What is Blockchain Technology? (Updated 2019)

Since late 2008 when blockchain technology was first implemented in Bitcoin, masses steadily started to get involved in and the technology itself just got more complex. Most people may consider Bitcoin and Blockchain as the same thing, and it is hard for many people may be including our readers to understand what is all about.

To put it in basic concept, you should understand that blokchain is a huge innovative ecosystem where Bitcoin is just currency. The most important point in that technology for an average user is that that you do not have to know everything to be able to get all advantages of the blockchain. Well, understanding how the ecosystem is built will allow you to see its full beauty and understand why is it so important. You can learn much more blockchain technology and innovations it brings together reading other articles.

What is blockchain technology

What is blockchain technology?

Blockchain, as it is clear by its name, is a chain of blocks of a distributed database, in which the storage devices are not connected to a common server. This database stores an ever-growing list of ordered records called blocks. Each block contains a timestamp and a link to the previous block. The use of encryption ensures that users can only change those parts of the chain of blocks that they “own” in the sense that they have private keys, without which writing to the file is impossible. In addition, encryption ensures synchronization of copies of a distributed blockchain among all users.

What is blockchain technology

How did blockchain technology come about?

The emergence of the blockchain is directly related to the development of the Internet and electronic money. Since the beginning of the 90s, researchers have been looking for the answer to the question: is it possible to create such a decentralized payment system that allows users to send each other funds in an atmosphere of complete distrust?

The ideas embodied in modern blockchain platforms were first formulated by crypto enthusiast Nick Sabo back in 1998. In his E-mail newsletter, he described the theory of the bit-gold protocol, the main ideas of which later migrated to Bitcoin. A year earlier, Adam Beck outlined the concept of the Hashcash protocol, which was actually a model of the Proof-of-Work consensus mechanism. However, at that time, the overwhelming majority of users did not have high-speed Internet access and hard drives of sufficient capacity, so these ideas did not find much support. Their implementation was postponed until 2008, when an unknown user under the pseudonym Satoshi Nakamoto published a technical description of his “digital cash” protocol. January 3, 2009 in the new network, known as Bitcoin, the first blocks were generated.

What is decentralization?

Today, we are accustomed to sharing information through a decentralized interactive Internet platform. But when it comes to sending valuables (money), we usually have to re-use the services of the old centralized financial institutions (banks). Yes, Internet payment methods appeared almost at the moment of the birth of this network (the most obvious example is PayPal), but they usually require integration with a bank account or credit card, otherwise, they cannot be fully used. The blockchain technology offers a tempting opportunity to get rid of this “extra link”. It can assume all three important roles that the financial services sector traditionally plays: the registration of transactions, the confirmation of the identity of the person and the conclusion of contracts.