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3 Things You Should Know About The Blockchain

The question that has been answered thousands of times and which answer still confuses everyone: What is a blockchain?

The short answer: It’s a secure database. More specifically It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way, keeping you anonymous”.

If you’re still confused how a blockchain works, we will show you the three main points that characterize a blockchain.

1. It is Distributed

Have you heard of uTorrent, the p2p filesharing software?

The way it works is this: Participants automatically join a network of computers worldwide. If you are looking for a specific file, you can download it from everyone who offers it. The connection you make with every computer who allows sharing of this file creates this “peer to peer network”.

Similarly the blockchain is made by “nodes” that work together in order to validate (accept) the new blocks (actions and data) in which the transactions are recorded. Each computer that works for the system represent a node.

As you can see, the system is based on consensus between computers. The more nodes will work on the system, the better the ecosystem works. For the “work” that each node in the distribute network does the system gives away a reward. When you validate a block, this is called “mining”, you will receive a reward as a result of your contribution to the blockchain.

2. It is open to anyone

I mentioned “anonymous” in the description, so how can it be open?

As the word “cryptocurrency” states itself, wallets and transactions are encrypted in order to make its data secure.

However, the blockchain is an open database that everyone can consult. In fact, everyone can see all the transactions of the blockchain history (true for most blockchains). Nevertheless it’s transactions are anonymized. That means you won’t find any names and addresses attached to one’s account, but a 26–35 character number/letter.

Bitcoin Wallet of Satoshi Nakamoto: 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa

Photo by Micah Williams on Unsplash

3. It is safe and unalterable (mostly)

The safety of the system is a consequence of its distributed and shared nature.

In fact, since the ledger is shared and saved in each node, like a file in our example of the uTorrent network. A hacker needs to hack the 51% of the nodes, of all computers in its network, in order to effectively modify the value in the blockchain.

The blockchain system is based on consensus. Therefore, if there is something wrong in a minority of the nodes, the other part, the majority, will recognize the error and it will continue with the right version of the blockchain. (This is a simple and non technical explanation)

Because there is always someone who checks every transaction we are solving the problem of double spending.

Double spending?

If I sent a text document to 2 friends of mine via mail, I effectively doubled the file. It now exists 2 times and I could easily duplicate it. This would be devastating in a financial system. On the blockchain, the nodes are checking every transaction and approving it only if its validity is confirmed. So 1 bitcoin can never be sent to 2 persons at the same time. Each transaction has a timestamp so it is unique.

These are just the basis of the blockchain technology. This system is tailored for cryptocurrencies but can be used for higher purposes as asset tokenization.

In TaoDust we exploit the asset tokenization feature in order to tokenize equities.

If you don’t know what tokenization is, here there is the link to the article; but we will do other focuses on this topic.

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