Blockchain: what is it and how it works
A Blockchain is a communication protocol that identifies a distributed database logic technology (A database in which data is not stored on one computer but on multiple machines connected to each other, called nodes).
A Blockchain is a database made of blocks that store recent valid transaction blocks correlated by a timestamp.
Each block includes the hash (a non-invertible computer algorithmic function that maps an arbitrary length string to a predefined length string) of the previous block, connecting the blocks together. The linked blocks form a chain, with each additional block that reinforces the previous ones. Blockchain is also a public and shared registry consisting of a set of clients
and is organized to automatically update on each of the clients participating in the network.
Any performed operation must be automatically confirmed by all nodes through encryption software, who test a seeded data package (Private key package), which is used to sign transactions. By guaranteeing the digital identity of those who have authorized you.
As mentioned, Blockchain is a distributed database. So, to understand what blockchain is, you need to know better what a distributed database is (Which, as it is easy to guess from the name, is a distributed database, or shared between multiple computers called nodes, connected to the network).
What is a distributed database
A distributed database is a database that is not only physically located on a server (computer), but which is located on multiple computers at the same time.
For example, it may be on all computers that are connected to the network. In this way, the information can be found very quickly, as the computing power exploits the power of all connected computers.
There are basically two processes that allow distributed databases to work properly, and not lose data on the road. They are:
Database Replication: A software is responsible for analyzing the database to identify changes. Once these changes are identified, the software ensures that these changes are replicated and that all databases are identical.
Duplication:This is a process that ensures that all databases have the same data. It basically identifies a master database, which then duplicates on all the other databases, so as to make them the same. Users can only modify the master database, ensuring that local data is not overwritten incorrectly.
One of the most important features of the blockchain is security. The timestamp also prevents the operation from being canceled, once it has been executed. The main feature of the model, therefore, is that operation is not guaranteed by a central body, but every single transaction is validated by the interaction of all nodes.
The Timstamp allows you to associate a certain date and time with a legally valid IT document.
The model is based on the combination of digital signature and time stamp:
The first guarantees that the sender and recipient of any type of message (such as the payment transaction in the world of payments) are identified in a certain way.
The second allows a set of messages, validated with the timestamp by a randomly chosen node from a robust mathematical model, being communicated and written into the register of all other nodes in the network and made irreversible.
All operations, in the case of Bitcoin, are confirmed by the network within ten minutes (but for example, even faster protocols have been developed such as Litecoin) through the distributed mining process.
Pratically, the correctness of the block of operations entered into the network is verified by the computers of the network participants, comparing it with the most up-to-date version of Blockchain.
The first node that gets green traffic light communicates it to everyone else, who validates the block by updating Blockchain. This preserves the chronological order of operations and network neutrality at the same time.
What are the main features of the blockchain? Let's see them together:
-Reliability: Blockchain is reliable. Not being governed by the center, but by giving all the direct participants a controlling part of the entire chain, blockchain becomes a less centralized system, less governable, and at the same time safer and more reliable, for example by attacking malicious people. If only one of the chain nodes undergoes an attack and gets damaged, all the other distributed database nodes will still be active and operative, welding the chain and not losing important information.
-Convenience: Conducting transactions through the blockchain is convenient for all participants, as there are no third party parties needed in all conventional transactions between two or more parties (banks and other similar entities).
-Transparency:Blockchain transactions are visible to all participants, thus ensuring transparency in operations.
-Solidity: The information already entered in the blockchain can not be changed in any way. In this way, the information contained in the blockchain is all the more solid and reliable, precisely because they can not be altered and therefore remain as they were first inserted.
-Digitality: With the blockchain everything becomes virtual. Thanks to digitization, the application areas of this new technology become so many
-Irrevocability:With the blockchain you can make irrevocable transactions, and at the same time easier to trace. This ensures that the transactions are definitive, without any possibility of being modified or canceled.
1) Blockchain in finance and banks:
Finance and the economy are surely among the sectors most targeted by investors in relation to the blockchain. In fact, since we do not have intermediaries to handle transactions, the blockchain would cut down the costs of bank commissions, allowing savings, speeds and reliability of transactions.
2) Blockchain in Insurances:
As one study by Ernst Young points out, there is a good chance of being used also for blockchain in the insurance industry (insurance). Some ways through which the blockchain can help insurances are:
Access to secure and decentralized transactions, which provides a solid basis for fraud prevention, to ensure greater governance, for better data and reporting. Thanks to the blockchain, insurance can also have up-to-date and accurate notifications of changes, allowing them to improve risk management and maximize capital and fund opportunities.
From a technical point of view, insurers see Blockchain as an opportunity to integrate a third-party ecosystem to reduce the cost of their management platforms while at the same time improving customer experience and market share, And developing new solutions and opportunities.
At the market level, insurers also have opportunities in the governance of their companies, through improved access to data, third-party controls and more sophisticated risk management systems associated with their products and services, such as cybernetic insurances.
3) Blockchain in Digital Payments:
Even with regard to digital payments, there are great opportunities for the blockchain. Obviously there are still many issues to be addressed, such as the processing time of a transaction, which is still very slow considering the needs of a market and a world that is getting faster. System performance should also be improved in order to be better absorbed by digital payments, and equally clear guidelines and a more careful threat and opportunity analysis are the challenges of the digital payment blockchain. Despite these challenges, however, there are many opportunities for this new technology applied to digital payments, and we will probably soon be the first responders from the market.
4) Blockchain in Healthcare:
With regard to blockchain and healthcare, managing patient medical data through a shared system, it would allow physicians to share patient information safely and quickly, and would therefore help to improve medicine and health to improve service Of the patient. The ability to control all patient registers and then know the patient's history in advance, in order to provide better care and faster times.
5) Blockchain in Public Administration:
The blockchain also finds application areas in the public administration. Blockchain could help, for example, public administration and citizens have a true digital identity shared and implemented in this system, with several advantages: to make tax evasion more difficult, to have greater control of citizens and thus to fight the Crime, simplified services in all areas of public administration (sending simplified data), and much more.
This was my first post, I hope you'll like it, if you have any question please comment :) Have a good day!!
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Thank you sir!