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What is a blockchain?
Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system.
What are the characteristics of blockchain?
1. Data records are difficult to be tampered with
Since each node in the blockchain has a copy of the master ledger, if any node wants to tamper with the data, it has to modify the catalog of each node in the network.
On the other hand, to add a new block, it is necessary to obtain the approval of more than 51% of the network nodes through an algorithm. This makes the data on the blockchain highly trustworthy, permanent, and almost impossible to be deleted at will, even by the creator of the blockchain application.
2. Removal of intermediaries
Because of blockchain's P2P and decentralized nature, any service that requires third-party verification (e.g., financial transfers, third-party payments, etc.) can be verified by blockchain technology.
Blockchain technology can be used to verify the transaction, and the intermediaries can be eliminated at the same time.
3. Information Transparency
All the data on the identical blockchain will be the same. This means that the information is open and transparent, which ensures that all participants in the blockchain can share the correct information that cannot be tampered with.
This feature also allows blockchain technology to eliminate some of the complex procedures required in the past (e.g., checking the correctness of data in the insurance process or financial account opening). The data transparency can also help reduce a lot of workforce and paperwork and etc..
Benefits of Blockchain
- Improve data accuracy without human involvement and intermediaries
- Cost reduction without third party verification
- Decentralization makes it difficult to tamper with data
- Secure, private, and highly efficient transactions
- Information transparency
- Provides a safer and more reliable alternative to banking and personal information retention for countries with unstable or underdeveloped governments
The development context of blockchain
Blockchain 1.0: Cryptocurrency as represented by Bitcoin
The emergence of Bitcoin has resulted in a trusted, decentralized, free-money transaction system that enables direct circulation between two parties as long as there is a network.
This is equivalent to blockchain cryptocurrency, which is a new digital payment system, decentralized to reduce transaction costs while still ensuring security.
This is subversive to traditional finance, and may eventually unify the global currency.
Blockchain 2.0: Blockchain for Financial Services
The characteristics of cryptocurrency make blockchain the first to integrate into financial services, and even adding smart contracts in blockchain can basically replace the current traditional financial services; for example, in financial fields such as stocks, private equity, and exchanges are trying to use blockchain technology to register and transfer shares.
At present, the blockchain-based applications include:
- P2P transactions (e.g. cross-border payments, futures contracts trading)
- Identity registration (e.g. anti-money laundering lists)
- Ownership (e.g. land ownership, equity verification, and transfer trading)
- Smart management (using smart contracts to make automatic interest payments, dividends, etc.)
Blockchain 3.0: Blockchain Applications in Other Industries
In addition to being widely used in the financial sector, blockchain is also beginning to be used in the legal, retail, and healthcare sectors, and may be used in many more in the future.
The logic of blockchain can solve the trust problem between different organizations, and the decentralized model can optimize the efficiency of peer-to-peer, and eventually, it may subvert the existing capitalist model with local and make the global collaboration model possible.
From the definition of Blockchain 1.0 to 3.0, it may seem like a "progressive" and "incremental" development, but in fact, it is just a difference in the scope of application. Actually, blockchain technology is developing in parallel from 1.0 cryptocurrency and 2.0 financial field to 3.0 various fields.
Conclusion
- A blockchain can be understood as a highly secure database that can link together any information stored in a block. As new data enters the blockchain and reaches the block capacity limit, it is linked to the previous block, allowing the data to be linked in chronological order.
- The most common use of blockchain today is in financial transactions.
- In the case of a decentralized blockchain currency like Bitcoin, there is no single person or group that controls it.
- Decentralization means that the records entered into the blockchain are irreversible, as anyone bitcoin transaction is permanently recorded and can be viewed by anyone.
- What is a blockchain?
- What are the characteristics of blockchain?
- 1. Data records are difficult to be tampered with
- 2. Removal of intermediaries
- 3. Information Transparency
- Benefits of Blockchain
- The development context of blockchain
- Blockchain 1.0: Cryptocurrency as represented by Bitcoin
- Blockchain 2.0: Blockchain for Financial Services
- Blockchain 3.0: Blockchain Applications in Other Industries
- Conclusion