What is blockchain?

Birth of Blockchain

Conventional transaction system, even that utilizing virtual currency, had to go through agencies, namely banks, credit card companies, or PayPal in order to ensure the integrity of the transaction. Old system required too much personal information for verification which inevitably raised security issue. Such concerns made minor pushes in 1990s to develop blockchain-related technologies including data encryption, tamper-free technology, and distributed processing, but those achievements didn’t hit the ground yet.

In late 2007 the whole thing changed when Wall Street-launched financial tsunami hit the world. United States, desperate to make a breakthrough, tried quantitative easing of unprecedent scale in response. Credibility of dollar dropped in the market, and it led to form an idea, an idea of transaction system which doesn’t involve central banks and safely guard leak of personal information. In 2009, Sastoshi Nakamoto, a mysterious programmer – or a “group” of programmers as many speculates so – created world-fist cryptocurrency based on previously developed blockchain technology, Bitcoin the first blockchain-based currency.

▲Difference between transactions in conventional and blockchain system

Blockchain

A blockchain,originally block chain,is a growing list of records, called blocks, which are linked using cryptography.(Wikipedia)

In plain language, blockchain is collection of chained-blocks which records transactions publicly. Within blocks transaction data are sorted and stored. Conventional virtual currency is usually managed by bank-run central servers while blockchain-based coins are traded in P2P(Peer-to-Peer) and record of such trades is managed in blocks. Once a block stores data, no one can easily mess with them and data can be readily accessible on any internet-available environment.

Also, blockchain is not stored in a single computer but in numerous systems. Bitcoin, the front runner of blockchain system checks transaction records every 10 minutes. When an error or displacement is found in blocks, those parts are replaced with those of “normal” ledgers, where “normal” ledgers are the ones which is approved by more than half of entire users. That being said, if somebody intents to steal cryptocurrency, say Bitcoin, by tampering data in blockchain, he/she has to change data in of more than half of the blocks within a short period of time, possibly 10 minutes for Bitcoins. No doubt people say it is an impossible task.

Blockchain, tamper-free public ledger

Pros and Cons of Blockchain

Pros
1.Everyone has the ledger for all transactions – no need to have a 3rd party to ensure credibility.

1. Hacking is extremely difficult. Even when some part of network is hacked, distributed system significantly reduce the risk, making attacks like DDOS a joke.
2. All transaction records are transparent and public, making transactions on blockchain reliable than conventional method in many aspects.
3. Blockchain runs on its own – cost of maintenance from central management and agencies can be saved.

Cons

1. Transaction speed is slow. Information which formerly traveled only to the central system now has to be spread through network even for P2P transactions.
2. Major changes, some may be critical, can be hard to be implemented. More than half of users should reach consensus in order to fix technical glitches or introduce upgrades, so decision-making on big issues can be time-consuming.

Though spotlighted in financial sector, blockchain technology is now spreading over to managing medical data, working government services, and utilizing IoT(Internet of things). In South Korea Ministry of Science, ICT and Future Planning mentioned that it would push the policies to facilitate the development of blockchain technology including the launch of test projects. It is a matter of time blockchain would be used everywhere we see.

Source: https://coinpan.com/coin_info/1699120