Blockchain technology what is it in simple words
The main problem in business is trust. When two parties want to make a deal, the question of trust is the most worrying. If one person transfers money to another, will the transfer be successful? Will it be recorded somewhere? Who will oversee the transaction and ensure that the rights of both parties are respected? No financial system can exist without trust. That is why in our world there are institutions and laws that regulate the conduct of business and punish those who violate the rights of other participants in the transaction.
Blockchain: what is it in simple words
With the advent of cryptocurrency, the need for controlling organizations has disappeared: the necessary level of trust is provided by the blockchain.
This technology is a long list of records like an accounting one. Blockchain is available to all users for viewing, verification and addition. Each individual entry in the blockchain is called a block. The block contains information about the transaction: how much was debited from which wallet and where it went.
The blockchain grows as new blocks are added to it. In order for no one to doubt the authenticity of the blockchain, each block is assigned a unique number called a hash. The next block in the chain has a hash from the previous block. This means that all blocks are inextricably linked. Any attempt to interfere with the existing blockchain is impossible, as this would require rewriting the entire chain from scratch.
So, each block has its own special number – a hash. If hashes were easy, it would be easy for fraudsters to fake the entire blockchain. Therefore, the block hash must be complex so that no single computer has enough power to compute all the hashes. To do this, the hashes in the blockchain must be special. The easiest way to make a hash complex is to set a condition under which the number will start in a certain way, for example, with a certain number of zeros. Then, to calculate one hash, the computer will have to make hundreds of millions of attempts.
Application of blockchain technology
Blockchain technology can be useful not only in the field of cryptocurrency. It will find application in any industry that requires a record of transactions: for example, when registering the right to a land plot. In many countries, this register is publicly available. To find out who owns a particular plot, you need to submit a request to the relevant organization and wait for a response. If this registry were based on the blockchain, it would be more accessible, secure and reliable. You could access the data you need directly from your home computer without the involvement of intermediaries.
Significant Blockchain Issues
However, there are difficulties with the practical implementation of this idea. To prevent fake entries on the blockchain, each participant in the transaction must use public key cryptography. The problem is that if the key is lost, there is no way you can confirm that you were a participant in the transaction. So if the land registry was a blockchain and you lost your private key, you would lose ownership of that land and be unable to prove ownership.
28-year-old IT specialist James Howels was among the first miners in the world, but underestimating the prospects of cryptocurrency, abandoned this hobby. Three years later, while doing a spring cleaning, he threw away a drink-stained hard drive with a wallet containing 7,500 bitcoins. By that time, they could have received $6 million. Attempts to find a hard drive in a landfill were unsuccessful.