Blockchain: What it is and how it works

Gamco

Gamco Team

Blockchain technology is best known as the computer architecture on which Bitcoin and other cryptocurrencies are based, but you should also know that this technology is applied to other business models such as tracking transactions in a decentralized, secure and clear way.

Below we will explain in detail what blockchain is, how it works, its advantages and sectors where it is applied.

What is Blockchain?

Developed by Satoshi Nakamoto starting in 2008, the technology blockchain is a technique for storing and transmitting information. This technology offers high standards of transparency and security because it operates without a central control body. 

To be precise, the blockchain allows its users connected in a network to share data without intermediaries.

Definition

A blockchain or blockchain is a registry, a large database that has the particularity of being shared simultaneously with all its users, all are holders of this registry and, in addition, have the ability to enter data into it, according to specific rules set by a very well secured computer protocol thanks to cryptography. 

In other words, blockchain is a technology that makes it possible to store and transmit digital data reliably and securely. It is a base shared in real time by all users in a network "peer-to-peer"and, above all, without central authority.

How does Blockchain work?

In practice, a blockchain is a database that contains the history of all exchanges made between its users since its creation and whose main characteristics are:

  • Identification of each part through a process cryptographic.
  • The transaction is sent to a decentralized network (or storage "node") of computers located around the world.
  • Each "node" hosts a copy of the database in which the history of transactions is recorded. All interested parties can access it simultaneously.
  • The security system is based on a consensus mechanism of all "nodes" each time information is added. The data is decrypted and authenticated by data centers and the transaction is added to the database as a block of encrypted data (this is the "block" in blockchain).
  • Decentralized security management prevents transaction forgery. Each new block added to the blockchain is linked to the previous one and a copy is transmitted to all "nodes" in the blockchain network. The integration is chronological, indelible and tamper-proof.

What are the advantages of a blockchain?

what is blockchain

The use of blockchain has many benefits, but here are the 3 most important ones:

  • It has a high speed of transactions thanks to the fact that the validation of a block takes only a few seconds or minutes.
  • The security of the system is guaranteed since the validation is performed by a set of different users who do not know each other. This protects against the risk of malicious intent. To give you an idea, to make false transactions on a blockchain it would be necessary to hack each node and modify the databases of each one. An operation that is impossible today.
  • Your reliability of validation mechanisms behind blockchains allow for a significant reduction in errors.
  • See improves the productivity and efficiency generated since companies entrust exchanges to a computer protocol, which mechanically reduces transaction or centralization costs existing in traditional systems (financial services, control or certification, use of intermediaries, automation of certain services, etc.).

Where is blockchain used?

The blockchain structure represents a major innovation that is used in particular in the banking sectorThe blockchain technology has been developed to protect transactions made through cryptocurrencies / cryptoassets, whose objective is not to depend on a centralizing organization such as a central bank and to have an international character.

But its use is not limited to this sector; it is currently present in others and will continue to be implemented in more sectors in the coming years. 

Other sectors where Blockchain is used:

  • InsurersAutomation of reimbursement procedures and reduction of certain formalities for companies/clients.
  • EnergyAuthorize the exchange of services and securities outside of a central management body.
  • LogisticsThe following are some of the key features of our products: guaranteeing product traceability and reducing paperwork.
  • Security: where information theft is prevented, thus reinforcing your database.
  • Other sectorsThere are other sectors that will be present in the near future, such as healthcare, agriculture, public administration, entertainment, real estate...
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