The world has seen a significant increase in interest in Bitcoin and cryptocurrencies in recent years. Everyone is talking about the impact of these volatile currencies on businesses, stock markets, and companies.
In this article, we will delve into the background technology behind these encrypted currencies; the blockchain or block chains. We will try to understand the reasons for their spread and also explain the mechanism of their operation and applications.
The blockchain technology enables individuals or companies to transfer valuable assets securely and without intermediaries. Simply put, the blockchain is a series of permanent blocks that are archived and managed by a network of computers that follow common rules and do not belong to any particular entity or entity.
Securing fixed blocks and connecting them to each other is done using cryptography. Also, the blockchain network is considered an independent world and is not subject to any central authority. The network is considered a separate system, which means that no part of the stored information can be changed or modified.
Information on the network is available and open to everyone, leading to high transparency in the system. The unique feature of the blockchain network is that transactions on the network are free and there is no direct cost that requires payment.
The blockchain technology operates through a decentralized system where a block is created by one party and verified by numerous computers spread across the globe. Upon verification, the approved block is added to the blockchain, forming a permanent and unique record linked to other records. To alter a single record, the entire chain would need to be altered, making it almost impossible.
Technically, a blockchain is a chain of blocks of digital data, stored in a public database. Each block in the blockchain comprises a collection of digital information, similar to a page in a ledger that holds information relating to specific financial transactions. Once a block is complete, a new block linked to the previous block is unlocked and added to the chain.
The block, which is permanent and unalterable, consists of two parts: the block header and the block body.
- The block header contains components such as the software version, the hash of the previous block, the date of registration, transaction amounts, and other information.
- The block body comprises all transactions recorded in the block and information about the parties involved in the transactions, but instead of using real names, transactions and purchases are recorded using digital signatures that act as usernames. No personal information is required.
Each block has a unique hash code that distinguishes it from other blocks.
For a block to be added to the blockchain, the following steps must occur: the transaction, such as a purchase or transfer of funds, must take place, the transaction must be verified by a network of computers, the transaction data must be stored, and the block must be given a hash.
The block is also given the identification code of the most recent block added to the blockchain, linking all blocks in the form of a chain. But is the blockchain technology safe? The blockchain technology addresses security issues through its linear and chronological storage of blocks.
For instance, new blocks are always added to the end of the blockchain, making it challenging to modify the contents of a block. Each block contains its own identifier and the identifier of the preceding block, and if information is altered, the identifier will change, rendering it necessary to recompute all identifiers for subsequent blocks, requiring vast computational power.
As a result, many companies and banks have adopted blockchain technology as a means of transferring money, assets, and data, leading to its integration into various industries such as finance, health care, supply chain, insurance, and logistics services.
With the anticipation that all companies will become blockchain users by 2027, the blockchain technology opens up new opportunities and inspires companies and institutions across all sectors to seek creative and evolutionary ways to leverage this advanced technology.