What are Blockchain and its relationship to digital currencies?
Blockchain technology has received considerable attention over the past years and has made a qualitative shift in the digital economy, given the protection it provides; The information stored in this technique cannot be pirated or manipulated, and through the following lines we will learn about this technique, how it works and its extensive uses.
Blockchain. To store cryptocurrencies away from hacking and counterfeiting.
Blockchain (or blockchains) can be defined as technology for the decentralized storage and sharing of information; It prevents the manipulation, piracy, or falsification of data, particularly in digital currencies and associated technologies, such as smart contracts and non-replaceable symbols.
What is the blockchain mechanism?
The basic principle of blockchain work is not to store data on a central server and distribute it to network members, but to create blocks or copies of the data set and instantaneous changes to it, such as transfers in the case of cryptocurrencies.
blockchain technology elements?
The blockchain network consists of several key elements that can be explained as follows:
- Blocks
Each block contains information related to the instantaneous change of data, and - in the case of cryptocurrencies - each block contains, for example, the latest transfers and rapid changes to users' To confirm the validity of the information about the blocks.
- Hash
Based on the one-way encryption method, each block has its own part, and the former block is part of maintaining the sequence of blocks. The hash is created via a mechanism adopted by each blockchain called the "consensus mechanism", and has two basic types, as follows:
- proof-of-work
It will be according to this mechanism - whoever wants to create the new block and certify the transactions in which it drains a lot of computer power to generate the hash of the block, and the number of attempts made by the computer is attached to the basic mass information; As proof that enough computer power has been put into place to create it, which is the method adopted in bitcoin and many other currencies, the user who performs this task usually earns wages in the form of new currencies created with each new block or wages for certified conversions in the new block or both.
- proof of stake
This mechanism relies on the participation of those with minimal shares of the currency or virtual assets traded to certify the new blocks. The process participants are selected at random. This mechanism is linked to the "Staking" process, which means that users freeze a section of their cryptocurrency to use it to create new blocks and get benefits from it.
Uses of blockchain in various fields
The uses of blockchain in different areas today are as follows:
- Cryptocurrencies
Blockchain technology is the main factor in today's existence of digital currencies, that is, it is this technology that has been relied upon since the creation of Bitcoin and is the first digital currency, and by relying on it several benefits, such as There is no need for a broker or central entity to manage payments and transfers, the great security that it has due to the difficulty of pirating it, preventing withdrawal of the same balance more than once, or what is known as double-spending.
- smart contract platform
Defined as a type of self-application code that allows contracts between two parties without an intermediary that they are obliged to apply, it is the key to the emergence of many new blockchain applications, such as decentralized applications and blockchain-based games.
- Decentralized Applications
They are defined as applications that operate according to the rules placed on the blockchain, do not need a central server as normal applications are, and are not subject to change after loading on the blockchain.
Non-replaceable codes are a means of recording and trading ownership of digital files and work without the need for a central entity to recognize parties' ownership of these assets.
What are the positives of blockchain?
Blockchain technology has many features that make it attractive to various applications as an alternative to traditional centralized methods.
Among its most important positive elements are the following:
- Safety
In the absence of a central server, it is almost impossible for Blockchain to be attacked, and mining operations make the amount of computer energy needed to penetrate it too high, to the point where any hacking attempt does not outweigh the entire grid by the amount of computer energy. Low costs blockchain dependence reduces much of the expenses related to data protection, management, and storage.
- A decentralized structure that enables a new method of providing content, software, and financial transactions so that they do not need to rely on big companies, and facilitates transparency and speed in various transactions.
What are the cons of blockchain?
Despite its advantages and benefits, blockchain technology has been criticized for several key ideas, including:
Energy consumption and environmental impact The use of blockchain technology, especially in cryptocurrencies, requires large amounts of energy, especially for the mining process, causing mining companies to turn to countries with low energy prices, which usually rely on highly carbon-emitting fossil fuels, along with the resulting electronic waste.
- Inability to modify
When issuing blockchain rules, they cannot be modified or canceled, making it challenging to fix gaps in how blockchain is designed and programmed or the smart contracts it is built on.
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