Few people know how blockchain works; some doubts and questions need to be answered. For starters, it appeared in 2008 as the source code for bitcoin.
As virtual currencies do not depend on banks to circulate, developing a way to record all movements securely was necessary.
Many believe that it comes to revolutionize not only the financial sector — which has more experience with the system and already has studies for improvement, but also the areas of health, law, e-commerce, etc. Thanks to the possibility of working in an environment where tampering with any information or process are practically impossible.
Even though it is seen as a path of no return, blockchain still causes strangeness in entrepreneurs and needs some improvements to grow. Many difficulties encountered in accepting the new technology lie in confusion regarding understanding how it works and its advantages.
After All, What Is Blockchain?
Before we clearly define how blockchain works, we must understand what blockchain is. Technically, it can be defined as a computer engineering initially developed for the bitcoin market but already used by other systems in various areas. As its name suggests, it is formed by a chain of blocks where each one has a series of information locked through highly secure encryption.
Imagine a shared database that is changed by just one company. The system is centralized, and everything depends on the validation of only one point, the gym system.
How Does Blockchain Work?
Blockchain works. It is a database in which several companies can write and add information. At the same time, everything needs to be validated by the chain and not by just one point, decentralizing the entire process.
Still confused? Let’s imagine that you want to open a new account at another banking institution. For this, you need to take the documents and vouchers and go through the same bureaucracy again. Now imagine if all this information and data were recorded in a common database for everyone.
Any change or creation of a new account would be recorded on all computer systems, and any company would witness the actions taken. We are giving more integrity and reliability to updates, transactions, changes, cancellations, etc. An immutable, impenetrable, and unquestionable chain.
What Are The Advantages Of This Technology?
Using blockchain brings many advantages; among them is all processes’ complete history. As if we could access every step of building a house, from the first drawing to handing over the key. And from there, know all the extra expenses, what was saved or which brands were used.
The transaction based on the blockchain does not need a head oversight; the software allows for a public and controlled structure. Any user can access the network to inquire about a trade or transaction.
If any changes are made after the information is in the blocks, the other systems will automatically decline. As the computers are interconnected and talk to each other, every new transaction needs to be approved by the majority. This minimizes errors and lack of information and streamlines the buying and selling processes. Thanks to its engineering, human interaction is practically eliminated.
Why Is Blockchain Secure?
It can be considered one of the most secure forms of transactions. The chain is made up of blocks, each receiving two codes, known as a hash. One is responsible for identifying the information that is inside that block. The other will recognize and be recognized by all previous blocks.
In this way, any attempt to modify any point of a given block will generate a different hash than expected, and it will be denied by the nodes — the name given to the complete blockchain history caused by the system’s computers.
Anyone can run a full node, and the more connected PCs, the more secure the network will be. That’s because the only possible way to change is to have more than half of the network nodes. Only then will the hacker be able to modify what he wants without being noticed.
This tactic is called the “51% attack,” but it’s virtually impossible to pull off. As we have seen throughout the text, several machines are connected and generating records. For a bad guy to break in and tamper with whatever he wants, he will need to identify most systems on the network and take them over.
What Are The Challenges Of This New Technology?
One of the challenges is to take this engineering out of the world of bitcoins. There are already some solutions being thought and developed based on the blockchain. But to reach new areas of business, it is necessary to improve the standardization of use and facilitate access for people and companies.
We can see that blockchain is one of the safest ways to make transactions and store information. Especially for companies with highly confidential data but still, need to prove themselves to continue gaining space to be adopted by the common public.
For companies, the technology will prevent fraud, reduce the need for a human intermediary to make records, give more reliability to processes and optimize storage costs.