what its properties are that make it so unique. So we hope you enjoy this “What Is Blockchain Guide”. And if you already know which block spirit level and want to become a blockchain developer please see the in-depth blockchain tutorial and create your first blockchain.

Blockchain is an indestructible digital financial transaction account that can be programmed to record not only financial transactions but almost everything of value. ” – Don & Alex Tapscott, authors of Blockchain Revolution (2016).

A block chain is, in simpler terms, a time-stamped set of invariant data records that manages a cluster of computers that do not belong to a single entity. Each of these data blocks (i.e., blocks) is secured and bound to each other using cryptographic principles (ie chain).

So what is so special about it and why do we say it has industrial disruptions?

The exclusion network has no central power – it is the very definition of a democratized system. As it is a common and unchanging diary, the information in it is open to anyone and everyone to see. Therefore, everything built into the blockchain is by its nature transparent and all participants are accountable for their actions.

Blockchain Explanation
A blockchain bears no transaction costs. (Infrastructure costs are yes, but there are no transaction costs.) Blockchain is a simple yet clever way to transfer information from A to B in a fully automated and secure way. Part of a transaction starts the process by creating a block. This block is verified by the thousands, perhaps millions, of computers distributed around the net. Block verification is added to a chain, which is stored across the net, creating not only a single record, but a unique record with a unique history. Falsifying a file would mean falsifying the entire chain in millions of cases. This is almost impossible. Bitcoin uses this model for cash transactions, but it can be developed in many other ways.

Blockchain is the most disturbing invention of the Internet itself
Think of a railway company. We buy tickets on an app or on the web. The credit card company receives a cut to process the transaction. With blockchain, not only the rail operator other than credit card processing fees can move the whole ticketing process to blockchain. The two parties to the transaction are the railway company and the passenger. The ticket is a block, which will be added to a ticket blockchain. Just like a blockchain monetary transaction is a unique, independently verifiable and undisputed record (like Bitcoin), so is your ticket. By the way, the final blockchain is also a record of all transactions, for example, a particular train route, or even the entire train network, which includes every ticket ever sold, every trip ever taken.

But the key here is this: it’s free. Not only can it transfer blockchain and save money, but it can also replace all processes and business models based on charging a small fee for a transaction. Or any other transaction between two parties.

Here is another example. The gig economy hub Fivver charges $ 0.55 in 5 transactions between people buying and selling services. Using blockchain technology, the transaction is free. Ergo, Fivver will stop there. This will auction houses and any other business entity based on the market maker principle.

Even newcomers like Uber and AirBnB are threatened by blockchain technology. All you need to do is encode the transaction information for a car ride or overnight stay and again you have a perfectly safe way of disrupting the business model of companies that have just begun to challenge the traditional economy. We do not just limit the middle man who processes the charges, we also eliminate the need for a matchmaking platform.

Because blockchain transactions are free, you can charge tiny amounts, for example 1/100 a minute for a video view or for reading an article. Why should The Economist or National Geographic pay an annual subscription if I can pay per article on Facebook or my favorite chat app? Again, remember that blockchain transactions have no transaction costs. You can charge for anything at any amount without worrying that third parties are cutting your profits.

Blockchain can make selling recorded music again profitable for artists by cutting from record labels and distributors such as Apple or Spotify. The music you buy could even be encoded on the blockchain itself, making it a cloud file for each song purchased. Because the amounts billed can be so small, subscription and streaming services will become irrelevant.

Blockchain can make selling recorded music again profitable for artists by cutting from record labels and distributors such as Apple or Spotify. The music you buy could even be encoded on the blockchain itself, making it a cloud file for each song purchased. Because the amounts billed can be so small, subscription and streaming services will become irrelevant.

It goes further. Ebooks could be equipped with blockchain code. Instead of taking a cut from Amazon, and the credit card company making money for the sale, the books would be circulated in a coded format and a successful blockchain transaction would transfer money to the author and unlock the book. Transfer ALL the money to the author, not just meager rights. You could do this on a book review site like Goodreads or on your own site. The Amazon market is then superfluous. Successful iterations could still include reviews and other third-party information about the book.

In the financial world, applications are more obvious and revolutionary change is changing more imminently. Blockchains will change the way stock markets operate, loans are grouped and insurance contracts. They will eliminate bank accounts and virtually all services offered by banks. Almost every financial institution will go bankrupt or be forced to fundamentally change, since the benefits of a secure, transaction-free book are widely understood and applied. After all, the financial system is based on getting a small cut of your money for the privilege of facilitating a transaction. Bankers will become mere advisers, not gatekeepers of money. Brokers will no longer be able to earn commissions and the spread buy / sell will disappear.

How Does Blockchain Work?

Image of a spreadsheet copied thousands of times across a computer network. Then imagine that this network was designed to update this spreadsheet regularly and you have a basic understanding of blockchain.

The information stored in a blockchain exists as a shared – and constantly reconciled – database. This is one way of using the network that has obvious benefits. The blockchain database is not stored in any location, which means that the files it maintains are truly public and easily verifiable. There is no centralized version of this information for a destructive hacker. Hosted by millions of computers at a time, its data is accessible to anyone on the Internet.

To go deeper with the spreadsheet ratio of Google, I would like to read this piece from a special block.

The Three Pillars of Blockchain Technology

The three main properties of Blockchain technology, which have helped it gain wide recognition, are as follows:

Pillar # 1: Decentralization

Before Bitcoin and BitTorrent came out, we were more accustomed to central services. The idea is very simple. You have a central entity that stores all the data, and you should only interact with that entity to get the information you need.

Banking is another example of a centralized system. They save all your money and the only way you can pay someone is to go through the bank.

The traditional client-server model is a perfect example of this:

What is Blockchain
When you google search for something, you send a query to the server who will then answer you with the relevant information. This is a simple client-server.

Now, our central systems have been doing well for many years, but they have many vulnerabilities.

First, because they are clustered, all data is stored in one place. This makes them easy targets for potential hackers.
If the central system were to go through software upgrade, the whole system would stop
What if the central entity somehow ends up for any reason? This way no one will have access to the information available
The worst case scenario, what if that entity becomes corrupted and malicious? If this happens, all data inside the blockchain will be compromised.
So what happens if we just get out of this central entity?

In a decentralized system, information is not stored by a single entity. In fact, everyone on the network owns the information.

In a decentralized network, if you want to interact with your friend, you can do so immediately without going through a third party. This was the main ideology behind Bitcoins. Only you and only you are responsible for your money. You can send your money to anyone you want without having to go through a bank.


Column 2: Transparency

One of the most interesting and misunderstood concepts in blockchain technology is “transparency”. Some people say that blockchain gives you privacy, while others say it is transparent. Why do you think this is happening?

Well … a person’s identity is hidden through sophisticated cryptography and is only represented by his public report. So if you were looking for a person’s trading history, you would not see “Bob sent 1 BTC” instead you would see “1MF1bhsFLkBzzz9vpFYEmvwT2TbyCt7NZJ sent 1 BTC”.

The following Ethereum trading snapshot will show you what we mean:

Transaction requests

So while the person’s real identity is secure, you will see all the transactions that took place with their public address. This level of transparency has never existed within a financial system. He adds that the extra and much needed level of accountability required by some of these larger institutions.

Speaking clearly in terms of encryption, if you know the public address of one of these big companies, you can simply open it to an explorer and examine all the transactions they have undertaken. This forces them to be honest, something they had never faced before.

However, this is not the best use case. We are pretty sure that most of these companies will not trade using cryptocurrencies, and even if they do, they will NOT ALL trade using cryptocurrencies. However, what if blockchain technology was incorporated … they say in their supply chain?

Can you see why this can be very useful for the financial sector?

Pillar # 3: Conversion

Shifting, in the context of blockchain, means that once something enters blockchain, it cannot be violated.

Can you imagine how valuable this would be to financial institutions?

Imagine how many cases of misappropriation can be hit in the bud if people know they can’t “work the books” and move around in corporate accounts.

The reason why blockchain acquires this property is that of the cryptographic hash function.

Simply put, hashing means taking an input string of any length and giving a fixed length output. In the context of cryptocurrencies such as bitcoin, transactions are taken as input and run through a hash algorithm (bitcoin uses SHA-256) which gives a fixed length output.