Blockchain is one of the latest technologies that has revolutionized the world, especially in financial transactions. Indeed, this technology is the origin of the first cryptocurrency. But this technology has advantages in many other areas beyond its role in decentralized finance. One example is the field of voting. But how does blockchain work? What are its advantages? What are the different applications of blockchain that it offers? This article aims to provide more clarity by addressing the points listed above.
Clarification of the blockchain concept
The concept of blockchain was born towards the end of 2008 with the creation of the first cryptocurrency. In this context, the blockchain is presented as an electronic ledger that tracks all electronic transactions made by holders of electronic currencies. Unlike traditional ledgers, it is very secure and tamper-proof. Moreover, it guarantees security to all users. Similarly, the blockchain serves as a channel of information transmission for various transactions and exchanges worldwide.
In other words, we can consider the blockchain an extensive database that traces the history of different virtual monetary transactions since its creation. For its security, it uses a high level of constantly evolving coding. All users can access the platform at any time. They can perform various operations, except for modifying the registry. Thus, each user can easily connect to the platform to check the chain’s possible information and validity.
In addition, it is essential to note that there are public blockchains. In these blockchains, all the various users can access all the information that resides in them. On the other hand, in private blockchains, the user can only access a restricted part of the platform.
How does the blockchain work?
The principle is quite simple. The blockchain works on different transactions or operations and sometimes on currencies. Indeed, everything that users do on the blockchain is expressed as information. Therefore, all the information about a transaction forms a block. Thus, several blocks are formed on the network.
The program will then distribute the data or information of each block to the nodes. Then, miners validate the blocks and, consequently, the nodes each time the users find a consensus between them. And each node has a copy of the different transactions made on the network; the goal is to guarantee transparency in the exchanges.
The validation of each block goes through specific nodes known in the technical jargon as “mines.” The validation system used depends on the type of blockchain. Indeed, each blockchain has a particular system to validate its blocks. For example, the Bitcoin blockchain is known as the “Proof-of-Work” technique.
When the block is validated, it is dated with programming time and added to the chain of blocks. Thus, the person who is to receive the transaction starts by seeing it on his account. Each user is also identified by an encrypted computer program to protect his information.
Finally, it is essential to note that the total absence of state or governmental control, added to the decentralization, helps the system. Indeed, this organization allows it to integrate the different pieces of information chronologically. The same is true for the inviolability of the data.
What are the links between bitcoin and blockchain?
It’s not uncommon to see people who consistently associate the words “bitcoin” and “blockchain.” Although one calls for the other, the two do not mean the same thing, and it is important to emphasize their difference. Bitcoin is an electronic currency like any other. It can be used as a means of payment. It can also be used to invest in the financial market (stock exchanges and many others). The only difference with traditional currency is that it does not exist in physical form.
It can’t be printed like traditional banknotes or coins, such as the Dollar, Franc, Euro, and many others. However, bitcoin can be exchanged for these currencies. The same is true for other types of cryptocurrencies. When we look at its creation, we notice that Bitcoin is generated by a computerized cryptographic process known as “bitcoin mining.”
In short, mining or generating Bitcoin involves solving advanced algorithms based on the computing power of specific computers designed for the task. You’ll need to connect to specific networks with the appropriate software to get the full benefit. You will have to create nodes at each stage to solve the mathematical algorithms that generate bitcoin. Depending on the coding level, the different nodes are grouped by block. The different blocks are then grouped to form a chain.
This is how the blockchain is created. The blockchain is necessary for the resolution of the algorithm. Indeed, it is the blockchain that holds the key to the different levels of the algorithm to generate Bitcoins. Bitcoin was just the first model on which the blockchain could be developed. Today, this technology is advanced and is used in other areas.
What are the advantages of blockchain?
Every step of humanity’s progress aims to bring an improved answer to what is already done or new ways of doing things while gaining efficiency. The blockchain is no exception to this rule. Indeed, since its creation, it has offered many advantages. Among these benefits are the following:
- Speed: is the main advantage of blockchain. Indeed, transactions have become very fast, thanks to blockchain technology. The block is validated through the blockchain in a few seconds or even minutes in the worst case. In doing so, this technology facilitates transactions.
- Security: Security is the other advantage that blockchain provides. This is possible because it will take several connected users before validating each transaction. Also, these different users do not know each other and can be thousands of miles apart. Therefore, it is impossible to breach the system or embezzle funds through nodes.
- Benefits related to productivity and efficiency: The blockchain manages exchanges through a computer program that reduces the costs related to the transaction of funds as it would have been in the classic system.