Have you heard about blockchain, a technology that has been creating a craze in recent years? It sounds complicated, but in reality, blockchain is not difficult to understand. This article will be your gateway to the world of blockchain, helping you master the basic concepts, thereby preparing you for the journey to explore its potential applications.
What is Blockchain?
Blockchain, simply put, is a chain of blocks, where each subsequent block is cryptographically linked to the previous block. This is an immutable ledger that can only be read and written, data in added blocks cannot be deleted or modified.
The data in the blocks can be information about financial transactions, for example: Bob sends 100 USD to Alice. Each block contains transaction records that cannot be altered or deleted, protecting data from tampering.
Centralized and decentralized models
Blockchain is a distributed network, compared to a centralized model where data is stored at a single point such as on a company's servers. With blockchain, data is stored on multiple devices at the same time, each participant keeps the same copy of the blockchain and adds new blocks according to a consensus mechanism.
Consensus mechanisms
Three main consensus mechanisms:
– Proof of Work: Based on computing power.
– Proof of Stake: Based on the participant's deposit amount.
– Proof of Authority: Based on pre-approved participant reputation.
Types of blockchain
Private Blockchain: Controlled by companies or individuals, has low transaction costs and high throughput.
Public Blockchain: Fully open, allowing anyone to store and maintain a copy of the blockchain and add new blocks, ensuring transparency and security thanks to a public consensus mechanism.
Bitcoin and Ethereum
Bitcoin: Designed as a payment system, using Proof of Work mechanism. Every 10 minutes, a new block is created, currently 3,125 BTC/block. The number of Bitcoins issued is limited to 21 million.
Ethereum: Supports not only cryptocurrency transfers but also smart contracts, helping to create applications that run in the decentralized environment of Ethereum. The currency is Ether, used to pay transaction fees.
Stablecoins
Stablecoins are a special type of cryptocurrency designed to minimize price fluctuations commonly seen in cryptocurrencies such as Bitcoin and Ether. The value of stablecoins is often tied to a stable asset such as a traditional currency or commodity. There are three main types:
Fiat-backed stablecoins: Backed by cash or assets of equivalent value, for example Tether (USDT) is pegged to the US dollar at a 1:1 ratio.
Crypto-backed stablecoins: Backed by other crypto assets, for example DAI maintained by a decentralized autonomous organization (DAO) and backed by Ether.
Algorithmic Stablecoin: Uses algorithms to adjust supply and demand to maintain a stable value without the need for collateral assets.
Application of blockchain
Tokenization of real assets: Transferring ownership of real assets into the digital space.
Central Bank Digital Currencies: Centralize currency control, reduce counterparty risk and cross-border transaction costs.
Decentralized Finance (DeFi): Ensures transparency and does not require centralized regulators.
Digital ID: Secure and unforgeable identification system.
Healthcare: Medical data management and transparent pharmaceutical supply chain.
Supply chain: Manage logistics and track goods effectively.
Game: Own and trade virtual items in the game.
Certification: Transparent and secure document issuance and authentication process.
Conclude
Blockchain is not only the foundation for cryptocurrencies but also a powerful tool for many industries. Thanks to its decentralization and high security, blockchain is changing the way we manage data, bringing transparency, safety and efficiency. This technology is in a period of strong development, promising more applications and innovations in the future.
What is Blockchain? Imagine a chain of blocks, each containing information and linked to the previous block by encryption. This chain is called Blockchain. The special thing is that once a block is added to the chain, it cannot be changed or deleted. Changing one block will affect the entire chain, making it invalid.
