What problems does the blockchain solve?
The main characteristic of a traditional database is that it has a central authority that governs it.
For example, a database is owned by the organization that creates it. The decision of who can access the database, and in what form, belongs to the organization that also decides what is stored, what is deleted and what is archived. However, he has two possible shortcomings.
First, if a system depends on a central database, it runs the risk of failure by a single element. In other words, if the central authority is affected or an alternative entry is discovered, the database is threatened by all kinds of risks.
The second deficiency is in the centralization of power, in a single authority in general. This is what you want. For example, if you have an online store and want to have absolute control over it, your own central authority, yourself as the director, decides the characteristics of that environment, including whether to close it if you wish. A centralized power may end up limiting access. For example, if your cost is restrictive or if you need specialized skills. If it depends on approval of workflows by a real individual.
In most cases, by extension, the final arbiter of the validity of any transaction is a human being. It’s easy to see this in any contract. If two entities sign a contract on the Internet, one or two central authorities must validate this data. For example, with a mortgage loan, the Bank must validate the savings and authorize the loan. A notary must certify the property and the legal team must confirm the signatures and other requirements of the contract. Each of these central authorities has non-transferable power that increases the structural expenses of any mortgage transaction. Transactions in a database require processing time. They cost money. They are vulnerable to attack. They allow for limited stakeholder participation. They require specific skills and are subject to error.
Until now you could work very well like this. However, the blockchain allows you to solve all these inconveniences. Let’s see how it works. Blockchain is a new type of database, rather than having a centralized or decentralized database on one or more servers. A blockchain data structure is installed on the individual computers of each database user. In fact, what is installed on each user’s computer is a copy of the same database.As we know, a central database is located on the center server, a decentralized database is distributed among several servers. However, a distributed blockchain database is copied to every computer on every client on the network. There is no server. Let’s see what happens to transactions through distributed databases. For simplicity, we use the example of the contact database with names and numbers. Our electronic diary. Let’s first create a phonebook rule. In this case, we decided that:
“Only the owner of the phone number can change it.”
This rule is encoded in the software. Well, I just got a new phone and I want to update my number in this electronic directory. First I change the number in the database that is on my computer. My database then broadcasts this transaction to all identical databases on the network distributed over the Internet. At this point, all computers hosting the database must agree that I have permission to change my phone number, as all distributed databases know the rule that only the owner can change the number. They will allow for changes. It’s a kind of consensual permission, as the computers on the network must come to an agreement before the change can take place.
Each database attaches a new block of information to the database with my new phone number. I will demonstrate this with these blocks.
Here I have some data. I add a new entry. We can think of this as my new phone number. So we rounded it up like this. We already mentioned that this entry is replicated across each of the blockchain database participants.
Here are three examples of a typical blockchain database, usually thousands of computers. Now we’ve added another entry to the database, it could be someone else’s phone number and that phone number is appended to all the other databases.
It has to be identical. The database has accepted that this is allowed. We now have a chain of blocks that contain identical information in all databases distributed everywhere. What’s really interesting is that if someone tries to break into this database and for example change this block to a blue one, the database on the blockchain won’t allow it.
The reason? Each row in this database is based on whether the row in the previous database is identical to it. Any change that alters this relationship would not allow the top row to exist, nor would it break the integrity of the database. It’s a very important quality. Blocks can only be added and never removed. All changes are recorded as new blocks. This characteristic is called immutability or otherwise, a blockchain database is an immutable database. A blockchain database keeps track of changes like a ledger that records financial transactions. For this reason, the blockchain is also called a distributed database or Distributed Ledger. Let’s take a closer look at the example that demonstrates how it transforms possibilities. First, there is no central authority. Power is distributed among the entire network of database users. No person or system can approve or deny changing the phone number in the electronic address book. Because power is decentralized and needs the consensus of all participating computers. As the distributed database knows that I am the only one who can change my phone number. It’s almost hack-proof.
We are able to create these immutable transactions. A hacker would have to change information on hundreds or thousands of computers before getting permission to change the data. This quality that guarantees the integrity of the database creates an inherent reliability. That’s why the blockchain is sometimes described as the trust protocol. When I made the number change, it was accepted and the change was reflected almost instantly. There is a slight delay, but only because blockchain change requests are aligned and processed in order. There are also some mathematical processes needed by some computers that cause small delays. These are the simplified fundamentals of blockchain databases. In short, this new model does not have a centralized database. A blockchain database is installed on every computer that uses it. Any transactions in the database must be validated by the participating members. It’s virtually 100 percent hack-proof. Eliminate central authority and significantly reduce transaction costs. Quickly process complex transactions and more. To better understand the blockchain, you need to know its history, which starts with Bitcoin.
