Blockchain What is it, what is it for and how does this technology that is revolutionizing the world work?

After the severe economic crisis that hit the economies of the great powers in 2008, the world began looking for ways to back itself up to prevent a further decline in world markets. This is how the following year one of the most influential technologies of the century is developed.

Perhaps the most remembered of that moment are the cryptocurrenciesthose digital currencies that are so commercial today, but what really matters is the technology that supports them; the blockchain. Also known as Blockchain, this is the foundation of all crypto trading today.

In this article we are going to tell you everything you need to know about Blockchain technology and its main characteristics, so that you fully understand this entire digital environment in which cryptos operate.

What is Blockchain and what is this cryptographic technology for?

Blockchain technology is a joint database in which information is grouped into encrypted blocks, which in turn are linked to other earlier blocks in the system. This link is what gives it the name “chain”, since all the sets are connected to each other, and to modify one of them, it is necessary to do the same with all subsequent ones, which gives it an unmodifiable and 100% transparent character.

This, moreover, allows operations to be carried out on it that are verified and recorded over time without the need for a certifying entity, which makes it a completely decentralized technology. That is why it allows the creation of, for example, global economic systems that do not require the participation of banking or government institutions, with users having control of the entire system.

Do you now understand its importance? Due to the fact that the great world economic crises are largely due to the mismanagement of the systems by the regulatory entities, this technology is developed that allows us to get rid of all of them, creating a huge P2P (person to person) exchange networkin which everything is based on users’ confidence in the system itself.

What are the characteristics of Blockchain technology?

This technology can be seen as a simple database, but the reality is that it is much more than that. Its unique features have not been seen in any other created so far, and it is these that have earned the trust of millions of people around the world, who invest their money in the various projects that are supported by it:

Consensus

Blockchain consensus refers to the fact that in order to modify it, or fork it (create a new chain), the general consensus of all the nodes (user) of the network is necessary. This makes it virtually impossible for someone to take unilateral actions independently, as I will need the support of more than half of the members of the chain.

These consensuses are not impossible to achieve, but when they are achieved they are done with the intention of changing the way the entire chain works, and not to tweak or eliminate a particular transaction. This is one of the main bases of transparency that characterizes this database.

cannot be modified

This is related to the previous point. When modifying a transaction, all those that were made later are automatically altered, so that everyone would notice something like that. In addition to that, the cryptographic method used (Hashing) makes it almost impossible to decrypt a block for modification.

Being such a cumbersome operation, for which, in addition, you need to have powers superior to those of the other members (which are only obtained with consensus), it is considered practically impossible to modify a block of the chain unilaterally.

It is decentralized

Perhaps the most striking thing about this is that it is a decentralized database. That is, it does not require the supervision (or control) of any government or financial entity such as banks.. This allows the creation of all kinds of P2P systems, in which the member users are the ones who have total control over their behavior.

Enhanced Security

By creating a block that is automatically linked to all the blocks subsequently created, a unique transparency is achieved, since modifying one will modify all the others. This is an aspect that raises network security to another level. On top of this, the hashing that is used to encrypt transactions is nearly impossible to crack.

Types of blockchains, how is their classification and operation?

Since its birth more than a decade ago, blockchains have evolved enormously, so we can identify different types of them, which have special characteristics that differentiate them from the others:

Based on data access

The first way to classify blockchains is based on how users access their data. In this sense two types can be defined; public and private.

Public chains are those in which all network users can review, verify and make sure of each and every one of the transactions carried out on them.. These are transparent, since everything is free for the public, and obeys consensus rules to be modified. This is the chain that is used for Bitcoin and other cryptocurrencies.

Private chains, on the other hand, are totally different, and lose transparency in a certain way since the transaction data is exclusively accessible to certain entities that make it up.. In them, aspects such as consensus are left aside, since the “administrators” have total freedom to modify the chain, which is why they are usually centralized. An example of this would be the Petro, a Venezuelan cryptocurrency backed by oil and centralized by the government of that country.

according to permissions

The next known strings are those that depend on permissions, and these they can be classified as: permissionless and permissioned blockchain. They are related more than anything to the creation or encryption of the blocks.

• Which do not require permissions are those in which any member of the chain can act as a node to apply the hashing that encrypts each transaction. To do this, the figure of incentive tokens is created, so that users who are encouraged to help in this task receive them as a reward for their collaboration.
• The strings with permissions are those in which the blocks are encrypted by a select group of users with the necessary permissions to carry out this task. In these, the figure of the incentive token is not necessary.

hybrids

Hybrid chains are those that have characteristics of the two previous models. In this sense we have chains such as Bitcoin Cash or Ethereum Classicwhich are considered public strings without permissions, as well as private strings without permissions.

According to change of state model

State change refers to the manner in which a transaction changes from its entry or exit state. The most popular are the so-called strings with output charge, in which With each transaction, an expense is generated that is used to “finance” subsequent input transactions. to be created when making a transaction in the future. This model is used, for example, by Bitcoin.

side chains

Finally we have the sidechains, which are those that used to confirm transactions from a central blockchain.

Hashing in the Blockchain How are the blocks encrypted within the network?

The blocks in the blockchain are encrypted with a hash function, which consists of assigning a number hexadecimal to a transaction. This number is unique, and is a way to identify the input data of each of the transactions made. In the world of cryptocurrency mining, every 10 minutes a new block with a transaction must be created, so the “miners” compete to crack the correct hash of each one to register it in the block chain.

The hash is a function older than the blockchain itself, it is an algorithm widely used in the past, and its application in this technology is largely what allows guaranteeing the security of the network, since in the event that want to modify a block, the hexadecimal value will have to be decrypted again, with input data identical to the one used the first time.

What are cryptocurrencies and how are they related to Blockchain technology?

Cryptocurrencies are nothing more than currencies that are used to exchange or trade goods and services on a blockchain. Using a strong cryptographic technique, it manages to transparently record transactionsas well as the number of units of each crypto.

By using cryptography and a transparent and unmodifiable database such as blockchain, a new decentralized economic system is achieved, in which the value of each currency is not determined by any government or banking entitybut because of the confidence and the volume of money that enters its market.

A special feature of these coins is that they are limited, and unless there is consensus, this number cannot be increased. In this way, the more people enter to invest in them, the more value they will gain and vice versa..

What are the most used cryptocurrencies?

After the first Bitcoin bull market occurred in 2011, new cryptocurrencies were born anchored to it, thus forming what are known as altcoins, which would be the most used cryptocurrencies with the highest market value.

These would be the following:

• Bitcoin: the first cryptocurrency developed in 2009 by an anonymous user named Satoshi Nakamoto. It cost up to $20,000 USD in January 2018.
• Litecoins: the second oldest crypto after BTC. It is the token of an open source software project with technical aspects identical to those of bitcoin.
• Ethereum: These are the tokens of a decentralized application which in turn allows the creation of other apps of the same nature, which work on a public block chain. It is the cryptocurrency with the highest value after BTC.

What is an ICO?

An ICO or Initial Coin Offer is nothing more than the presale of tokens or cryptocurrencies of a new blockchain project. These would be the lowest value at which these currencies can be purchased in the market before their launchsince later as investors join, the price will rise.

ICOs are a great way to get ahead of other investors. In a way it is like buying the shares of a company, and once it is successful these shares will rise in value considerably. The most famous ICO is possibly that of Bitcoin in 2009, when it started costing just a few cents on the dollar and 7 years later it was priced at up to $20,000 USD.

What are the most interesting uses of blockchain technology beyond cryptocurrencies?

Although the greatest use given to this technology is that of cryptocurrencies, it must be said that it is so versatile and practical that It can also be used for tasks such as the following:

• R3 consortium.
• Property registration.
• Payments in the real world.
• Carsharing.
• Cloud storage.
• Digital identity.
• Music.
• Public/government services.
• Social security and health.
• Authorship management.

Now you know everything about this revolutionary technology that changed the way we trade and may continue to change things in the near future, since we have barely exploited 20% of its real potential.