Blockchain technology | Simple explanation for beginners

If you've been buying cryptocurrencies or following cryptocurrency news in the past few years, you've probably heard of blockchain technology.



While searching for more information about Blockchain technology, you must have come across the following definition:

Blockchain is a distributed and decentralized public ledger.

In this article, we will explain the amazing blockchain technology in simple language and examine its benefits.

?What is Blockchain

Blockchain technology is made up of two words block and chain. The literal meaning of blockchain is (Blockchain); When we talk about chains and blocks in blockchain technology, we are actually talking about chains of digital information, and each block stores that information.

In a general definition, we can say that Blockchain technology is a distributed, decentralized and shared ledger that is created as a series of records called blocks. Each block in this chain is responsible for storing some type of information (eg transaction logs).

Each block stores information related to transactions such as the date, time, amount of purchase from the site, and information of sellers and buyers in transactions. Instead of using your real name in transactions, the purchase takes place without any identification information and with a unique digital signature. For example, your purchases were recorded on a site using your username. Each block stores a unique code called a hash to identify any activity on the Blockchain.

For example, suppose you have already purchased a product from Amazon, after some time, you decide to make another purchase. Even if the details of your new purchases are the same as those of your previous purchases, Amazon can separate two purchases; Therefore, due to the above unique tokens called hashes, we can separate blocks.

The example shown above for storing a single purchase from Amazon is actually slightly different from the block in a Blockchain A block on a Blockchain can store a certain amount of data. This means that depending on the volume of transactions, a single block can contain several thousand transactions.

?Why do we need blockchain technology

The blockchain concept was first introduced by Stuart Haber and Scott Sternetta. Digital business owners thought of using this technology to improve their businesses, and eventually Blockchain felt like using this technology all over the world. But there are three main reasons why blockchain is needed;

Increase digital processing power

Due to its designed structure, blockchain requires higher processing power than normal data computations. Blockchain design is defined by encryption, and data encryption and decryption is inherently expensive. Today, computers have more processing power thanks to modern advanced processors, which has led to a growing demand for the use of this technology.

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Increase in cybercrime

Internet crime has doubled in the past few years. Hacking over a billion Yahoo accounts, leaking user information on Facebook, and increasing malware damage are just a few of these crimes. In fact, more than a million cyber threats are deployed every day, which in itself leads to more concern about security. Today, cyber security is one of the biggest challenges for online business owners. Blockchain partially responds to this need by using its strong encryption system.

The emergence of bitcoin and digital currency

Bitcoin and other types of digital currencies are one of the biggest reasons for the rise in popularity of blockchain. Bitcoin is a digital currency created by an anonymous person named (Satoshi Nakamoto) who used blockchain technology to create and distribute the digital currency and make it secure.

?How does blockchain work

 Blockchain consists of several blocks connected to each other. In order to add a block to the blockchain, 4 things must happen:

1. The start of the transaction or transactions

Any transaction or transaction that takes place in the network leads to the addition of a new block in the Blockchain. For example, if you want to deposit some Ethereum to your friend's wallet, this transaction is done by creating a new block in the Ethereum ecosystem .

2. Confirm the transaction

After you register your transfer request, the network miners will be responsible for confirming your transaction. First, new information must be entered into the system. This is done by computers. This network often consists of thousands of computers spread around the world.

3. Save the transaction

Your transaction must be stored in a block. After the transaction is validated, the amount required for the deposit and digital signature is stored in a block.

4. Add blocks to the blockchain using hash

After all transactions of the block are confirmed, a unique identification token called Hash must be assigned to the block. After hashing, the block can be added to the blockchain.

After a new block is created in the network, this block will be available to everyone. For example, if you take a look at “Bitcoin Blockchain”, you will see that you have access to transaction data and you can see the following information

Block Height (Height) which is calculated based on the total number of blocks and shows that this is the largest block placed in a Blockchain.

 A hash is a 64-digit code string that includes numbers and letters and begins with a zero.

Types of Blockchain

There are different types of Blockchain networks that we have presented below:

public blockchain

In a public blockchain like Bitcoin, everyone can become members of the system and there is no limit to access. Anyone can view the contents of the public Blockchain such as the Bitcoin Blockchain. Also, users can connect their computers with Blockchain technology. By doing this, whenever a new block is added, computers get a copy of the blockchain that is automatically updated.

private blockchain

In private blockchains such as the corporate blockchain, there are restrictions on accessing information (such as employee wages) and you need consent to register and use this system.

Blockchain Consortium

Consortium Blockchain is a semi-decentralized blockchain. These blockchains are very useful when many organizations or companies intend to partner and collaborate with each other. They can create a common space on this platform and easily share information with each other with complete security.

Hybrid Blockchain

Another type of blockchain, which is a mixture of public and private blockchains, is called a hybrid blockchain.

The hybrid blockchain took advantage of the advantages of both types of these blockchains and minimized the drawbacks. In this version, membership permission is issued by order of its controller and the amount of activity permission in the network is determined in the same way. Access to this network is not open to the public.

Every computer in the Blockchain technology has a copy of the Blockchain. In the case of Bitcoin, there are millions of copies of the blockchain spread over thousands of people. The spread of information in a network of computers makes it more difficult to process information.

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However, looking at the Bitcoin Blockchain, you will notice that you cannot access the information of the users making transactions. Personal information about users is limited to their digital signature or username.

?Is Blockchain Technology Safe?


Blockchain technology covers various topics including security and trust. New blocks are always stored linearly and added to the end of the blockchain. This means that the latest block is always at the end of the chain. After adding a block to the end of the blockchain, it is very difficult to go back and change the content of the block. Because each block contains a hash and the hash of the block preceding it. Hash codes are generated by a mathematical function (the hash function) that converts numerical information into a string of numbers and letters. If this information is edited and manipulated in any way, the hash code will also change; This issue is important for network security.

For example, suppose a hacker tries to edit your transactions from Amazon so that you have to pay twice for the purchase. Once the hacker changes the amount of your transaction, the hash block will change. The next block in the block chain still contains the old hash, and the hacker must update the old block to cover his changes. By doing this, the hash of this block will change.

Therefore, in order to change a single block, the hacker must change every block created on the Blockchain technology. Recalculating all these hashes requires an unimaginable amount of computer power and is not economical for a hacker. Therefore, once a block is added to the Blockchain technology, it will be extremely difficult to release and impossible to delete.

Consensus Algorithm in Blockchain

To solve the trust issue, many blockchain networks have tests for computers that want to join and add new blocks to the chain. These tests, called consensus models, force users to prove themselves before participating in blockchain technology and adding blocks. One of the most famous examples used in the Bitcoin network is called Proof of Work.

In a proof-of-work system, computers must prove that they have worked on a complex mathematical problem. If the computer solves one of these problems, it will be eligible to add a block to the blockchain. But the process of adding blocks, what the cryptocurrency world calls "Minig", isn't easy.

In fact, according to news site BlockExplorer.com, the odds of solving one of these math problems on the Bitcoin network in February 2019 were about 1 in 5.8 trillion. To solve these complex problems, high- and large-capacity devices must be used. These devices consume a lot of power and miners have to pay a lot of fees.

Proof of Work doesn't make hacker attacks impossible, but it does make them somewhat useless. If the hacker orchestrated an attack on the Blockchain, they would have to solve complex math problems with a 1 percent chance of 5.8 trillion percent just like everyone else on the network. The cost of organizing such an attack would almost certainly outweigh the benefits.

The difference between Blockchain and Bitcoin



The purpose of blockchain technology is to provide a platform where digital information is recorded and distributed, but not edited and processed. You will notice that blockchain technology is not the same as Bitcoin .

Bitcoin is just one of the countless applications built on blockchain technology. Bitcoin is undoubtedly the most popular blockchain project at the moment, but blockchain technology can go well beyond Bitcoin. In other words, this Bitcoin technology can be said to be similar to the Internet for Google.

There are people all over the world who own bitcoins, and according to a study conducted by the Cambridge Center in 2017, this number is more than 6 million people. When it comes to fiat money, the use of fiat currency is regulated and approved by a central authority (usually a bank or government), but bitcoins are not controlled by anyone. Instead, transactions made with bitcoin are verified by a network of computers around the world known as nodes.

Let's say one of those six million people wants to spend their bitcoins in a fruit shop. This is where blockchain technology comes into play. When someone wants to pay a seller with bitcoin to buy goods, some computers in the bitcoin network compete to confirm the transaction, called miners. To do this, miners run programs on their computers and try to solve the complex mathematical problem.

When the computer solves the problem by hashing the block, it has already confirmed the transaction. The completed transaction is recorded and stored publicly in the block chain and at this point, it becomes immutable. In the case of bitcoin , computers that successfully verify blocks are rewarded with an amount of bitcoin called a mining reward.

The public key and the private key in a blockchain

To conduct transactions on the Bitcoin network, participants must run a program called a wallet. The Blockchain ecosystem is equipped with its own wallet called Blockchain Wallet. Each wallet consists of two unique and separate cryptographic keys: a public key and a private key. The public key is where transactions are deposited and withdrawn (such as an account number). This key also appears as a user's digital signature on the blockchain's home page.

A user's public key is a shortened version of their private key, generated through a complex mathematical algorithm. However, due to the complexity of this equation, it is impossible to reverse the process and generate a private key from a public key. For this reason, this technique is considered confidential.

For example: Is there a note box at school? Teachers and students can put their messages and notes in this box and only those with the key to the box can access the contents of the box. The key to the chest was kept in the main office of the school. In a blockchain, the public key acts like a school's public chest and the private key acts like a fund key, but there are differences between them.

Unlike a school, where information and private keys are stored and managed in the main office, there is no center that tracks and accesses the private keys of a blockchain. If a user forgets and loses their private key, they will lose access to their bitcoin wallet forever.

Impact of the consensus algorithm on blockchain security

In the Bitcoin network, the blockchain is not only shared and maintained by a public network of users, but is also agreed upon. Users who connect to the network through their computers receive a copy of the blockchain technology, which is updated as soon as a new block is added to the block chain.

Blockchain technology prevents many block chains from being created using a process called consensus. Having more users on the blockchain means that blocks can be added to the end of the chain quickly. By this logic, blockchain technology will always be what most users will trust.

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The consensus algorithm is one of the strengths of the blockchain technology and it ensures the security of the blockchain technology along with the encryption.

Is it possible for hackers to prove working in a blockchain?

Is it possible for hackers to prove that they work in the blockchain?

In theory, a hacker might be able to use the majority right, the so-called 51% attack, to manipulate theblocks. How does this attack happen?

Suppose there are 5 million computers in the Bitcoin network. To achieve a majority in the network, a hacker or hacker would need to control at least 2.5 million computers. By doing so, a hacker or a group of hackers can interfere with the process of logging new transactions. They can make a transaction and then deal with the same transaction; So it seems that the digital currency they sent to someone else is still there. The vulnerability, known as double-spending or double-spending, is the equivalent of digital forgery and allows users to spend their bitcoins more than once.

It is extremely difficult to implement such a blockchain attack on a Bitcoin scale, as a hacker would need to gain control of millions of computers. It has been more than 10 years since Bitcoin was introduced and its first block was mined, and so far there have been no 51% hacking, hacking or tampering with blockchain technology.

Blockchain technology and its impact in the future

Although blockchain technology is slightly older than Bitcoin , it is the main factor in digital currency networks. Every day, new coins and tokens are created in the market, which has a more accurate and complete use of the blockchain. In the future, with the increasing popularity of the Metaverse and of course the technology of NFTs, the blockchain technology will have more extensive changes, which of course will be made in the direction of improving the blockchain technology for the better.

Frequently Asked Questions 

?What are digital currencies

Digital currencies are a special form of money that is based on cryptography. Its important feature is decentralization, that is, it is not controlled by banks, or governments, and it works on the blockchain technology, which secures these cryptocurrencies and secure transactions.



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What is Blockchain?

Through the blockchain , transactions (or any other type of information) are collected, categorized, processed and verified at specific time intervals. After confirmation, this data is hashed and added to the previous information. Therefore, blockchain technology contains a series of data, each component of this chain is called a block.

?How secure is the blockchain

All Blockchain transactions are secured by encryption. Each block contains a unique private key that can be verified with a public key. This process ensures the security of the blockchain

?What are the advantages of Blockchain

Blockchain has many advantages, among which it is not controlled by anyone and without intermediaries such as, institutions, or organizations, and contains transparency and security, this technology has many applications and benefits in the financial sectors, medical services, supply chains,  

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