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Understanding Blockchain: History, Principles and How It Works

Timesofummah.comDoes you already know about blockchain? For especially  who are involved in the IT/IT world or short for Information and Technology/Information Technology, they are certainly familiar with the term blockchain, right? There is a fact that is quite surprising, it turns out that blockchain itself is quite popular in Indonesia. It turns out that not only is it popular among IT connoisseurs, blockchain has spread its wings to ordinary or lay people as well.

In short, blockchain is a technology that forms the basis of developments in the sphere of currency in the form of cryptocurrencies. Usually exemplified by the most popular forms such as bitcoin, ethereum, and other crypto forms of the like. It should be noted that the function or use of the blockchain does not only function as a crypto currency, but can also be used as something useful in various other fields, such as digitization and technology.

Another brief understanding, regarding blockchain is that blockchain can also be interpreted as a technology that focuses on making the best possible use of a computing technology with the aim of creating a collection of groups or as the name implies blockchain, a collection of blocks that are connected to each other. So it can be concluded that a set of interrelated blocks has various records of a set of transactions and can be used to track the existence of an asset contained in a business network.

Blockchain itself is considered a transaction in digital form which of course has an arrangement and is based on the form of its structure. With a clear structure, recording records from each individual or called a block will be related to each other like a chain called a chain. Now, the understanding of blockchain above is considered incomplete and is still in the general sense.

In this article, we will invite  to find out and learn more about what is blockchain? In addition, we will also invite to learn about the brief history of blockchain, how the blockchain works, what blockchain is used for, the advantages of blockchain, the three principles of blockchain technology, and the differences between blockchain and cryptocurrency. A lot isn’t it? Just so you don’t have to worry about providing information.

Understanding Blockchain

Understanding Blockchain History, Principles and How It Works

Blockchain itself is a collection of various data records that are processed or processed by a collection of computers that do not contain any or all entities. A collection of data blocks or data records is given a security and bound together by utilizing the application of the principles of cryptography.

The network contained in it does not have a centralized authority or authority. Why is that? This is because a blockchain contains various records that are shaped like a very large notebook. Although the ledger can be shared, the contents in the ledger will not change. In addition, all the information contained in the ledger can be viewed and accessed for anyone to just look at it.

That is why on the three principles of blockchain technology there is a principle of transparency, this is because blockchain is transparent. That nature means that everything contained in the blockchain can be seen by other people who have involvement as a form of accountability for the actions of their respective activities.

Besides all of the above, blockchain technology is free of any transaction fees, including infrastructure fees. With these advantages, blockchain is dubbed or considered the most simple, smart, and effective way to convey information from one person to another and so on more securely and of course runs automatically.

The various blocks listed in it have received verification status from various computers and the distribution process is of course assisted directly by the support of the internet. Various blocks that are successfully verified by the computer will then be added to the chain and then shared in a special network. Well, after that a special record will automatically be formed containing the unique history that was formed due to the process earlier.

An example can be illustrated with a situation when  buys a train ticket through an application or a certain train ticket purchase site. When making transactions using the payment method using a credit card. Well, that’s when the credit card service provider will take cutting actions so that the transaction process runs smoothly and successfully.

The use of blockchain can also cause a drawback, namely the operator of the train is not given access to save costs when processing or processing credit cards. The entire process of ticket sales transactions will be completely transferred to the blockchain. In this process, the only parties involved in the ticket transaction process are prospective passengers with the serving train company

In this case of purchasing a train ticket, the ticket is considered a block. The ticket or block will then undergo the next process, which is added to the ticket blockchain. This can be likened to when there is a monetary transaction process that occurs on the blockchain and is interpreted as a unique record, verifiable, and some cannot be verified.

The blockchain contained in the ticket is a form of overall record of all transactions that occur for the purchase of a particular train ticket, or it may also be for the entire railroad network. The record contains various transaction history for each ticket that was successfully sold for all travel records that have been taken previously.

Understanding Blockchain Literally

Blockchain itself is a term that comes from a foreign language that is formed from a combination of two words, namely the word block and the word chain. The two words can be interpreted as a group for the word block and chain for the word chain. The purpose of the name is to describe how the blockchain itself works. The workings of the blockchain is to create many blocks that are related to each other with functions to facilitate the execution process of transactions.

As the name given, blockchain is a chain of various blocks arranged sequentially with a concurrent chaining and distribution system. In a block composed of a ledger or interpreted as a ledger and below it is followed by the three blockchain components, namely the data itself, the hash, and the last is the hash generated from the previous block.

A Brief History of Blockchain

Quoted from a book entitled Blockchain for Dummies written by Manav Gupta, it is explained that initially blockchain was formed and developed to meet a great need for a system that works more effectively, efficiently, cost-effectively, is more secure, and proven safer to perform tasks such as: recap various financial transactions that occur in the future.

The idea of ​​​​using blockchain itself was formed in 1991. At that time, there were two people who wrote and published a journal entitled Journal of Cryptography: How to Time Stamp a Digital Document, the two people were Stuart Haber and W. Scott Stornetta.

Initially blockchain was used for use in bitcoin and was developed around 2009. Blockchain development was carried out by a Japanese man named Satoshi Nakamoto. In contrast to the money produced by a central bank, which is still in the form of traditional money, the existence of bitcoin is slightly different where bitcoin does not have a central power or authority and does not have a party working to control it.

Instead of relying entirely on a central authority in terms of monitoring, obtaining verification, and approving transaction requests and for processing money receipts, bitcoin prefers to be activated using a network with peer to peer connections.

Three Fundamentals of Blockchain Technology

Did  know, that blockchain has three origins in its implementation and properties. Here are the three blockchain principles that we will present to

– Decentralization Principle (Decentralization)

It is known that before the existence of bitcoins and bittorrent, a centralized service has been created that has a simpler idea concept. The idea itself has a core like this, if  has a centralized entity, where  can store all the data that  has. Besides that,  must be able to interact with these entities. however, keep in mind that only interact with those entities. Why is that? It aims to make it easier for  to get the information that  need.

One can get an idea of ​​this principle by looking at the implementation of the banking system in the world. The bank is given access and permission to keep all the  money that  saves there. The only way for  to be able to withdraw and pay an expense to form a transaction is through that bank as well.

– Principle of Transparency (Transparent)

This one principle or concept is the most interesting principle, but most people often misunderstand this one principle. Most people think that blockchain provides them with privacy, while others call it providing transparency. Why is that?

This is because a person’s identity will be automatically hidden by the blockchain using a very complex cryptographic method. In addition, the data contained is only the public address data that the person has.

An example of implementing transparency is that when  tries to look up the transaction history of other people,  cannot see their names. will only be given a random collection of letters combined with numbers and shapeless block letters.

The point is that even though can see the history of transactions made by that person, still cannot find out the real identity of that person.

– Principle of Immutability (Eternity or Eternity)

In the context of blockchain, immutability or immutability means that if there is already data that is inputted or entered into the database, then that data cannot be deleted, destroyed, let alone deleted. The existence of a principle like this of course must put extra attention in entering data into the blockchain.

Why was the principle of immutability or immutability created in the blockchain? This is because there are currently rampant acts of embezzlement of funds that can be removed if too many people know that they cannot change the contents of the financial books and play with company accounts for fun. In this case end up using a cryptographic hash function.

In simple terms, a cryptographic hash function is defined by the act of hashing which means taking an input string of an unspecified length and giving its output of a similar length.

How Blockchain Works

As  knows that the main function of the formation of the blockchain is to function as a form that gives permission for digital information to be recorded and distributed or disseminated without having access to being able to be changed, destroyed, deleted, and deleted.

This has earned blockchain the nickname DLT or short for Distributed Ledger Technology. The working system of the blockchain is to use bitcoin purchases. In the following, we will present the working system of the blockchain.

– The way blockchain works starts with someone buying a certain amount of bitcoins.
– After that, the transaction process will occur, the transaction process will be transferred through a computer network installed using the peer to peer method which of course is spread throughout the world.
After that, the computer network then solves an equation that serves to confirm the validity of the transaction.
– After the transaction is confirmed to be a valid transaction, the next process is that the transaction will be grouped together as a block.
– This collection of blocks will then be combined into one and will be recapitulated to become a record containing a long history of the transaction which is permanent which obviously cannot be changed.
– After that, the transaction is complete.

Because the blockchain makes transactions more secure, decentralized, secure, and durable or permanent which can attract the interest of many industries in the world.

Advantages of Blockchain

As knows, the fact is that blockchain is very popular and has become a favorite among people around the world. In the following, we will present some of the advantages of blockchain that make it a favorite among various people in the world.

1. Quality Guaranteed Data Security

The database in the blockchain is append only, which can only add and cannot or does not provide access to repair the data. thus making it difficult for hackers who want to hack the data on the blockchain.

2. Use More Transparent Systems

As we explained earlier, blockchain technology provides advantages in the form of effectiveness in storing transactions and traces of information. This is even proven by the security and transparency of the data stored. This is evidenced by when a transaction process takes place, public access can be seen by all parties without having to go through the login process first.

Unlike systems owned by banking, systems owned by blockchain are different, by utilizing all the technologies that have been successfully implemented in blockchain, all data, information and even funds provided by users will not fall into the hands of others without the knowledge of the users themselves.

3. Much Better Audit Quality

There is an advantage that blockchain has, where users are given access to be able to find out all the history and traces of the audit assets owned by the user. This is very helpful in reducing the risk of embezzlement of funds that is currently rife in the entrepreneur environment.

4. Can Prevent Possible Middleman Fees

The presence of blockchain will not only directly help in eliminating middleman fees in the blink of an eye. Middleman or commonly referred to as brokers often add transaction fees as a form of wages for their services in replacing the role of something. Well, this is the advantage of blockchain where all actions or activities from recording history and traces will become more organized, structured, and directed. It also becomes more enduring and durable.

Blockchain Utilization

The use of blockchain technology can be utilized in all fields, especially in the financial sector. This is because blockchain is always likened to a digital cash book which only has the advantage that it can be accessed and visited by anyone, anywhere, and anytime in a very easy way without having to ask for approval from financial institutions such as banks.

The existence of a blockchain can make it easier and provide a sense of security because of the transparency principle that we have explained. Where this principle has a use to minimize the occurrence of embezzlement of funds by certain elements.

Blockchain can also be used in the financial sector with evidence in 2018, McKinsey once made a special blockchain opportunity table that can provide an overview of the opportunities of blockchain for various other fields, such as media, property, telecommunications, medical, agriculture, and many more.

Difference between Blockchain and Cryptocurrency

The difference between the two things above is that cryptocurrency is a system that has a dispersed nature. What does it mean? The meaning of these properties is that these cryptocurrencies cannot be controlled by other people or companies.

So that’s the meaning of blockchain that we can present to note that this blockchain is very broad and has many uses for various fields, especially in the financial sector.

About robert fernandez

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