What Is Blockchain and Why Is It a Technology Worth Considering?
The author of this article is EPAM Lead Software Engineer Yuriy Markov.
In this article
Though the term "blockchain" has a long history, its implementation only started in 2008 thanks to the article by Satoshi Nakamoto. Initially, the blockchain was a part of a larger concept — cryptocurrency. With time, the ideas behind the blockchain evolved significantly and it is now a solid, stand-alone technology.
For me, it was a big and interesting topic: what practical applications could this technology have in our day-to-day life? What benefits does it bring, and why is it worth using instead of more traditional methods?
To better understand this topic, I wanted to get acquainted with the basics. I opened the "blockchain" Wikipedia page. And I literally drowned in the mass of new terms on this page. Thanks to the Wikipedia community, though, most of those terms have their own articles on the platform.
After a while, the constellation of terms began to form a picture. At first, it was a bit blurry and torn at the edges. But it gave me a start. And, of course, I thought about some courses, such as LinkedIn learning, and getAbstract.
These materials vary in complexity, specificity, and the depth of knowledge they provide. They will, however, help a learner to form a complex knowledge of the blockchain domain. And that is great because we're all busy people and need to have the ability to manage our schedule.
Now, let's consider what blockchain is, how it can be used, and what benefits it brings to the modern world.
What is behind the blockchain concept?
To start I propose to analyze the following statement: blockchain provides a trustless method of peer-to-peer interaction between entities, without the involvement of a third party, for unlimited types of operations by leveraging the mechanism of distributed ledgers.
Let's examine the component parts of this statement individually.
The term blockchain literally means that every interaction is confirmed by a block stored in a distributed ledger. This leads us to the definition of a block.
The block, in the world of blockchain, is proof of work. The proof of work points to the fact that something must be done to obtain a hash value. This hash value is the block that will be stored in the distributed ledger. When each new block is generated, it includes a link to the previous block in the chain. This process ensures the solidity of the system.
The distributed ledger represents a decentralized database that stores the chain of blocks. The system gains its stability and invulnerability from the fact that every ledger is independent and stores the same data. It is virtually impossible to hack the history of transactions, since doing so requires replacing the hashes in each ledger, and the new hashes must use the existing ones.
Next, let's consider the term trustless. By replacing humans with smart contracts, the blockchain eliminates the element of trust from the transaction.
But what is a smart contract? This is code that is automatically executed once the requirements covered by the conditions of the contract are met. This means that humans only define the conditions, the rest is handled by the software.
Why is it so important that the blockchain operates in peer-to-peer mode? The answer is simple: there are no fees since there are no third parties involved, only those who are directly interested in the transaction. Moreover, the parties to the transaction are always equal from the point of view of the software, which disregards the type of the entity. The party may be a person, a company, or the whole state.
Where can blockchain technology be applied and what are the benefits?
And the last thing I want to mention is the application of this technology. Blockchain is already used in a wide variety of very different areas, including banking, scientific research, real estate, and documentation, to name just a few.
I found an example of cooperative work by parties on the development of a cutting-edge technology where every step was confirmed by a blockchain transaction. That allowed for the confirmation of completeness of every step, and also added transparency and traceability. The entire process can easily be investigated to identify the point at which a mistake was made, or to find chains that can be optimized, and so on. And the history of this process is solidified by blockchain, so it is impossible to shift the responsibility onto anyone else. Exciting!
The blockchain offers enhanced security, greater transparency, instant traceability, increased efficiency, speed, and automation. These advantages are welcomed in: supply chains of all sorts, banking and the financial industry, healthcare, pharmaceuticals, government, insurance, and more.
This article doesn’t cover all the aspects of blockchain because they can’t be adequately described in such a brief format, but I hope it will help you to begin your own journey into the world of blockchain and learn more about this promising technology.