"Think of a blockchain as a distributed database that keeps a shared list of records. These records are called blocks, and each block of encrypted code contains the history of all previous blocks with transaction data recorded with timestamps up to the second. Basically, you know, chaining these blocks together. Hence the name blockchain. It consists of two main components: a decentralized network that facilitates and verifies transactions, and the immutable ledger that this network maintains. Everyone on the network can see this shared ledger of transactions, but there is no single point of failure from which the records or digital assets can be hacked or corrupted."
From this definition, it is possible to understand the basic concept of blockchain, which is basically a shared list of records made up of blocks of information. It mentions other concepts - such as cryptography - that need to be explored in greater depth for a better understanding. The author also mentions other important concepts: the decentralized network and the ledger. These are essential for a blockchain to work and fulfill its real function.
The process takes place as follows: every x minutes, all transactions made on the blockchain during that period are verified, validated and stored in a block. A hash is created from the data contained in the block (ID + transactions + timestamp + hash of the previous block). The current block is linked to the blockchain precisely because it "imports" the hash of its predecessor and uses it to create its own hash.
For operations to take place and be persisted, a means of transmission and a form of control are required. There are a few types of blockchain, but for this example, we'll consider a public and decentralized one.
Public: this is an open network. Anyone can download the protocol and participate in the network. All transactions are public and audited by all nodes (participants) in the network and once the information is validated it cannot be changed.
Decentralized: no information is stored in a central location. The ledger is copied by each node in the network. Whenever a new block is added, each node updates its version to reflect the change. By spreading this information across a network, rather than storing it in a central database, the blockchain becomes more secure and reliable.
Firstly, new blocks are always stored linearly and chronologically, i.e. they are always added to the "end" of the blockchain. Once a block has been added, it is very difficult to go back and change its content. This is because each block contains its own hash, along with the hash of the previous block. The hashes are created by a mathematical function that transforms the digital information into a sequence of numbers and letters. If this information is edited in any way, the hash code also changes.
Let's say Chuck tries to edit a transaction. As soon as he edits the transaction value, the hash of the block will change. The next block in the chain will still contain the old hash, and Chuck would need to update this block to cover his tracks. However, this would change the hash of the other block, and so on. Chuck would need to change all the blocks. Recalculating all these hashes would require an enormous amount of computing power, making it impractical. There is one possible vulnerability scenario: the 51% attack (considering a cryptocurrency blockchain, such as Bitcoin, for example).
Due to its decentralized nature, transactions and data are not verified by a single central entity as in typical systems. Instead, the validity of transactions is confirmed by any node that has access to the network. The technology used in blockchains protects and authenticates transactions and data through cryptography.
An important aspect of privacy in blockchains is the use of private and public keys to protect transactions between users. Each user has a public key and a private key. Public keys can be shared with other users on the network because they don't expose confidential information (it can even be represented by a QR Code, as a means of receiving BTC for example). Private keys are used to access these funds and personal wallets. Participants in transactions are represented by their public addresses and their identities are not revealed.
Blockchain is the basis for cryptocurrencies, such as Bitcoin, for example. Currencies like the dollar or real are regulated and verified by a central authority, usually a bank or government. The Central Bank in this case has a lot of power and control over the issuance of currency and also over its value, consequently. Bitcoin was created for this and other reasons. By using a blockchain, Bitcoin and other cryptocurrencies can exist and be used without the need for a central authority. This not only reduces risk, but also eliminates many of the processing and transaction fees.
A smart contract is an algorithm that can be integrated into the blockchain to facilitate, verify or negotiate an agreement via contract. Smart contracts operate under a set of conditions that users agree to. When these conditions are met, the terms of the agreement are automatically fulfilled.
Let's say, for example, that Bob is renting an apartment to Alice using a smart contract. He agrees to provide the apartment's door code as soon as Alice makes the security deposit. Both would inform their respective conditions to the smart contract, which would keep the information and automatically exchange the door code for confirmation of the security deposit. If the door code is not provided by the rental date, the algorithm would refund the security deposit. This eliminates the need for a third-party mediator, for example.
Suppliers could use a blockchain to record the origins of the materials they supply. This would allow companies to verify the authenticity of their products.
The use of a blockchain has the potential to eliminate electoral fraud and increase voter participation. Each vote would be stored as a block on the blockchain, making them almost impossible to tamper with. The blockchain protocol would also maintain transparency in the electoral process, reducing the personnel needed to conduct an election and providing officials with immediate results.
There are also many other areas where, in theory, it would be possible to make use of this technology, such as:
It is expected to take some time for blockchain to become popular, considering that it is still an emerging technology. In many countries, the government is still in the process of formulating regulations for its possible implementation. Many companies and organizations are hesitant to adopt the technology precisely because of the lack of information and official regulations.
Pros
Automated process and decentralization, making it more secure;
Cost savings by eliminating third-party verification (e.g. bank fees);
Transactions are secure, private and efficient;
Cons
Slow transactions (depending on the type of application);
It is not known how tech will behave with a high volume of (global) transactions;
There can be a high cost of implementation depending on the approaches chosen;
With many practical applications for the technology already being implemented and explored, even if in an experimental way, blockchain is growing more and more, largely because of Bitcoin and cryptocurrencies. The use of blockchains can mean making commercial and governmental operations and transactions between people more accurate, efficient and secure.
https://au.pcmag.com/features/46389/blockchain-the-invisible-technology-thats-changing-the-world
https://www.intheblack.com/articles/2018/09/05/difference-between-private-public-blockchain
https://onlinelibrary.wiley.com/doi/full/10.1002/spy2.109