BlockChain Fully explained
Blockchain is a widely used term that represents a whole new set of technologies. There is a lot of confusion surrounding its definition because the technology is in its early stages and can be implemented in many ways depending on the goal.
“At a high level, blockchain technology enables computer networks to regularly agree on the true state of distributed ledgers,” said Sloan Christian Catalini, an assistant professor at MIT and an expert on blockchain and cryptocurrency technology. These ledgers can contain different types of shared data, such as transaction records, transaction attributes, vouchers, or other information. Ledgers are usually protected by a clever combination of cryptography and game theory and do not require trusted nodes like traditional networks. This allows Bitcoin to transfer value globally without resorting to traditional intermediaries such as banks.
On the blockchain, transactions are recorded in chronological order, forming an immutable chain, and can be more or less private or anonymous, depending on how the technology is implemented. The ledger is distributed among many participants in the People-Yes network, they do not exist in one place. Rather, a copy exists and is updated at the same time with each node fully participating in the ecosystem. A block can represent multiple types of transactions and data: currency, digital rights, knowledge, property rights, identity, or property ownership, to name a few
“This technology is particularly useful when combining distributed ledgers with cryptocurrencies,” Catalini said. “Suddenly, it can guide the entire network to reach an Internet-level consensus on the status and authenticity of the block’s content in a decentralized manner. Each node participating in the network can verify the true status of the ledger at a cost. very low. Trade it. This is just one step away from distributed markets and will support new digital platforms. ” What does the
How is blockchain related to bitcoin?
Bitcoin has a market value of more than 40 billion US dollars and is by far the largest application of blockchain technology. Although much media attention has shifted from bitcoin to blockchain, the two are intertwined.
“When The Economist put blockchain on the cover in 2015, it was no longer used to support digital currencies. Catalini said that this technology will be launched in other applications in the next 5 to 10 years. “For example In the field of finance and accounting, people are keen to use technology to settle and coordinate global transactions at a lower cost. In terms of logistics, the focus is on how to use the immutable audit trail generated by the blockchain to improve the tracking of goods throughout the economy. Others are fascinated by the possibility of using it as a better identity and authentication system. “So what’s the problem? In a recent article, Catalini explained why business leaders should be excited about blockchain – it can save them money and disrupt business operations.
There are two types of costs blockchain could reduce for you: the cost of verification and the cost of networking.
All businesses and organizations conduct many types of transactions every day. Each of these transactions requires verification. In many cases, this verification is easy. Get to know your clients, colleagues, and business partners. After working with them and their products, data or information, you have a good understanding of their value and credibility.
“But every now and then, there will be problems, and when there are problems, we usually have to do some kind of audit,” Catalini said. “This may be a real auditor coming into the company. But in many other cases, he is running some kind of procedure to make sure that the person claiming to have these credentials has them, or that the company selling the products does. When we do this, it is a costly and time-consuming process for society. The market slows down and you have to bear additional costs to match supply and demand. “
” The reason distributed ledgers have become so useful in these situations is that if you record those attributes that you now need to securely verify on the blockchain, you can always go back and check them for free,” it said. It is a free verification. So when you consider how Bitcoin works, it is because you can inexpensively verify that the funds exist. You can transfer value from here to anywhere in the world with almost zero transaction costs. Sending Secure valuable messages no longer requires the intervention of banks or PayPal.
Bottom line: because blockchain verifies credibility, it is not necessary. And it reduces transaction friction, saving costs and time.
The use of blockchain can also reduce the cost of operating a secure network. Catalini said that this will happen over a longer period of time, perhaps ten years. The Internet has enabled a faster and easier exchange of goods and services. But you still need middlemen, no matter how efficient they are – think eBay, Airbnb, and Uber.
“These intermediaries are expensive and earn income by processing payments, maintaining reputation systems, and matching supply and demand,” Catalini said. “This is where the combination of blockchain technology and encrypted tokens allows you to rethink the entire value chain from the ground up. This is where incumbents should be a little worried because, in the long run, they provide customers with value and The way to compete with other companies may be fundamentally different.”