Blockchain technology: what it is and who needs it

Blockchain is a public database of operations performed in the Bitcoin system. With its help, each user can find out how much Bitcoin was at a particular address at any given time. More in detail about what Blockchain technology is, read on.

Purpose

Blockchain can be used wherever there is distrust between the participants. For example, in sales transactions there is always a risk that the seller will not receive money, and the buyer - the service / goods. With the help of the system, you can check the reliability of documents, goods, services or companies.

Blockchain: description of technology

Blockchain is a kind of accounting database that stores information about events from real life. But at the same time it differs from analogues with a high level of openness and reliability. It can not be faked or deleted, but all recorded events can be checked. Let's consider the essence of the technology in more detail.

Blockchain is a method of recording all public data (transactions, agreements, contracts). Its peculiarity is that information on all operations is not stored in one place, but is scattered across thousands of computers. So any user can access the materials.

All data is combined with mathematical algorithms into blocks, and the latter form a chain. Each block contains a hash of the previous one. This chain starts from the first block in the system and is valid until the last. Edit the information that is on the network for a long time, impractical. It is necessary to rewrite all the blocks. The length of the chain is determined by complexity, and not by the number of elements.

The hash method does not leave detailed information about the transaction, but only confirms the fact of its existence. After updating the data, they can not be changed. You can only add new information.

Benefits

The distributed nature of the database makes it secure from hacker attacks and ensures data confidentiality. Information from the hash can not be copied. But even if the data is changed at some stage, they will not match the digital signature. The system will immediately generate an error.

Scope of application

Blockchain - technology against theft. If the records of loans were recorded in the system, it would be possible to prevent the provision of loans on forged documents, fraud with mortgages and car loans. Some countries are already considering the introduction of a system for these purposes.

To date, Blockchain technology is used primarily in crypto-currencies (bitcoin, litecoin, nxt). On these examples, the whole power of the system and its limitations became clear. In some countries, the system is used to fix rights when buying works of art.

Already 42 largest world banks (in particular, Bank of America, Morgan Stanley and others) have created a consortium R3. They are developing a new direction for Blockchain (the technology of mobile payments and other financial flows). A similar company DAM has already created 13 organizations (ABN AMRO, BNP Paribas, JPMorgan, etc.). She also deals with the implementation of the platform in the financial sector. R3 already conducts experiments on the exchange of bitcoins via the worldwide network, without the participation of third parties.

In 2015, Goldman Sachs and IDG Capital Partners invested $ 50 million in the Circle Internet Financial start-up, aimed at using Blockchain to improve the quality of transfers in bitcoins and dollars.

Blockchain technology is successfully used by Everledger to develop a safeguards system for diamond mining companies. Buyers will be able to learn the history of any diamond. For these purposes, Everledger has invested $ 850 million in the database.

The Estonian firm Guartime, which is the foremost in the processing of the country's digital data, created the Keyless Signature Infrastructure, built on bitcoats. Thanks to this innovation, the government can protect the information of citizens in 1000 Internet services.

That is, the demand for technology is constantly growing. In Russia, there is as yet no such activity.

Why such a demand?

In the banking system, one powerful device follows all transactions. The introduction of a large number of computers is resource intensive. The Blockchain system, the description of which technology is presented above, makes it possible to get rid of intermediaries, manual processing of data, speed up processing, reduce costs. Open access to information is useful for the regulator. The state can easily levy taxes. If banks accelerate the transaction process and reduce costs, this will make the service more efficient and cheaper. The international translation will be instantaneous.

Other projects

There are a few interesting start-ups using Blockchain:

• TØ - a platform for trading in securities;
• BoardRoom - system for corporate management;
• UjoMusic - management of the rights to works of art;
• Provenance - a system for controlling the origin of goods;
• BitProof - technology of document certification;
• EverLedger - a system of accounting for diamonds.

This is not the whole list of stratops using Blockchain and Bitshares technologies.

Qiwi Introduces Blockchain

In the Qiwi system, information was previously transmitted centrally. This led to a high load and a large number of failures. Increase the technical security and reduce the cost of processing will allow the introduction of Blockchain.

The purse of the Qiwi payment system contains "block chains". In each subsequent link the checksum of the previous one is built in. As a result, the blocks form a chain in which it is impossible to change or remove something.

The next payment system, which will be implemented by Blockchain - WebMoney wallet. It is planned that the identification of customers will take place on the block chain. This will allow new participants in the system to confirm their identity without visiting the office.

Sberbank Introduces Blockchain

The largest bank in Russia intends to join the R3 consortium in order to integrate services based on cryptology. This will improve the level of transaction security and reduce the dependence on the SWIFT system in the future. Methods of protecting the database system virtually eliminates the possibility of spoofing records. At the same time, the database is characterized by a high level of distribution and openness of information.

Sberbank plans to use a new system for making transfers between its subsidiaries and other banks. About the introduction of its own crypto currency, it does not go. In addition, the Central Bank has a negative attitude to all surrogate money.

Theoretically, Blockchain technology can mitigate some of the political risks. When sanctions were only introduced, the banks feared that they could be disconnected from SWIFT. The use of Blockchain improves the stability of operations, as the system does not have a single regulator.

Obstacles

The implementation of Blockchain interferes with the legal uncertainty of the use of the system. Venture investors view Russia as a supplier of managers and workers. According to opinion polls, only 1 in 5 Russians know about the existence of Bitcoin. Of these, two-thirds of the population consider the crypto currency to be something illegal. These problems are already being actively addressed in other countries

Blockchain technology: "for dummies"

Startup Blockstrap will hold a series of free seminars on block technology for residents of Turkey, Germany, Australia, the Czech Republic and England. The course is designed for people who want to learn more about public registries, software developers, people interested in digital economy.

In the framework of the program, students will learn about distributed systems, circuit technology and learn how to create their own applications. Participants only need basic knowledge of site development and application development in general.

Cryptographic keys

Cryptographic keys are the foundation on which Blockchain technology is based. What it is? The key is a very long number. For example, this is: 1731695423709850868. You can decrypt it only through a set of hash functions. For each record, only one key is suitable. Another important feature: when replacing at least one element in the block, the set of digits changes completely.

Net

Information about the blocks is stored on users' computers. All of them are equal. Logging into the network, the user connects to all other computers. It is important that this network is not geographically related.

Having received the data, the user checks them and, having made sure of the reliability, stores it in the network, and then transfers it further. Participants are divided into groups: users creating new records, and miners creating blocks.

Information on the network is distributed in this way: "a user with a key B transfers 300 monetary units to a user with a key". Data is open, but encrypted at the same time. Knowing the car key, you can check whether it is in the mortgage, but you will not be able to find the owner's name. It's the same here.

Miners collect the records, then they are checked and written to the blocks distributed over the network. Ordinary users get access to these blocks to store them in their own, generate correct data and check other people's accounts.

While the record is not registered, it is considered unreliable. The participant can use it at his own risk. This record can be canceled at any time if it shows up counterfeit.

Key extraction

Miner is the user creating new blocks. He collects records from the network, generates a header and generates a key. Consider a brief example.

Suppose that after the first calculation the key has the form: "311630826946518243738". According to the rules of the system, it must start with zeros. It is necessary to edit the original data. For this purpose, a nonce field is provided in the header of the block. After adjustments are made, its value from 0 to 1. The recalculation will occur several million times until the generated key meets the requirements. Only after this, the generated block will be sent to other Blockchain users. The description of the technology is quite simplistic, but it allows us to convey the principles of the system operation.

The trick of mining is that the probability of finding a key is always the same. That is, it is impossible to buy. Each block has only one key. It must be found. This is what the miners are doing. They receive money for their work. The procedure for generating keys, on the one hand, complicates the work, and on the other - makes it almost impossible to attempt to form a fake block.

Recommendations for beginners

• Despite the great potential of the technology, do not try to screw it to each Blockchain. The fifth wheel has not helped anyone.
• There is no need to develop your own Blockchain. It is better to refine the existing scheme for the needs of your project.
• If you decided to implement Blockchain, then you need to focus immediately on the whole world. Only then can you reveal the full potential of the project.

Conclusion

Within a few years, Blockchain technology will become the same everyday phenomenon as the Internet. What does it mean? Ordinary services and goods can be obtained using the system: make out a passport, register a car, get a loan, buy tickets, etc. A person will only have to provide a key to the system to get or check the service. This will improve the quality of life.