What Blockchain Is
The term blockchain has been widely used since the appearance of cryptocurrencies. It’s because Bitcoin is actually used based on this technology.
5-Minute Crafts is going to tell you what blockchain is, when this technology first appeared, how it works, and where it’s used.
What blockchain is
Blockchain is basically a chain of blocks, as you might have understood from this term.
Blockchain is a digital database that contains certain information (like records of financial operations, for example). The database looks like a chain of blocks. Every block contains not only its own data but also the data of the previous block. The previous block does the same and together they make a chain.
If any of the blocks are changed, all the following blocks are changed too. This is why blockchain is really secure. It’s impossible to change data in a block without changing all the following blocks.
The blockchain network is supported by many computers all around the world. This is why it’s a decentralized database. It means that every computer has its own copy of the data and exchanged it with other computers, making sure the data is secure.
How and when blockchain appeared
The protocol that was the most like blockchain was first invented in 1982. It was described by an American scientist, David Chaum, in his dissertation. In 1991, a different group of scientists continued to work on the system where timestamps of documents couldn’t be changed. But the full concept was developed only in 2008. It was made by an individual or a group of individuals under the name, Satoshi Nakamoto.
In 2009, the technology was used to make the first cryptocurrency bitcoin, where blockchain was a public record of all the network transactions.
How blockchain works
Let’s see how blockchain works in a simple financial operation:
- Participant № 1 wants to transfer money to participant № 2 and makes a transaction request.
- This and other unfulfilled transactions are put into the network and into a new block.
- Every computer in the network receives info about the new block and verifies it with special algorithms.
- If everything is current, the new block is added to the chain. It contains data about the transaction, hash (a unique block identification), and the hash of the previous block.
- Every computer in the network adds the block into its copy of the database.
- Participant № 2 receives the money.
Where blockchain is used
Nowadays, blockchain is used mainly for cryptocurrencies. But it can also be used in many different areas. Banks and financial companies are really interested in this technology. But it can be used to make smart contracts and protect goods and media content from copyright violations.