In this article, you will learn blockchain: what is blockchain used for. The term 'blockchain' is used as a broad catch-all term for the implementation of a distributed ledger based on cryptographic hash functions. Both distributed ledgers and blockchains have a variety of implementations. The first widespread implementation of a block-chain was the Bitcoin cryptocurrency.
What is Blockchain?
Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. An asset can be tangible (a house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding). Virtually anything of value can be tracked and traded on a blockchain network, reducing risk and cutting costs for all involved.
Purpose of Blockchain
A blockchain consists of a set of protected information blocks chained sequentially to one-another. Together they form an immutable ledger, distributed over the participating nodes. These nodes are computing platforms that interact with the end users.
The purpose of the blockchain is to share information among all parties that access it via an application. Access to this ledger in terms of reading and writing may be unrestricted ('permissionless'), or restricted ('permissioned'). The shared information is protected against modification, meaning that any al-teration would be easily and immediately detectable. For that reason, once information is rec-orded on the blockchain, it is considered immutable because it is so strongly protected.
What is Blockchain used for?
Virtual coins are a popular family of applications built on Blockchain. A coin consists of data (representing value) and code (rules on how to spend the value). Here are some ways Blockchain is used for.
- Making a payment
To make a payment, an end user installs a wallet application and generates an account and an address to interact with the Blockchain. First, they pay to receive coins at that address using a traditional payment method. Once the coins have been received, the user can create their own payment transactions from the wallet.
The transaction contains data (identifying payer, payee and amount) and code (a script defining how to unlock the value the payer wants to transfer to the payee and how to lock the value subsequently to the payee). Performing the transaction requires interaction with a full-function node to execute the script code. Upon successful execution, the transaction output is broadcast to peer nodes, which relay the output to further peers.
-Mining
Mining is Bitcoin's protection against users who try to double spend. Upon reception, nodes insert the transaction output they received in the payload of their new candidate block. In the payload, there's room for this output along with two reserved locations, one to be filled by the nonce and the other by a value that represents the creation and allocation of a benefit. All full-function nodes insert the benefit value of their choice (typically a transaction that makes a payment to itself) and start 'mining' (searching the nonce that when combined with the rest of the information yields a valid hash value). This is referred to as the POW. Alternatives to mining exist, the most common of which is referred to as proof of stake (POS).
With POW, the first node to find a hash value that meets the specified condition broadcasts the newly completed block to all other nodes to verify it. This new block contains the benefit value for the miner that was the first to successfully find the required nonce. If this new block is successfully verified by the network, the originating miner sees its efforts rewarded by the benefit, which can be used in future transactions. The results included in the payload of the new block are available in all full-function nodes. Competing miner may broadcast its block just after the first miner, and also link its block to the Blockchain. However, the nodes will notice the time difference and its block will become an orphan block, it'll no longer participate in the active chain.
Partial nodes do not mine and may store the entire Blockchain, or only parts thereof (blocks that contain transactions relevant to them). Partial nodes can interact with end users, but are dependent upon full-function nodes to commit transactions to the Blockchain. A wallet can be implemented on a mobile device as a partial node, maintaining only information about the coins its owner can spend. The mobile device would not have to store the full Blockchain, but would still be able to offer its user wallet functionality.
Bottom Line
Blockchain is the most basic term of the decentralized system and cryptocurrency. So, it is important to know what blockchain is and blockchain: what is blockchain used for.
