Blockchain - Simply explained
Blockchain describes the technology which uses a public and distributed ledger, to create the foundation for safe communication and safe storage of informations. Cryptocurrencies, digital contracts or even land registry can use Blockchain as a underlying technology. The developement of Blockchains has the potential of being the biggest technological developement in the future, with more impact to our everyday life as other developements as further digitization, artificial intelligence or autonomous cars.
The Blockchain is a long list of Informations, also called a ledger. These informations are collected in blocks. Every block contains certain informations, like transactions in Cryptocurrencies such as Bitcoin, digital contracts in networks like Ethereum or many other possible informations. To this informations, a block contains some more important informations like the unique, digital fingerprint of his predecessor. If the content of one block changes, his fingerprint will change and the following Blockchain will be invalid.
If the blocks are completed and written into the ledger, it is practically impossible to change their content, which ensures the high safety within a Blockchain. The authenticity of the informations in the Blockchain is ensured and nobody is needed to prove its credibility.
How can I use the Blockchain?
Every user of a Blockchain creates his own account. An account always consists of a public adress and a private key. The public adress is visible to everyone and serves as an account, which you can assign informations, currencies or other things to. The purpose of the private key is to send transactions, or to sign contracts or informations. Similar to a signature, but a lot more secure.
Where is the Blockchain stored?
The Blockchain is stored on computers all around the world. Independant and voluntary users can provide their own computers to store and to continue the Blockchain. Everyone who helps to continue the Blockchain and to distribute it, gets a reward. This process is called “Mining”.
Who is controlling the Blockchain?
The users. Almost all Blockchains are designed without a central authority, like an administration or bank. After a Blockchain is developed, it can be used and managed by an independant network. Decisions will be made democraticly by the whole network. Even more important, there is no central institution which benefits and controlles the network alone.
Anonymity and control
Even though the Blockchain is completely public, there is a certain degree of anonymity. Users don’t identify themselves with their names, but with their unique adress in the network. This adress can only be matched to a user, if he provides it. There are some Blockchains, which are creating full anonymity. This creates new possibilities of controlling your own private data.
What are the usecases for Blockchains?
Blockchains can be an improvement to almost every field by creating new values and trust. Example applications can be to secure identities, protect creators, equal and fraud-proofed elections, controlling energy distribution or the secured storage of your data. One important field is the financial sector, in which Cryptocurrencies can restore real values behind currencies. Another example is the land registry. Sweden is working on projects which could change the management of land ownerships from the old paper management to the use of a Blockchain. This change will save about 100 Million Euro of swedish tax payers money, every year. Russia is also researching a lot in Blockchain technology and president Vladimir Putin recently met Vitalik Buterin, the creator of Ethereum, to discuss future applications. Big companies are developing their own projects as well, to improve their companies and products. Google, Microsoft, IBM, VISA are only a few examples.
“While the Bitcoin hype cycle has gone quiet, Silicon Valley and Wall Street are betting that the underlying technology behind it, the Blockchain, can change… well everything.” –Goldman Sachs