About Blockchain

Blockchain is a fascinating technology. However, it’s necessary to understand what it is – and what it is not. Here’s my short explanation for it, which of course can only scratch the surface.
For years people have been talking about the Bitcoin as an electronic means of payment. The technology on which the Bitcoin is based, the blockchain, offers far more applications than just the “Internet money.” There are already numerous concepts that could decisively influence the life of tomorrow. It is foreseeable that the public administration will also use this trend because the blockchain provides a framework for the simplification of work processes, which are still characterized by high administrative overhead.

The blockchain is a decentralized database, which is continuously being extended by the users. In the beginning, there was the first block (creation block). Each new block is checked for validity by a consensus principle, such as “proof-of-work” or “proof-of-stake,” and appended chronologically to the back. The result is a “blockchain.”

The distinctive feature of this database is decentralization. Contrary to our previously known databases, which are usually stored on servers or computers, the database of the blockchain is distributed among its users. It has two advantages: Firstly, the operator’s information monopoly is dissolved in favor of all users. On the other hand, the blockchain is forgery-proof. Within this chain, each block has stored the data of the previous block and the entire chain in the form of their checksums (similar to a checksum).

The chain is firm and unalterable. The information stored in it requires no administration or certification. Such technology, which replaces the middlemen, has the revolutionary potential to simplify processes and procedures for public administration as well.

Decentralization

In the past the processes were centralized. One of the most famous examples of a centralized system is banks. They store all the money, and the only way that account owner can pay someone is by going through the bank. Centralized systems have treated for many years. However, they have several vulnerabilities and points that have to be developed.

They are centralized, and, therefore, all the data is stored in one spot. It makes centralized systems easy target spots for potential hackers. In a decentralized system, the information is not stored by one single entity or by one single user. Every user of this network owns the complete data and has access to this network without the third party in the process.

Transparency

One of the most exciting and maybe “mystic” concepts in the Blockchain Technology is transparency. A user’s identity is hidden via complex cryptography and represented only by their public address. While the user’s real identity is secure, it is still possible to see all the transactions that were done by their public address.

This level of transparency has never existed before this revolutionary technology, also within a financial system. Blockchain Technology adds that extra level of accountability.

Immutability

In the context of the Blockchain immutability means that once something has been entered into the blockchain, it can’t be tampered with.

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

A peer-to-peer network maintains the blockchain. The system is a collection of nodes which are interconnected to one another. Nodes are individual computers which take in input and performs a function on them and gives an output. The blockchain uses a special kind of network called “peer-to-peer network” which partitions its entire workload between participants, who are all equally privileged, called “peers.” There is no longer one central server, and now there are several distributed and decentralized peers.

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