What is Blockchain?

As we have already mentioned, blockchain is a revolutionary technology that underpins cryptocurrencies like Bitcoin and has far-reaching potential across various industries. In fact, Bitcoin is not the only blockchain, there are countless other blockchains, however, the most important ones are based on Bitcoin model, so we'll focus on this model in our course.

Understanding Blockchain

First of all, it is important to define what a blockchain is.

You can also think of blockchain as a global distributed ledger. The data in a blockchain isn't saved in a central database or a file somewhere, but rather distributed across a network of various devices, each of which holds a copy of the entire ledger. Each device within such network is referred to as a node.

Let's take a look at the visualization of such network to make things clear:

As you can see, there is indeed no central database, and the network itself is distributed among various devices. This decentralization ensures that no single entity has control over the entire network, enhancing security and resilience.

Why Blockchain?

You may wonder what is so special about blockchain after all. Well, despite being decentralized, blockchain has the following key characteristics:

Immutability

Once data is recorded on a blockchain, it becomes nearly impossible to alter. Any attempt to change the information in a block would require altering all subsequent blocks, which is computationally impractical, which in turn makes blockchain secure.

Here is an example of a part of blockchain:

Each block has a unique identifier and some data, which is stored as 0s and 1s in computer memory.

In real blockchains like Bitcoin, there are actually thousands of such blocks with data. Besides, in Bitcoin, for example, a new block is created approximately every 10 minutes on average requiring a lot of computational power. Imagine how much time and computational power it would take to alter all of these blocks and verify the data in each of them.

Transparency

While the identity of participants can be pseudonymous, the transaction themselves or other data are visible to anyone with access to the network. This transparency helps build trust among participants and makes the system auditable.

Applications of Blockchain

While blockchain is most famously associated with cryptocurrencies, its potential applications extend far beyond. Let's take a look at some of them: