Blockchain technology is widely heard today, but not everyone has an idea of what the principles of its operation are based on. Interest in operations with cryptocurrency is only growing, and an ordinary trader may become curious about how to occupy a professional niche in the field of blockchain development or what a blockchain engineer’s salary is. The prospects for widespread use of blockchain apps for smartphones and PCs are impressive with a range of coverage across various sectors of the economy. Why is blockchain so useful for business?
The implementation of the programmers’ ambitious idea was embodied in such areas as the execution of currency transactions, the creation of cybersecurity algorithms, the identification of a user’s identity in banking structures and government agencies. The multifunctionality of blockchain technology is explained by its versatility, since now it can act not only as a register of financial transactions with cryptocurrency, but also be a connecting link for information blocks in general.
So what is blockchain at its core? The technology is based on a sequential and continuous chain, which is a kind of list with data. Ensuring the relationship between each separately taken block occurs through numbering and information about the hash sum of the previous and subsequent blocks. The hash sum is susceptible to any adjustments in the information in the block, and all changes in the information also entail changes in the hash sum.
There are certain rules for building such a chain, which blocks must correspond to. For the correct observance of this principle, the changes affecting the hash sum must be written already in the next information block. However, this action does not change the hash of the predecessor blocks. A process like this may seem relatively easy to do when it comes to the last block in the chain. In other cases, changing the hash sum becomes a labor-intensive task, especially if copies of all the required chains are located in the storages of different computers.
The transactional block as an important link in blockchain operations
This block is needed in order to carry out payment transactions using cryptocurrency. The completion and confirmation of a transaction can be considered the stage of the operation when parameters such as signature and format were verified. In this case, a single transaction is combined with similar actions, and then written into a block. This is quite convenient due to the availability of data for verification within a single block, which allows eliminating errors in the general base of operations.
Any block begins with a header, under which you can see a list of all transactions. A prerequisite for the header is the presence of its own hash, as well as the hash of the previous block, together with the transaction hash and technical information that plays an additional role. For example, in the Bitcoin ecosystem, the very first transaction will be data on the receipt of a commission. Usually, this amount is a reward to the miner for the very fact of creating a transaction block. Only after the so-called “parent” block are the following blocks in turn.
Their order can be set by the miner, but the chronological order is not considered mandatory here. For example, a selection of operations with a high percentage of commission or with a list of specific addresses can be carried out, and all these parameters are built by a person personally, basing his requests on any specific criteria. This principle effectively organizes data, for which hashing is used in the block in a tree-like scheme, and this makes the blockchain technology transparent in the aspect of tracking transactions.
The blockchain database implies that a block of transactions will be approved by all participants in the chain, provided that the hash of the header in a numeric value is equal to or less than a certain target number. The value of this number is not a constant, but periodically goes through the stages of editing. The peculiarity of programming transactional blocks in C sharp is the irreversibility of the hashing process of this function, therefore, to achieve the desired result, it is required to search for the desired number by brute force in random order.
Transaction confirmation and double spending
This block is needed in order to carry out payment transactions using cryptocurrency. The completion and confirmation of a transaction can be considered the stage of the operation when parameters such as signature and format were verified. In this case, a single transaction is combined with similar actions, and then written into a block. This is quite convenient due to the availability of data for verification within a single block, which allows eliminating errors in the general base of operations.
Any block begins with a header, under which you can see a list of all transactions. A prerequisite for the header is the presence of its own hash, as well as the hash of the previous block, together with the transaction hash and technical information that plays an additional role. For example, in the Bitcoin ecosystem, the very first transaction will be data on the receipt of a commission. Usually, this amount is a reward to the miner for the very fact of creating a transaction block. Only after the so-called “parent” block are the following blocks in turn.
Their order can be set by the miner, but the chronological order is not considered mandatory here. For example, a selection of operations with a high percentage of commission or with a list of specific addresses can be carried out, and all these parameters are built by a person personally, basing his requests on any specific criteria. This principle effectively organizes data, for which hashing is used in the block in a tree-like scheme, and this makes the blockchain technology transparent in the aspect of tracking transactions.
The blockchain database implies that a block of transactions will be approved by all participants in the chain, provided that the hash of the header in a numeric value is equal to or less than a certain target number. The value of this number is not a constant, but periodically goes through the stages of editing. The peculiarity of programming transactional blocks in C sharp is the irreversibility of the hashing process of this function, therefore, to achieve the desired result, it is required to search for the desired number by brute force in random order.
Transaction confirmation and double spending
Blockchain technology has such an advantage as the clarity of the execution of all operations and the absolute transparency of their tracking. For a full-fledged transaction, its confirmation is required, because as long as the transaction is not in a block, it is categorized as unconfirmed by default, and, accordingly, the amount of cryptocurrency on someone’s account remains the same. Therefore, before entering a transaction into a block, it is possible to execute several different transactions for transferring funds to different recipients from one account.
An interesting nuance here is the fact that all subsequent transactions will be ignored by the system if one of them is added to the block. At the same time, even educational books on blockchain emphasize the priority of a later transaction over an early one, since the early one will be perceived by the system as incorrect. It is curious that two similar transactions can fall into different branches and each of them will continue to be considered correct only until a branch dies out. It should be noted: the time of the operation itself will not play a special role.
Not only ordinary traders, but also representatives of the e-commerce sector are concerned about the likelihood of an erroneous payment. Blockchain developers warn about the hypothetical risk of transferring the same cryptocurrency units 2 times to completely different and independent recipients. In such a scenario, one transaction can be public, its confirmation will take place in the general order for all parties, but the second transaction can go secretly, and only blocks of the parallel branch will record its confirmation.
To prevent such a phenomenon as the doubling of funds, in particular, bitcoins, from happening, the network after a certain period of time receives information about the second transaction, which receives the status of confirmed, and the first one starts to be ignored by the system. Of course, there will not be 2 times more bitcoins, but the owner will change, that is, the first addressee will lose money without compensation and notification about it. Nevertheless, statistics show that this situation has never received a real practical implementation, so blockchain users should not have much cause for concern.
Blockchain technology application in Russia
As we mentioned earlier, blockchain technology has stepped far beyond cryptocurrency turnover. Over the past few years, this universal mechanism for accounting and data analytics has confidently been introduced into other areas of everyday life. Large corporations realized the convenience and reliability of this technique, gradually switching to using blockchain in order to control cybersecurity in enterprises. Which companies have pioneered the use of blockchain?
In 2017, Rosreestr was one of the first to plan the launch of a project for large-scale digitalization of its work. It was expected that such major market players as the Agency for Housing Mortgage Lending and Vnesheconombank would act as partners in the implementation of blockchain technology. In addition, Tatarstan, as a constituent entity of the federation, put forward a proposal on the widespread use of blockchain at the state level, which includes the most significant legal issues for any person:
- global implementation of blockchain in the workflow system, for example as a centralized ledger;
- the use of blockchain developments in accounting for issued diplomas;
- blockchain application in voting;
- implementation of blockchain-based notary services;
- providing medical assistance with entering data into the blockchain registry;
- making records of civil status using blockchain technology;
- conducting transactions in the field of land law through a blockchain database.
In addition, Sberbank also thinks progressively: it held negotiations with the management of the SWIFT platform in Canada, during which the parties in 2017 agreed on the possibility of using the products of blockchain developers to carry out interbank financial transactions through e-wallets and other instruments. A distributed ledger is convenient for SWIFT in that it has the ability to carefully verify incoming information in real time.
In the autumn of the same 2017, an international technology forum “Open Innovations” was held in Moscow, at which Vnesheconombank, together with the administrative management of the Novgorod region, launched a project to create a blockchain algorithm aimed at monitoring the provision of citizens with medicines. The benefit of this project lies in the timely identification of possible violations and abuses at the stage of drug distribution to pharmacies. Surprisingly, but true: the blockchain is starting to solve socially acute problems.
However, we are considering these events in retrospect. What is happening to blockchain companies in 2021? Currently, the Magnit store chain has launched an ad management platform with the support of Aggregion and Microsoft. Marketers can now access the anonymous data of their target audience in a unique way to categorize potential customers into variable segments and structure the information they receive using blockchain technology.
Of course, other leading enterprises in various industries, as well as in the field of logistics, energy and finance, are actively using blockchain in 2021, since the convenience, high efficiency and reliability of this technology has managed to positively recommend itself in practice. As for the original function of blockchain technology as a ledger for Bitcoin and Ether transactions, this algorithm is, without a doubt, in demand by any trader. The products of the intellectual work of the best blockchain engineers are still the foundation for cryptocurrency operations.