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What is the Blockchain

The blockchain is a data storage technology, whose main feature in comparison to a classical database, is its distributed and decentralized nature. Instead of being hosted on a single server with backups, a blockchain is spread among various computers of any kind.

Being distributed, the data isn’t owned by a centralized party. It also cannot be edited or corrupted, as every part of the blockchain will check on each other constantly, using code. Using cryptography in most cases, the data on a blockchain is encrypted to various extents. That way, the input of a transaction for example is only possible to the holder of a cryptographic key. In simpler terms: only the holder of the private key of a wallet can sign a transaction using the content of this wallet.

Blockchains have first been written about in the 1990s by researchers in cryptography. However, its first mainstream use case is the Bitcoin blockchain, which was designed in 2008.

what is blockchain

Differences between a blockchain and a database

A traditional database is usually a file saved on a computer or a server. Think for example of an Excel spreadsheet, an Access file, or to all the videos and user data on YouTube. If you shut off the computer or server, the database becomes inaccessible. Also, the owner of the computer can freely edit the data on this database.

With a blockchain, there is no single file, but a multitude. All of these copies of the blockchain are called “nodes”, and all of them have the same value as an original. All the nodes are interconnected by the use of code and the internet. They update each other regularly and check if the data hasn’t been corrupted.

In the technical side of a blockchain, everything is done through encryption. The data is encrypted in the form of cryptographic blocks. Whenever new information is added to the blockchain, a new block is added right after the last one. As a result, the blockchain is a long chain of blocks of encrypted information, hence its name.

An example of a blockchain: Bitcoin

Bitcoin is the most famous blockchain. Bitcoin is the name of both the blockchain and the cryptocurrency. It is important to separate these two terms.

Cryptocurrency is one possible use case of a blockchain. In this example, the blockchain data includes “accounts”, commonly named “wallets”, and transactions. The Bitcoin blockchain only includes a list of wallets and a very long list of transactions.

The process of updating the Bitcoin blockchain is operated through a mechanism called “proof of work”. Using computing power, a very difficult calculus is solved every 10 minutes, corresponding to the update of the blockchain – that is to say, the creation of a new block.

Expanding the blockchain technology: smart contracts

The blockchain technology has extended its boundaries by integrating more sophisticated applications than being a simple ledger, as Bitcoin is for example.

In 2015 appeared the Ethereum blockchain, featuring smart contracts, a revolutionary innovation. A smart contract is a code executed on a blockchain. This simple yet powerful feature allows for infinite new developments: games, financial instruments, property titles, etc. If there is a way to code it, then the smart contract can implement it. Smart contracts are the basis of groundbreaking technologies such as DeFi (Decentralized Finance), NFT (Non-Fungible Token) and many more to come.

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