What is #Blockchain?
IT IS DECENTRALIZED
One of the most exciting features of the blockchain is that its entire system is decentralized.
On the blockchain, each user in the network has a copy of the data and transactions so they can access transaction history and confirm new transactions without needing approval from the central entity. In other words, the power is distributed evenly between each participant: If anyone wants to change the information on the blockchain, every participant involved needs to approve.
Uber is an example of a centralized system: you have to depend on Uber to connect with your driver, and as an intermediary, Uber charges you extra fees to earn profits. However, with a system like blockchain, users could contact their drivers directly.
Thus, contrary to other technologies that depend on a single central authority for user interaction, the blockchain allows users to transact with no intermediaries involved, saving money and time.
IT IS TRANSPARENT
Another special feature of the blockchain that makes it different from other technologies is transparency.
On the blockchain, any transactions and holdings of public address are available to be viewed by other users. If an institution transacts using cryptocurrencies, other users can have access to the history of its transactions by knowing its public address and using an explorer — “an open source web tool that allows you to view information about blocks, addresses, and transactions on the blockchain.”
This high level of transparency supported by blockchain technology can be very effective in overseeing large companies’ integrity on their community and customers, which can contribute to preventing financial fraud such as the Enron Incident.
What’s more, privacy and transparency can coexist on blockchain: users’ identities will be encrypted, which makes linking those public addresses mentioned above to individual users very difficult.
IT IS IMMUTABLE
The third appealing feature of the blockchain is that once an information has been entered and stored, it is very difficult to change and manipulate. The reason behind this property is blockchain’s cryptographic hash function.
For simplicity, we will focus on the most critical property – the “Avalanche Effect.”
Blockchain is a linked list that includes data and a hash pointer that points to the previous block, which then creates the chain. Each hash pointer contains the address of the previous block as well as the hash of the data in the previous block.
Due to this property, a small change in the input can lead to huge reflection of changes in the hash. Akin to when one touches a domino that causes the entire chain of dominoes to collapse, a tiny change in one block can make the whole chain change drastically. This “Avalanche Effect” makes the blockchain resistant to the attacks from hackers, which prevents embezzlement.
For information on these events, please refer to corresponding official websites.