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The Basis of the three main pillars of Blockchain Technology
The three main pillars of blockchain technology that have helped it gain wide recognition are decentralization, transparency and immutability.
Before Bitcoin came along, people were more used to centralized services. The idea is very simple. You have a centralized entity that stores all the data and you only need to interact with these entities to get whatever information you need.
An example of a centralized system is a bank. They keep all the money and the only way you can transfer money to someone else is to use a bank. A further example is when you search for something on google, you send a request to the server which then replies to the relevant information. This is a simple client-server.
This centralized system has several drawbacks, one of which is that all data is stored in one place. This makes it easier for them to target places for potential hackers. If the centralized system had to go through a software update, it would shut down the entire system
Well, this decentralized system has several advantages that are better than centralized. This means that information is not stored by a single entity. In fact, everyone on the network has information.
In this blockchain technology decentralized network, if you want to interact with your friends then you can do it directly without going through a third party. That's the main ideology behind Bitcoin. You can also send money to anyone you want without going through the bank.
One of the most interesting and misunderstood concepts about blockchain is "transparency." Some say that blockchain provides privacy while some say it is transparent.
A person's identity is hidden through complex cryptography and is represented only by their public address. So if YOU are looking for someone's transaction history you will not see "Budi sent 1 BTC", you will see "1MF1 bhsFLkBzzz9vpFYEmvwT2TbyCt7NZJ sent 1 BTC".
So, even if the person's real identity is secure, you will still see all transactions made with their public address. This level of transparency is unprecedented in the financial system. This is very much needed, a level of accountability is needed by several large institutions.
Immutability, in the context of blockchain technology, means that once something is put onto the blockchain, it cannot be tampered with. This is of course very beneficial for the financial industry. Imagine how many cases of embezzlement would have been cleared if people found out that they couldn't tamper with the accounts of companies using blockchain.
The reason blockchain technology has acquired this property is because of cryptographic hash functions. In simple terms, hashing means taking an input string of any length and providing a fixed-length output. In the context of cryptocurrencies such as bitcoin, transactions are taken as input and executed via a hashing algorithm (Bitcoin uses SHA-256) which provides a fixed length output.
In the case of SHA-256, no matter how big or small the input is, the output will always be a fixed 256-bit length. This becomes important when you are dealing with large amounts of data and transactions. So basically, instead of remembering the input data which can be huge, you can simply remember the hash and keep track.
Cryptographic hash functions are a special class of hash functions that have various properties making them ideal for cryptography. There are several properties that a cryptographic hash function must have in order to be considered secure.
Those are the three pillars of Blockchain technology that are very useful, this technology has also begun to be used in various industries, both in the fields of finance, food, shipping and so on.