[Terminology] What is Blockchain & its application?

by GameAZ
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Blockchain is an innovative database system that allows the storage and transmission of blocks of information that are linked by encryption. With the ability to distribute identical copies across the entire network, Blockchain has mitigated hacker attacks. Currently, it is becoming a trend of the world, including Vietnam with high application potential. So what is blockchain technology? Let’s find out in the article below!

1. What is Blockchain technology?

This is a technology that encrypts all the data in blocks and connects them into a long chain. Every time a new piece of information or transaction occurs, the old information is not lost, but the new information is stored in a new block and in turn appended to the old block to form a new chain.

While any regular database can store this type of information, blockchain is unique in that it is completely decentralized. Instead of being managed by a central administrator in one place, many identical copies of the blockchain database are kept on many computers spread across the network. These individual computers are called nodes.

2. 2. Blockchain’s mechanism

2.1. Structure of a Blockchain

Blockchain is often described as a “chain” made up of individual “blocks” of data. As new data is regularly added to the network, a new “block” is created and appended to the “chain”. This involves all nodes updating their blockchain versions so that they are identical.

  • Its structure consists of many blocks (Block).
  • These blocks are linked with each other, the following block links with the previous block to form a chain (Chain).

Combining Block and Chain, we have a Blockchain

Structure of Blockchain

2.2. Blockchain’s Mechanism 

First, your transaction information will be recorded on the system to form a record.

Then, your record is validated by the computers in the system according to the consensus algorithm on the Blockchain.

Eg:

  • The record shows you sell 5 Bitcoins, in the validation system you have 5 Bitcoins in your wallet, the record will be valid.

  • If you only have 1 Bitcoin, the system determines that your wallet does not have enough Bitcoins to make the transaction, then the record will not be valid.

Next, your valuable authenticated record along with a series of validated records from other traders will be folded into a block of information.

Finally, the newly created Block will be added to the chain (Chain) by connecting the Previous Hash of the block to be added with the hash of the previous block and form a Blockchain.

The first block because there is no block before it, so its Hash is string zero. And it is called the primitive block or Genesis Block.

2.3. Structure of a Singular Block

Each block consists of 3 components: Data (Data), Hash Code (Hash) and Hash code of the previous block.

2.3.1. Data

Your verified data records are protected by an encryption algorithm depending on the blockchain.

2.3.2. Hash Code

Hash of Block. This is a sequence of characters and numbers that are randomly generated and are not identical. It specifically represents that block and is encrypted using a cryptographic algorithm. Hash codes are used to detect changes in blocks.

2.3.3. Previous Hash

The hash of the previous block. It is used to let adjacent blocks know which block is first, which block is next, and connect to each other.

3. What is Advantages and disadvantages of Blockchain?

3.1. What is an advantage of using blockchain technology?

3.1.1. Transparency and unbreakable

It can be said that this is one of the most outstanding features. All information stored, transmitted and processed in the blockchain system is presented in the most transparent, clear and unchangeable, unforgeable, unbreakable manner. Therefore, if you want to retrieve information about your own or someone else’s transaction (including date, time, transaction details, etc.), you will never have to worry about the inaccuracy of your transaction. data.

3.1.2. Anonymous feature

Central to blockchain’s privacy protection is its ability to anonymize users. This feature will help you to transact safely and securely without having to worry about others knowing your identity. Along with transparency, unbreakable or changeable data, and anonymity, blockchain creates a great deal of trust for users, helping you feel more secure when participating in Blockchain.

3.1.3. Shorten time and save costs

If the traditional transaction, in the style of requiring a 3rd party to authenticate, creates trust and transparency, then you will have to bear a certain part of the cost for this 3rd party. However, when you apply blockchain to your transaction, with a smart contract (smart contract) you and your partner will be the one to directly perform the transaction and the system on the blockchain will be the one to confirm for you. , without additional costs, even saving transaction time.

3.1.4. Wide applicability

Blockchain technology can be widely applied in all aspects of life today. For example, blockchain applications in food agriculture, educational management, digital elections, etc. And the most prominent is still blockchain technology applied in financial transactions.

3.2.What is an disadvantagesof using blockchain technology?

3.2.1. Limit transactions per second

Blockchain relies on a larger network to approve transactions so there is a limit to how fast it moves. For instance, Bitcoin can only handle 4.6 transactions per second.

3.2.2. High energy costs

Leaving all nodes active to verify transactions consumes significantly more electricity than a single database or spreadsheet. This not only makes blockchain-based transactions more expensive, but also places a heavier burden on the environment.

3.2.3. Risk of property loss

Some digital assets are secured using a cryptographic key such as cryptocurrency in a blockchain wallet. You need to carefully protect this key. If a digital asset owner loses the private cryptographic key that gives them access to their asset, there is currently no way to block it and the asset will be gone forever.

3.2.4. Potential for illegal activity

The decentralization of blockchain adds privacy and security. This unfortunately makes it attractive to criminals. It’s harder to track illegal transactions on the blockchain than it is through banking transactions tied to a name.

4. What is the Blockchain’s application in practice?

4.1. Cryptocurrency (Cryptocurrency)

The most common use of blockchain today is cryptocurrencies like Bitcoin or Ethereum. When people buy, exchange, or spend cryptocurrency, the transactions are recorded on a blockchain. The more people use cryptocurrency, the more popular blockchain can become.

4.2. Processing bank transactions

In addition to cryptocurrencies, blockchain is being used to process transactions in fiat currencies like USD and EUR. This technology makes bank deposits faster and transactions verified faster outside of normal business hours.

4.3. Transfer of property

Blockchain can also be used to record and transfer ownership of various assets. This technology is currently very popular with digital assets such as NFT – a representation of ownership of digital art and video.

4.4. Smart Contract – Smart Contract Blockchain

Another application of blockchain is self-executing contracts often referred to as “smart contracts”. These digital contracts are issued automatically once the conditions are met.

4.5. Supply chain monitoring

Supply chains include a large amount of information, especially as goods travel from one part of the world to another. Storing this information on the blockchain will make it easier to go back and monitor the supply chain.

4.6. Vote

Experts are looking to apply blockchain to prevent fraud in voting. In theory, blockchain voting would allow anyone to submit votes that cannot be tampered with.

5. What is the blockchain technology platform?

5.1. Blockchain 1.0 – Currency

This is the first version of blockchain technology. Thanks to the application of decentralized distributed ledger technology (Distributed Ledger Technology), transactions taking place on Blockchain are processed quickly and transparently.

A typical example for Blockchain version 1.0 is Bitcoin, the world’s first cryptocurrency and laid the foundation for the development of the Crypto market.

5.2. Blockchain 2.0 – Smart Contracts

This is the 2nd version of blockchain technology. With a smart contract (or Smart Contract), transactions on the Blockchain will greatly reduce the costs of authentication, anti-fraud, operation, and increase transparency.

This version completely removes the emotional or ethical factors often encountered when working with people, a typical example is Ethereum.

5.3. Blockchain 3.0 – Decentralized Application

Decentralized applications (DApps – Decentralized Applications) are independently deployed software, not on a single server, but distributed in a distributed manner on decentralized repositories, and can be written in any language.

Most of Dapp’s source code runs on peer-to-peer networks, which is the opposite of traditional applications and only runs on a single centralized system.

5.4. Blockchain 4.0 – Practical application

Blockchain technology 4.0 is the latest version of Blockchain today. This version will apply all the applications from sessions 1 to 3 to the actual production business process. I will talk in more detail about the applications of Blockchain 4.0 technology in life below.

6. Investment opportunity

2021 is the explosion of a lot of blockchains. If from 2020 and earlier, users only heard about Ethereum mainly, in 2021 there are many potential names such as Solana, Terra, Near, Binance Smart Chain, etc.

The characteristics of these blockchains mainly focus on 3 parts: transaction fees, transaction speed, and security. Since these blockchains were born after Ethereum, the limitations of Ethereum such as high transaction fees, poor scalability are all solved.

Therefore, investing in the current blockchain is quite prominent with investing in the coin of the blockchain itself.

Ethereum Blockchain DeFi Ecosystem

For example, Polygon in January-February had a huge growth, along with AMM QuickSwap that has a QUICK token growth of up to ~x1,000 times, if calculated from the bottom.

Hopefully the information GG brings to you will help you fully understand what Blockchain technology is and all the most necessary knowledge and potential of blockchain technology.

If you have any questions, comments, suggestions or project ideas, please email: [email protected]

DISCLAIMER: The information on this Website is provided as an overview of the market and does not constitute financial advice. GameAZ encourages you to do more research before deciding to invest.

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