The blockchain is, quite simply, a digital, decentralized network that keeps a record of all transactions that take place across a peer-to-peer network. To perfectly understand the term, continue reading and you will find different explanatory examples.
The first generation of the digital revolution brought us the Internet of information. The second generation — powered by blockchain technology — is bringing us the Internet of value: a new platform to reshape the world of business and transform the old order of human affairs for the better.
– Don Tapscott, from his book “Blockchain Revolution”
If you have been reading about cryptocurrencies, you might have noticed the word “blockchain” appearing many times. So, what is this blockchain?
The so famous blockchain is much like the well-known Wikipedia. I am sure you all know how Wikipedia works; every user (with associated permissions) is able to provide information about a specific topic, or even change it. Blockchain works in the same way, users (clients) are able to change the database.
However, there are still administrators who make sure everything runs correctly. They are involved in the updates, access to the network, and the most important, the prevention and protection of cyber-attacks. Obviously, this is one of the most crucial aspects. Being the blockchain a decentralized network, (anyone has access to change the information), it is a usual place where hackers will try to steal information from users. Control of the database remains with the administrators allowing for access and permissions to be maintained by a central authority. Therefore, no one is in control of the information and the network is the work of many users which join all the information together in this network.
Differences with Wikipedia
Having seen how the blockchain can be compared with Wikipedia, you have to know that it does not exactly work in the same way.
Let’s pick for example the Wikipedia entry for Isaac Newton. The first user who wrote the entry on Newton’s biography, would, in this case, have created the ‘master copy’. Now, every different user that changes something on that entry, is changing permanently the master copy. Basically, the information updated is the only information left on the server. All users are looking at the same new version of the master copy because the server is updating the biography uniformly.
In the case of the blockchain, every node in the decentralized network is each updating the record independently. This means that not all are looking at the same copy at the same time. In this case, the master copy is set to be the most popular record on the server.
This difference between Wikipedia and the blockchain is what makes it so useful. It suddenly eliminates the need of an intermediary, which slows downs processes and has to take some kind of incentive for the work it’s doing. For example, imagine a farm that cultivates carrots. Let’s say that the farmer’s farm is 500km away from the grocery store. He is then unable to transport his carrots to the store because that would take to much time, money and much more, while his other vegetables need someone to take care of them. The farmer needs to stay in the farm and cultivate the rest of his food. How does his sell the carrots then? He contracts a carrier to do the transportation process. This has higher costs than transporting the carrots himself, however, he is now able to stay on the farm. With the blockchain, he is able to eliminate the carrier, it would look like approaching the grocery store from 500Km to 5Km away. Now the farmer does not have to pay the carrier, and he can take his foods to the grocery store.
We also wrote an amazing post that shows you how exactly the blockchain works, feel free to check it out here.
Do you think that the blockchain will shape the future? Tell us in the comment section below!
And as always…