In a nutshell Blockchain technology is a distributed database system that provides encrypted data management.
Blockchain technology is not much different from other systems you have encountered before. With blockchain, many people can enter information records and users can see how the information records we mentioned have been changed or updated. We can show the Wikipedia site as an example. What is written is not the product of a single person. In other words, information is not monopolized by a single person.
But these similarities with Wikipedia are those that appear roughly at a glance. When we dig deeper, the features that make blockchain technology unique become more evident. While both work over distributed networks, Wikipedia is built on the World Wide Web (WWW) protocol, using a client-server architecture.
If authorized, a user can change Wikipedia posts on the central server, and whenever a user accesses the Wikipedia page, they get an updated version of the original copy. Control of the database remains with the Wikipedia administrators, so access and privileges are retained by the central authority.
The digital backbone of Wikipedia is similar to the highly protected and centralized databases used by governments, banks and insurance companies today. Control of centralized databases, including management of updates, access, and protection against cyber threats, remains with the site owners.
Wikipedia’s original copy is edited on a server and all users see its new version. In the use of blockchain, every node on the network, so to speak, achieves the same result. They all update the recorded information independently, and the most popular record becomes a kind of official record. Transactions are published and each node creates its own updated version.
Blockchain and Security
This is exactly what makes blockchain technology so useful. This difference represents an innovation in the recording and distribution of information by removing the need for a trusted party to facilitate digital relationships.
Despite all its benefits, blockchain technology is nothing new. Rather, we can say that several technologies that have proven useful before are combined and applied. What makes the idea of Bitcoin creator Satoshi Nakamoto so useful is the combination of 3 technologies in particular:
- Private key cryptography
- Protocol that manages incentives
The result with the combination of these is: Digital money transactions that can be made without the need for a trusted 3rd person. What secures digital relationships is that blockchain technology is based on a simple but robust network structure.
Defining Digital Trust
The concept of trust is a risky decision between different parties. When deciding whether you can trust someone in digital environments, the job usually ends with learning the identity and authority of the other person.
So the things we want the other person to answer are actually “Are you really who you say?” and “Should you be doing what you’re trying to do?” are questions.
In the case of blockchain technology, private key cryptography offers you ownership. Thus, you take care of the authentication requirements. In other words, you do not have to give the other person more information than you need to introduce yourself. In this way, you also get rid of a possible hacker attack.
Authentication is not enough. Things like authority, having enough money, trading with the right kind of money, need a distributed, peer-to-peer network. A distributed network reduces the risk of a centric corruption or error occurring.
This distributed network should also be used for record storage and security of the transactional network. Authorizing a money transaction happens as a result of the entire network meeting the rules it was designed to comply with.
Identity verifications and authorizations made in this way eliminate the need to trust the other person while making digital money transactions. Today, entrepreneurs of industries around the world have noticed the effects of this development. Unimagined, new and powerful digital relationships are now made possible. Blockchain technology is often described as the backbone of money transactions on the internet.
In fact, the idea that cryptographic keys and public ledgers can encourage users to establish secure and formal digital relationships is gaining a lot of attention. Various circles, from governments to data processing companies to banks, are eager to acquire this money processing system.
Authentication and authorization, which are very important for digital transactions, has been created with the configuration of blockchain technology.
This idea can be used wherever a reliable recording system is needed.