Dive into the world of blockchain technologies, which are behind the scenes of not only cryptocurrencies, but also real estate transactions, logistics processes and medicine.

What is blockchain?

Blockchain is a unique technology for storing and transmitting data in the form of a chain of interconnected blocks. Each block contains information and a link to the previous block, forming a chain. This structure protects the data on the blockchain from changes and tampering. A blockchain network consists of many participants who collaborate to process and verify transactions. Each node actively participates in validating and adding new blocks with these operations.

How blockchain works

Blockchain is often associated with cryptocurrencies, especially Bitcoin. Bitcoin is the first and most famous cryptocurrency that uses blockchain to process and record all transactions. Blockchain ensures the security and immutability of transaction data, making it an ideal tool for cryptocurrencies.

How does traditional money transfer work?

Sending information to the bank about the recipient and the transfer amount.

Data verification by the sender's bank.

If the data is correct, the bank informs the payment system that the money can be transferred to another account.

An alternative to bank transfers is blockchain

Imagine you need to transfer money to another country using blockchain. In this case, there is no need for a bank - the security of the transfer is ensured by the blockchain network itself.

Digital wallet

• The Internet is not always a safe place, and exposing bank details to transfer money is risky. A wallet is an alternative to a bank account. It can be in the form of an application or special physical media such as a flash drive. Instead of traditional currency, such wallets use cryptocurrencies. When a user creates a wallet, they receive unique addresses to which they can send and receive cryptocurrency.

Transaction signature - an alternative to a PIN code

• After sending the transfer data, you need to sign the transaction using a private key. This is a unique secret phrase that links the user's wallet and his assets. The signature ensures that only the person who owns the private key can initiate a transaction.

Smart contracts instead of payment gateways

• Payment gateways are services through which traditional payments pass, for example, from a buyer to an online store. In the blockchain, the role of such intermediaries is performed by smart contracts. These are different versions of software code containing logic and rules for automatically executing payments and transactions.

  
  
  
  

Protection from intruders - data hashing

• The encryption algorithm uses information about our transaction and converts it into a set of characters - this is a hash. The basic principle of its operation: any change in the source data leads to a change in the calculated hash value.

The consensus mechanism is an alternative to trusting banks

Consensus is needed to confirm the correctness of the transaction. Banks are usually responsible for this; Blockchain uses mathematics. There are two main types of consensus: proof of work and proof of stake.

Proof of Work (PoW)

• Proof of Work (PoW) is a kind of competition to solve a complex mathematical problem. Network participants compete to see who will be the first to find the correct solution. Each computer on the network sequentially tries different numbers (called "nonces" or "nonces") - integer values ​​that will cause the block's hash to meet certain criteria. For example, it will start with a certain number of zeros. It may take 100 or 1000 of these hash operations to find the correct nonce. When the problem is solved, the block is added to the chain and the transaction becomes immutable.

Proof of Stake (PoS)

• Proof of Stake (PoS) is an analogue of asset ownership. In PoS there is no need to solve complex problems like in PoW. It does not require large computing power and is easier to scale. Validator participants (analogous to miners in PoW) are selected randomly, taking into account the amount of cryptocurrency they own. The more cryptocurrency there is, the greater the chance of creating a new block. However, PoS contradicts the idea of ​​decentralization: participants who have a lot of cryptocurrency gain more influence in the network.