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Blockchain technology is commonly associated with Bitcoin and other cryptocurrencies, but this is only the tip of the iceberg. Some people think that the blockchain can end up transforming a number of important industries, from health care to politics.
If you're just trying to invest in Bitcoin, exchange a bit of Ethereum, or you're simply intrigued by what the blockchain actually is, you've come to the right place.
Blockchain is not just for Bitcoin
Anthony WallaceAFP / Getty Images
While blockchain technology does not It's simple when you dig into the core of the question, the basic idea is not too difficult to follow. It is actually a database validated by a larger community rather than a central authority. It is a collection of documents that an audience superintends and maintains, rather than relying on a single entity, such as a bank or government, which most likely hosts data on a particular server. Naturally, a physical database kept on paper can never be managed by tens of thousands of peers. This is where computers and the Internet come in.
Each "block" represents a number of transactional records and the "chain" component links them all together with a hash function. When records are created, they are confirmed by a distributed network of computers and matched with the previous entry in the chain, thus creating a chain of blocks or a blockchain.
The entire blockchain is maintained on this large computer network, in the sense that no one has control over its history. This is an important component, because it certifies everything that happened in the previous chain, and it means that no person can go back and change things. It makes the blockchain a public ledger that can not easily be tampered with, giving it an integrated layer of protection that is not possible with a standardized centralized information database.
While traditionally we needed these central authorities to trust one another, and to meet the needs of contracts, blockchain makes it possible for our peers to guarantee this automatically and safely.
This is the innovation of the blockchain, which is why you could hear it used to refer to different things Bitcoin and other cryptocurrencies. Although they are generally not yet used, blockchain could be used to maintain a variety of information. An organization called Follow My Vote is attempting to use it for a safer electronic voting system than modern versions and health professionals may one day use it to manage patient records.
Where does the blockchain come from?
Although blockchain technology has been used effectively only in the last ten years, its roots can be traced much further. A 1976 article on New Directions in Cryptography discussed the idea of a distributed ledger, which is what the blockchain does effectively. This was later built in the 1990s with a document titled How to print a digital timed document . It would take another decades and the combination of powerful modern computers, with clever implementation with a cryptocurrency to make these ideas valid.
To validate blocks in the same way as a normal private ledger, blockchain uses complicated calculations. This, in turn, requires powerful computers, which are expensive to own, operate and keep fresh. This is part of why bitcoin represented such a great starting point for the introduction of blockchain technology, because it could reward those who participate in the process with something of financial value.
Bitcoin eventually made its first appearance in 2009, bringing together the classic idea of the distributed ledger, the blockchain, with an entirely digital currency that was not controlled by any individual or organization. Developed by the still anonymous "Satoshi Nakamoto", the cryptocurrency allowed a method to conduct transactions protecting them from interference by using the blockchain.
How do cryptocurrencies use blockchain?
Although bitcoins and alternative currencies, all use blockchain technology, they do it in different ways. Since bitcoin was invented for the first time, it underwent some modifications at the behest of its main developers and the larger community, and other alt coins were created to improve bitcoin, operating in slightly different ways.
In the case of bitcoin, a new block in its blockchain is created approximately every ten minutes. That block checks and registers, or "certifies" the new transactions that took place. For this to happen, "miners" use powerful computational hardware to provide a job test, a calculation that actually creates a number that checks the block and the transactions it contains. Many of these confirmations must be received before a bitcoin transaction can be considered effectively complete, even if technically the actual bitcoin is transferred almost instantaneously.
This is the case when the bitcoin has encountered problems in recent years. With the increase in the number of bitcoin transactions, the relatively difficult 10-minute block creation time means that it may take longer to confirm all transactions and backlogs. This led to the creation of some "off-the-shelf" solutions such as the Lightning network, which validate transactions less frequently, to provide faster transactions without slowing down the confirmation rate.
Some alt coins, oriented towards faster transactions, don & # 39; t have a problem with resizing. With Litecoin it is more than two and a half minutes, while with Ethereum the blocking time is only 10-20 seconds, so confirmations tend to happen much faster. There are obvious advantages of this change, even if the blocks are generated at a faster rate and there is a greater chance of errors occurring. If 51% of computers working on the blockchain register an error, it becomes almost permanent and generating faster blocks means fewer systems working on them.
What is the trick?
Blockchain technology has a lot of exciting potential, but there are some important considerations that need to be addressed before we can say it is the technology of the future.
Remember all the computing power required to verify the transactions? Those computers need electricity. Bitcoin is a manifesto of the growing power escalation required by a large blockchain network. Although exact statistics on Bitcoin power requirements are difficult, they are regularly compared to small countries in their current state. This is not attractive given today's concerns about climate change, the availability of energy in developing countries and the reliability of power in developed countries.
Transaction speed is also a problem. As noted above, the blocks in a chain must be verified by the distributed network and this may take time. A lot of time. In the worst case, the average bitcoin transaction time exceeded 41 hours . Ethereum is much more efficient, but its average time is around 15 seconds – which would be an eternity in a pay line at your local grocery store. Blockchains used for purposes other than cryptocurrency may encounter similar problems. You can imagine how frustrating it would be to wait 15 seconds each time you want to change a database entry.
These problems will have to be solved as the blockchain becomes more popular. However, considering that we are less than a decade after the first implementation of the blockchain, it seems likely that we are just starting to adopt this new idea.
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