What Is Blockchain Technology?

Blockchain is one of the fastest growing and effective technologies. However, far from everyone has an idea of how its mechanism works and what is special about Blockchain. If you ask ten people of what blockchain technology is, you will get ten different answers. The best approach to forming a true understanding of blockchain is to comprehend the basic technologies of it step by step.

What’s Blockchain?

Blockchain is a database built on strict algorithmic rules designed for absolute information transparency of each structural element. At the same time, it is practically impossible to compromise (steal) any data due to multiple duplication of the database and the absence of a single storage center.

If you wonder why there is a “block” element in the word, there is a reason for that – all the data are grouped in blocks and aligned in a specific structure, just like atoms in a molecule. Since the database is formed as a chain, where the value of the subsequent element depends on the previous one, another part of the term contains the element “chain.” All in all, blockchain term implies a chain of transaction blocks.

What are these blocks and what is special about the chain? In this context, blocks contain the data about transactions, users, and contracts within the system – all presented in a cryptographic form. To create a block, you need to consistently read information about old blocks. All the data in the blockroom are accumulated and form a constantly updated database, with nothing to be removed or replaced from it. This database is limitless; an infinite number of transactions can be stored there, which is one of the main features of the block.

How Does Blockchain Work?

The work of blockchain can be compared with Torrent. The functioning of torrents is organized in the P2P mode – it is a computer network where all participants are equal. When we download a file from the tracker, we do not use a central server or storage point. The file is directly downloaded from the same torrent peer as you. If there are no participants in the peer-to-peer network, you will not be able to download files either. Things are similar in blockchain. All transactions are conducted directly between entities.

There are two kinds of chains in blockchain:

  • Public Blockchain – it is an open complementary database. This type of blockchain is used in the Bitcoin cryptocurrency. Each participant can record and read data.
  • Private blockchain – this blockchain type has restrictions on data reading/ writing. Priority nodes can be set.

Features of Blockchain

Based on the above information, there are some of the key features of Blockchain:

  • Decentralization – there is no server in the chain. Every participant performs a function of a server and supports the work of the whole system;
  • Transparency – information about transactions, contracts, etc. is kept publicly available. However, these data can not be changed or deleted;
  • Reliability – to conserve new data requires consensus of the block nodes. This allows you to filter operations and record only legitimate transactions.

Is it necessary to know all the features and main points of blockchain? No, there is no need in that. It is more important to understand the basic technology principles and the way the processes are arranged.