Blockchain Technology: Back To Basics

If you are reading this, then you’ve definitely heard of Blockchain. Since its emergence in 2008, Blockchain has been through a lot of ups and downs, but it was always widely discussed. However, while many people know some facts about Blockchain, only a few have a sufficient understanding of it. That’s why today, we’ll take care of enlightenment and dwell upon four key technologies that add up to the Blockchain.

Asymmetric Encryption

Asymmetric Key Cryptography

Here’s how it works. Public keys represent account addresses, and the private key is used as a digital signature of the user. For instance, if you want to confirm the identity of the account during the consensus, you send a message encrypted with the user’s public key that only the owner of the account could decrypt.

Distributed Ledger Technology

Centralized Ledger vs Distributed Ledger

Blockchain is only one of the technologies among multiple distributed ledgers. Although it is, as a matter of course, a sequence of blocks, other ledgers do not require such a chain. Besides, other distributed ledgers may, in theory, offer much better scaling options.

The synchronization of a single database between multiple parties is a key to many benefits of the Blockchain. It helps a lot of industries (e.g. financial sector or supply chain) be more efficient since they care about data synchronization between multiple parties.

Cryptographic Consensus

As any node may fail or a malicious node may emerge, the consensus helps to deal with them by means of its main feature — Byzantine Fault Tolerance (BFT). As long as two-thirds of the network participants act honestly and execute the same action, any unreliable activity will be spotted and neutralized.

Since there are several ways to build a BFT system, there are multiple types of Blockchain consensus. The most popular ones are Proof of Work (PoW) and Proof of Stake (PoS). The difference between these two is that while PoW rewards a user depending on the amount of work they have done for verifying transactions, in PoS, the creator of a new block is chosen according to their stake.

Smart contracts

Smart contracts can be useful in various industries, such as financial market, real estate, insurance, healthcare, supply chains, trading, etc. They are autonomous, trustless, and always accurate.

How do Smarts Contacts work

However complicated Blockchain seems, it is much simpler when you understand its components. Start small and make sure to check out our next articles to learn even more about Blockchain technology!

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