Whats the technology behind bitcoin? Its the blockchain.
How blockchain technology works? What porblem it is designed to solve?
Befor answering this, how we knew something today if its real or fake?
The answer is we keep a record of it. For example your dollar bill has a serial number wherein the bank keeps a record of it.
Whenever we want to know if the thing is legit, we just go to relevant authority to authenticate it. And there are persons approved by the government to authenticate documents or things like notary.
The one thing common in this is they are centralized. It means that there is a central authority.
Central authority means power! And power sometimes may become corrupt. What if this central authority wants to change something even a bit. It will cause some distortion that may end up not good.
Thus, bitcoin emerged. A decentralized currency wherein no one has the power to control.
Not just money is centralized. There is information too. Example is the encyclopedia brittanica, it is written by hundreds of authors and it can't be verified, while wikipedia decentralized, wherein anyone can edit information and anyone can see it and verify it.
Decentralization reduces corruption, fraud and manipulation. Blockchain technology is a new and innovated way to implement decentralization.
What is blockchain technology?
Blockchain technology is the solution for the problem of centralization. It is a system for keeping records by everybody without the any need for central authority.
Blockchain is a decentralized way of keeping a ledger that is practically can not be falsify.
Why it is called blockchain?
Each block is link to another. Imagine a book, a summary of the book is linked to other pages of the book. Once you edited the pages of the book, the summary needs to be changed too.
How does blockchain technology work?
There are four elements needed to have a blockchain a life of its own.
Peer to peer network - Its a network of computer (nodes). We need this system to openly communicate and share remotely
Crytography - art of securing data in a hostile environment.
Consensus algorithm - it is a rule, wherein how everyone agrees what is the rule on hiwcto add a block in the blockchain
Punishment and reward - it keeps the people in the system to follow the rules
There is one more element that is needed for this blockchain technology, the market adoption. Market adoption can not be synthesize. Decentralization will lose its value once the market won't adopt the technology.
Is blockchain the next big thing?
Blockchain technology is a good solution for the problem of centralization, but it is inefficient and slow. Example is the bitcoin process, it takes longer time for transastion to be done when it the system is overcrowded.
If you have a problem about centralization and you think decentralization is the solution, make use of blockchain technology.
