Blockchain technology or Blockchain has become today the talk of the hour and has the ability to grow to become the cornerstone of record-keeping systems and data all over the world, especially with the spread of digital currencies, as it was launched only 10 years ago by an unknown person / persons who were behind the creation of the first and most famous A digital currency, which is BITCOIN, or as it stands for BTC. During this article, we will learn about the concept of block chain technology, how it works, and why it has gained so much attention and popularity since its inception.
A brief history of the beginning and emergence of Blockchain technology
The beginning of the idea of the blockchain or blockchain was in 1991 AD when Stuart Haber and Scott Stornetta described the idea of building a chain of recorded and cryptographically secured data blocks for the first time, after which programmer and computer scientist Nick Szabo tries to use them in an attempt to create an indefinite digital currency. A centralization he called Bit Gold or Bit Gold, and that was in the year 1998 AD.
As for the real breakthrough of the blockchain technology or the blockchain, it was in 2008 AD when the developer / developers working under the pseudonym Satoshi Nakamoto issued a white paper to establish the Blockchain model, and a year later it is actually applied as a comprehensive record of transactions that take place using the digital currency Bitcoin.
In 2014, a major technological breakthrough occurred in Blockchain technology, as Blockchain was separated from currency and its potential for financial transactions generally between various other parties was explored. Blockchain 2.0 was created, the second version of the blockchain, which entered into applications other than the idea of digital currencies, such as what was presented by the ethereum blockchain system in computer programs in the form of blocks, which represent financial instruments such as bonds. It then became known as smart contracts.
Blockchain concept
Blockchain is an open-source, programmable, non-controllable technology. It is essentially a digital record book of transactions that are replicated and distributed across the entire network of the system in blocks of encrypted records, each of which is a block that is interconnected and secured with a special cryptography. Each block contains a hash, which is a mathematical algorithm that records a small part of the data for transactions included in the record as a whole, and is encrypted with a partial code of the total code in which the block chain constituting the transaction record and the total blocks is encrypted, and defines the decentralized database that it manages. Many of the participants - as happens in the blockchain - are distributed ledger technology (DLT).
We can say that the sequential block technology works almost on the same principle as torrent files, but in a more complex way, as it operates complex mathematical algorithms and requires powerful and sophisticated computer processors, meaning that it is an integrated network, and by storing data through that network, Blockchain blocks technology prevents any risks related to the centralization of storage. data.
To understand the subject in a simpler way, we follow the following example:
Imagine we have 4 people, Ahmed, Mohamed, Islam and Omar
Each one of them has a number of digital currencies and Ahmed wanted to buy a commodity from Muhammad for 0.12 bitcoins, and this means that Ahmed will enter his electronic bitcoin wallet, and send Muhammad 0.12 bitcoins in exchange for buying that commodity – this is called a transaction or transaction.
This transaction must be recorded in the transaction record of the four people, so the storage unit divides the record - the transfer statement from Ahmed to Muhammad - into four partial encrypted copies, and sends it to the records of the four people "Ahmed, Muhammad, Islam and Omar" so that each one of them is able On reading the record, and knowing that an amount of 0.12 bitcoins was transferred from one person to another without the knowledge of the transferor or the recipient - that is, Islam and Omar know that there is a transfer, but they do not know that the source is Ahmed nor the recipient is Muhammad.
This means that each one of them has a small share of the encrypted data between them, and they can see all the transactions that are recorded at the same time, without decrypting them or knowing the source of each transfer or the recipient, and all this is done through the complex communication network that is managed by Bitcoin software Himself.
Blockchain applications
Blockchain applications are like other traditional software applications, except that they are implemented through a decentralized structure to serve an encrypted economic or financial system environment whose primary objectives are to increase security, enhance trust and encrypt assets by designing an incentive or reward system in a new network that is available to miners as a return for work On the web.
Blockchain technology may show the power of its applications in the banking and financial field when financial institutions replace traditional paperwork and processes with a system with its own blockchain infrastructure. The benefits include eliminating human friction and delays, and increasing overall operational efficiencies, including global trade transactions, financing, auditing and settlement. banking, lending, and other transactions.
In addition, with blockchain as a database, blockchain in the healthcare and health insurance industries can help improve the security of patient data while facilitating the sharing of records between providers, recipients, and researchers. And to the extent that it is safe, transparent, and easy to track data within the network, and its stability without trying to modify or change it, the trust between the service provider and the recipient increases.
The benefit and advantages of Blockchain
Blockchain technology was able to gain business confidence and credibility thanks to its continuous development and strong advantages, starting from providing a high level of security, transparency, and the ability to track data recorded across the business network, to its ability to save a lot of costs while maintaining a high degree of efficiency, and below we mention five benefits Key features of Blockchain technology:
Enhance the safety factor
When data is sensitive and crucial, say your financial data, blockchain technology can dramatically change the way critical information is viewed by creating an immutable record that is end-to-end encrypted helping prevent fraud and unauthorized activities. Privacy issues can also be addressed by anonymizing personal data and using permissions to prevent access. The information is stored across a network of computers rather than on a single server, which makes it difficult for hackers or hackers to view or obtain the data.
Transparency
Because a blockchain uses a distributed transaction ledger, transactions and data are recorded identically in multiple locations. All network participants with authorized access see the same information at the same time, providing complete transparency to the network's contributors or clients. In addition, all transactions recorded in blocks are immutable, and are time- and date-stamped to document when they were built and recorded. This allows members to view the entire transaction history in exact chronological order and virtually eliminates any chance of fraud.
Instant tracking
Blockchain creates an audit trail that documents the source of the asset at each step in the logging and block generation journey. This makes sharing data about the source directly available and easy. Traceability data can also reveal vulnerabilities in the chain
Increase efficiency and speed
Traditional paper-based processes take a lot of time and effort and are prone to human error, and may require mediation from a third party. By streamlining these processes using the blockchain, transactions can be completed faster and more efficiently. Where documents can be stored on the blockchain along with transaction details, eliminating the need for a paper and document exchange. There is no need to reconcile multiple records, so review and reconciliation can be much faster.
Automation
This is what is meant to make the system automatic, as transactions can even be automated through smart contracts, which increases your efficiency and speeds up the process further. Once the predefined conditions are met, the next step in the transaction or process is triggered automatically. Smart contracts reduce human intervention as well as reliance on third parties to verify that contract terms are met. For example, once a customer has submitted all the documents necessary to file a claim, the claim can be settled and paid automatically.
Role of blockchain technology in Bitcoin transactions
As we mentioned before, Blockchain technology, which is the underlying technology of Bitcoin, is the main record of its transactions, and its role is to make sure that the real state of the records is verified and updated, as each node in its network makes mutual reviews and communicates with each other to see if all copies are identical. in all blocks. In this way, all transactions are published and validated individually for the digital currency. It also decentralizes digital currency, eliminating the need for a financial intermediary to verify its transactions, such as a bank.
Every bitcoin transaction must be added to the blockchain records, in order to be considered complete or valid. The work of validating transactions and adding them to the blockchain is done by miners, the powerful computers that make up and connect to the network.
Existing bitcoins are registered to private Bitcoin addresses. Creating an address is a private key encryption available for bitcoin, which is computed within a fraction of a second, bearing in mind that there are a very large number of keys sufficient for all available operations and currencies and cannot be broken.
Every person with bitcoin who wants to spend or transfer a transaction must have the private key, the encryption key, and electronically sign the transaction digital signature, then the verification network confirms the transaction using the public key - the decryption key - and the transaction is completed.