What is blockchain? 3 points to consider investing in the technology of the moment
Over the last few years, the word “blockchain” has got trendy and has risen like a foam. This concept raises a huge revolution in every way. But, What is blockchain?
Understanding the mechanism of the blockchain can be kind of bothersome. Therefore, if this universe turns out to be an indecipherable hieroglyph to you, here you have a quick introduction course to the blockchain.
Suppose your friend Fran’s birthday is approaching and, like in almost all groups, there is someone who is responsible for buying the gift. In this case, Martina.
After having created the typical WhatsApp group, the one with a less original name such as “Fran’s gift” or “Fran’s birthday”, it is time to participate and contribute the agreed amount of money.
Usually, this operation is done through a bank. That bank will act as an intermediary of this and many other transactions, centralizing the moving of capital from one account to another.
The truth is that in this management, the banks are the ones that have all the information and the users depend entirely on them to complete the process. Therefore, customers are automatically out of the action.
However, there is a revolutionary system that can put an end to this secrecy. You want to know more? Continue reading.
This revolutionary process puts an end to intermediaries and decentralizes the entire management. The users take control and they are the ones who are fully involved and become the managers of the account books.
The blockchain is a technology that provides purely digital property to people in the online world without the need for any intermediary, as we have previously commented, nor any central authority that controls the users.
This huge account book manages to link an encrypt the records to protect the security and privacy of the transactions.
This system records all the carried-out operations in a database and certifies that they cannot be duplicated or falsified.
The importance of nodes
One of the basic requirements for the blockchain to work, is the existence of nodes (users). These nodes will verify the operations so that the block, which falls to that transaction, is recorded in the account book of which we discussed earlier.
Over time, more transactions will be produced and completed. It is important to clarify that each block has a limited capacity which is influenced by the arrangement of the blockchain.
There will come a moment when that block will not be able to accept more transactions. Therefore, it will be validated or sealed.
How to make a transaction on the blockchain step by step
The process is relatively simple, but to understand it better, let’s go back to the example of Fran’s birthday and the gift that his friends want to give him.
- Once the amount of money that each person must contribute has been agreed, you want to send the money to Martina (who is responsible for collecting it).
- This transaction is represented in the network as a block with a certain capacity.
- This block will be passed on to all the users in the network. These users must verify that the entire process happens as it should.
- After carrying out the relevant verifications, the users that are part of the network approve the transaction as valid.
- This approval ensures that this block can be added to the chain, which provides and indelible and clear record of transactions.
- Lastly, Martina will receive your money and will be able to buy Fran’s gift
The token as a unit of value
The blockchain, as we explained before, a form of financing a business project that offers virtual tokens instead of offering shares, or what is the same, new cryptocurrencies.
But what is a token?
It is a unit of value created by a private entity to develop its business model. It allows its users to interact with its products, while facilitating the distribution of benefits among all those ones.
Written by OneUP Team
OneUP team is working and growing everyday to offer you the best content and to keep you updated.