When watching the news of virtual currencies such as Bitcoin, we often see the word “blockchain”.
Blockchain is a part of the mechanism for managing virtual money called virtual currency, and it is an important technology that supports the virtual currency.
Originally built as a Bitcoin system, it is also attracting attention in other fields due to its many merits.
This time, we will introduce the basic knowledge, features, and merits of blockchain in an easy-to-understand manner.
table of contents
- 1. Basic knowledge of blockchain
- 2. Features of blockchain
- 3. Types of blockchain
- 4. Benefits of blockchain
- 5. Disadvantages of blockchain
- 6. Example of using blockchain
- 7. Blockchain is an innovative technology that the world is paying attention to
Basic knowledge of blockchain
Before introducing the blockchain, let’s briefly introduce Bitcoin.
Bitcoin is a virtual currency (money used on the Internet that has no substance) that was born in 2008. An anonymous person called “Satoshi Nakamoto” is known as a currency developed from papers submitted on the Internet. There are many opportunities for news to report soaring (or plunging) in value, and there are many who say, “I’ve heard the name somehow.” Even today, Bitcoin is being traded among investors around the world, with its value fluctuating repeatedly.
In short, this “technology used for Bitcoin” is the blockchain.
Blockchain refers to “distributed ledger technology” that records the entire order from the beginning to the end of a transaction in a decentralized computer network rather than in one place. Before the advent of blockchain, centralized information management was the mainstream. Centralized information management is a system that simply stores transaction data in a single database.
In the blockchain mechanism, when a transaction process is executed, the record (transaction) remains. Multiple transactions are grouped into one block of constant size, which is connected and stored after the last block that exists at that time. By repeating this, blocks that are a set of transactions are connected back and forth and are organized in chronological order like a chain.
Blockchain data with transactions is not collected in one place, but the same data is stored in all multiple distributed computer networks.
Features of blockchain
How is blockchain different from the traditional centralized mechanism? Let’s take a look at the characteristics of blockchain.
● Independent of a specific administrator or server
The blockchain consists of a network of P2P technology that manages data in a distributed network and communicates between multiple terminals. Computers that participate in P2P are also called “nodes”.
Bitcoin has a structure in which users manage each other’s systems instead of placing them in one place. Therefore, it does not depend on a specific administrator or server, and even if one node breaks, Bitcoin transactions that utilize blockchain technology will not stop.
● A network that is almost impossible to break
Even if some data is deleted, the blockchain can be recovered because the same data is stored on other nodes. To stop the blockchain completely, all the nodes that share the data must be destroyed at the same time. Therefore, it is virtually impossible to destroy the blockchain network.
● Data is connected in a chain with a hash function
Hash functions are used for blockchain data. A hash function is a function that generates an irregular character string (hash value) from the underlying data. The hash function cannot read the underlying data from the generated hash value. In other words, it has the major feature of being irreversible.
In the blockchain, the hash function of the previous block is contained in the next block. By repeating this, the data is connected like a chain.
Types of blockchain
type Rough overview Main uses Public type Anyone can participate without the existence of an administrator. Cryptocurrency Private type One company has administrative authority and requires administrator permission to participate. Interbank transactions, securities transactions, etc. Consortium type Multiple companies have administrative authority and require administrator permission to participate. Interbank transactions, securities transactions, etc.
Blockchain can be divided into three types: public type, private type, and consortium type. The differences between them are as shown in the figure, but in short, the type of blockchain is divided according to the presence or absence of an administrator. Especially in virtual currencies such as Bitcoin, public blockchain is mainly used.
On the other hand, the private type and the consortium type are “systems used only by specific people” or “systems that require selection of participants”, such as transactions between banks and business management systems used only by company employees. Is expected to be used. Information transparency and processing speed differ depending on the type, but when we simply say “blockchain”, we often refer to “public type”.
Benefits of blockchain
Blockchain, which was a system for Bitcoin, is now widely used. The reason for this rapid growth is that blockchain has great advantages.
● Data cannot be rewritten or tampered with
The blockchain realized by the hash function will generate a completely different hash value if the data changes even a little. When the data is changed, the blocks after the target data part are changed and all the distributed computers are updated, so if malicious alteration is done, it will be immediately noticed. I can do it.
● Resistant to system failures and hacking
The feature of blockchain is that each data is managed in a distributed network. In a centralized system, if one computer goes down, the system may go down and stop working, but in the case of blockchain, data is distributed, so system failure or one It will continue to operate even if the node of the department is stopped.
Also, in the blockchain (public type), there is no specific institution that manages the data. Since the permissions are not centralized in one place, hacking requires access to the data on all distributed nodes. Therefore, it can be said that the system is resistant to hacking from the outside.
● Low transaction costs
In the case of virtual currency using blockchain, it is also a big advantage that costs such as fees are low because it does not go through a specific financial institution. Generally, sending cash overseas requires a large fee. However, if you want to send virtual currency using blockchain overseas, users can send money directly to each other without going through a bank, so the fee is minimal.
Disadvantages of blockchain
While it has grown rapidly as an excellent system in terms of low cost and high security, blockchain also has some disadvantages.
● Transactions take time due to slow processing speed
Blockchain tends to accumulate a huge amount of data and it tends to take time to process transactions. Specifically, it takes about 10 minutes to make one Bitcoin transaction. Some virtual currencies are making efforts to improve processing speed and transaction speed, but the blockchain is not suitable for cases where “real-time transactions” are likely to be required, such as finance and securities.
● The recorded data cannot be deleted
The advantage of blockchain that “data cannot be rewritten” leads to the disadvantage that “written data cannot be deleted” if turned inside out. If you inadvertently write in your personal information or send money with the wrong address, you will not be able to redo or cancel the process. When using the blockchain, you need to keep in mind that “all information is recorded” and use it with caution.
Although blockchain has the above-mentioned advantages and disadvantages, it is used in many businesses in the present age when it has developed as a basic technology to support virtual currencies.
Blockchain use cases
Blockchain is used in a wide range of fields. Here are three specific examples of how they are used, other than virtual currencies.
“Mojaloop” is an open-source payment platform that is a partnership between the Bill & Melinda Gates Foundation, which was launched by Microsoft founder Bill Gates, and Ripple, one of the virtual currencies. It is a platform for poor people all over the world, and it is a service that even people who can not have a bank account or credit card can safely store and pay money with the app.
Walmart, the world’s largest supermarket chain headquartered in the United States, uses blockchain for food management. Blockchain has been piloted in the distribution channels of pork and packaged products, and it is all about which country, who, when, and through what route they are lined up in stores. It has been recorded. For example, if you find an inconvenience such as a scratch or stain on a particular product, you can quickly identify when and where it occurred. Since production information can be read at any time, it is expected that food safety will be further improved.
● Estonian infrastructure equipment
Estonia is a small country in Northern Europe with a population of about 1.3 million, but it is known as an advanced IT country. Skype, which is used by many people, was also developed in Estonia. Estonia is the first country to utilize blockchain at the national level, and blockchain is used for infrastructures such as taxation systems, registration, and medical records.
It is also planned to be used for identification as an advanced form of managing taxation and medical records on the blockchain mentioned above. It is a mechanism to smoothly perform identity verification and identification by linking the managed family register and My Number with the biometric authentication system. Nowadays, a UN project is underway with the goal of “providing ID to everyone”.
In addition, the use of blockchain is being considered for various purposes such as “identification of branded products”, “copyright management of music and movies”, and “automatic execution of contracts (smart contracts)”.
Blockchain is an innovative technology that the world is paying attention to
With the advent of blockchain technology, all previously paper-based contracts can be replaced with blockchain contracts.
The blockchain system, which can be maintained almost permanently, is being introduced to a wide range of fields, such as commodity transactions and infrastructure, which were not initially envisioned, centering on virtual currencies.
The rapidly growing blockchain technology will bring great benefits to various services in the future, such as the operation of corporate payment services.
We recommend that you deepen your understanding of the mechanism and features of blockchain before introducing the service in-house.
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