Understanding Blockchain: History, Principles and How It Works

Understanding Blockchain – Does Matobers know about blockchain? For Matobers, especially Matobers, who is in the world of IT/IT or short for Information and Technology/Information Technology, of course you are no stranger to the term blockchain, right? There is a fact that is quite surprising, it turns out that blockchain itself is quite popular in Indonesia. It turns out that it’s not only popular among IT connoisseurs, blockchain has spread its wings to ordinary or lay people as well.

In short, blockchain is a technology that is the basis for developments in the scope of currency in the form of crypto. Usually exemplified by the most popular forms such as bitcoin, ethereum, and other similar forms of crypto. It should be noted that the function or use of blockchain does not only function as a crypto currency, but can also be used as something useful in various other fields, such as the field of digitalization and technology.

Another brief understanding of blockchain is that blockchain can also be interpreted as a technology that focuses on making the best possible use of a computing technology with the aim of creating a collection of groups or as the name suggests blockchain, a group of blocks that are connected to one another. So it can be concluded that a group of interrelated blocks has various records of a set of transactions and can be used to track the whereabouts of an asset contained in a business network.

Blockchain itself is considered as a transaction in a digital form which of course has an arrangement and is based on the shape of the structure. With this clear structure, the records of each individual or called a block will be related to each other like a chain, which is called a chain. Now, we consider the definition of blockchain above to be incomplete and still in the form of a general understanding.

In this article, we will invite Matobers to find out and learn more about What is blockchain? Apart from that, we will also invite Matobers to learn about the brief history of blockchain, how blockchain works, what blockchain is used for, the advantages of blockchain, the three hopes of blockchain technology, and the differences between blockchain and cryptocurrency. Lots right? Just once so as not to be in charge of providing information.

Understanding Blockchain

Well, Matobers, Blockchain itself is a collection of various data records that are processed or processed by a collection of computers which do not contain any entity or entity at all. A collection of data blocks or data records is given a security and bound together by utilizing the application of the principles of cryptography.

The network contained therein does not have centralized authority or authority. Why is that? That’s because a blockchain contains various records that are shaped like a very large notebook. Even though the ledger can be shared, the contents in the ledger will not change. In addition, all the information contained in the ledger can be seen and accessed by anyone who just looks at it.

That’s why the three principles of blockchain technology include the principle of transparency, that’s because blockchain is transparent. This nature means that everything contained in the blockchain can be seen by other people who have involvement as a form of accountability for the actions of the activities they each carry out.

Besides all of the above, blockchain technology is free of any transaction fees including infrastructure fees. It is with these advantages that the blockchain is dubbed or considered the simplest, smartest and most effective way to convey information from one person to another and so on in a more secure and of course automatic way.

The various blocks listed in it have received verification status from various computers and of course the distribution process is assisted directly by internet support. Various blocks that have been successfully verified by the computer will then be added to the chain and then distributed in a special network. Well, after that a special record will automatically be formed containing the unique history that was formed due to the process earlier.

An example can be illustrated by a situation when Matobers buys a train ticket through an application or a certain train ticket purchasing site. When making transactions, Matobers uses a method of payment using a credit card. So, that’s when the credit card service provider will take action to cut it so that the transaction process runs smoothly and successfully.

The use of blockchain can also cause a drawback, namely the operator of the train is not given access to save costs when processing or processing credit cards. The entire process of ticket sales transactions will be fully transferred to the blockchain. In this process, the only parties involved in the ticket transaction process are prospective passengers and the serving railroad company

In the case of buying a train ticket, the ticket is considered a block. The ticket or block will then undergo a further process, which is added to the ticket blockchain. This can be likened to when there is a monetary transaction process that occurs on the blockchain and is interpreted as a record that is unique, verifiable, and some cannot be verified.

The blockchain contained in the ticket is a form of overall record of all transactions that occur for the purchase of certain train tickets, or maybe for the entire railroad network. The record contains various transaction histories for each ticket that has been sold for all travel records that have been taken before.


Literal Understanding of Blockchain

Blockchain itself is a term that comes from a foreign language which is formed from a combination of two words, namely the word block and the word chain. The two words can be interpreted as a group for the word block and a chain for the word chain. The purpose of giving the name is to describe how the blockchain itself works. The way the blockchain works is to create many blocks that have a relationship with each other with functions to make it easier to process the execution of transactions.

As the nickname given, blockchain is a chain of various blocks arranged sequentially with a system of chaining and distribution simultaneously. In a block composed of a ledger or interpreted as a ledger and below it is followed by the three blockchain components, namely the data itself, the hash, and finally the hash generated from the previous block.

A Brief History of the Blockchain

Quoted from a book entitled Blockchain for Dummies written by Manav Gupta, it is described that initially blockchain was formed and developed to meet a great need for a system that works more effectively, efficiently, cost-effectively, guarantees more, and is proven to be safer to perform tasks such as recap various financial transactions that occur in the future.

The idea of ​​using blockchain itself was formed in 1991. At that time, there were two people who wrote and published a journal entitled Journal of Cryptography: How to Time Stamp a Digital Document, the two people were Stuart Haber and W. Scott Stornetta.

In the beginning, blockchain was used for use in bitcoin and was developed around 2009. Blockchain development was carried out by a Japanese man named Satoshi Nakamoto. In contrast to the money generated by a central bank, which is still in the form of traditional money, the existence of bitcoin is slightly different where bitcoin does not have a central power or authority and does not have a working party to control it.

Rather than relying entirely on central authorities in terms of monitoring, obtaining verification, and approving transaction requests and for processing cash receipts, bitcoin prefers to be activated using a network with peer to peer connections.

Three Principles of Blockchain Technology

Did Matobers know, that blockchain has three origins in its implementation and properties. Following are the three blockchain principles that we will present to Matobers.

– Principles of Decentralization (Decentralization)

It is known that before there were bitcoins and bittorrents, a centralized service had been created which had a simpler idea concept. The idea itself has a core like this, if Matobers has a centralized entity, where Matobers can store all the data that Matobers has. Apart from that, Matobers must be able to interact with these entities. however, keep in mind that only interact with the entity. Why is that? This aims to make it easier for Matobers to get the information Matobers needs.

Matobers can get an idea of ​​this principle by looking at the application of the existing banking system in the world. The bank was given access and permission to store all of Matobers’ money that Matobers saved there. The only way that Matobers can withdraw and pay an outlay to form a transaction is through that bank as well.

– Principle of Transparency (Transparent)

This one principle or concept is the most interesting principle, but most people often misunderstand this one principle. Most people think that blockchain gives them privacy, then some others call it transparency. Why is that?

This is because a person’s identity will automatically be hidden by the blockchain by using cryptographic methods that are very complex. In addition, the data that is loaded is only the public address data that person has.

An example of implementing transparency is when Matobers tries to look up other people’s transaction history, Matobers cannot see their names. Matobers will only be given a random set of letters combined with shapeless block numbers and letters.

The point is that even though Matobers can see the history of transactions made by that person, Matobers still cannot know the real identity of that person.

– The Principle of Immutability (Immortality or Immortality)

In the context of the blockchain, immutability or immortality means that if there is already data that has been inputted or entered into the database, then that data cannot be destroyed, destroyed, let alone deleted. With a principle like this, of course, you have to pay extra attention in entering data into the blockchain.

Why was the principle of immutability or immortality created in the blockchain? That’s because nowadays there are rampant acts of embezzlement of funds that can be removed if there are too many people who know that they cannot change the contents of the financial books and are just playing with company accounts. In this case it ends up using a cryptographic hash function.

In simple terms, a cryptographic hash function is defined by the act of hashing, which means taking an input string of unspecified length and giving output of the same likely length.

How the Blockchain Works

As Matobers knows, the main function of the formation of blockchain is to function as a form that gives permission for digital information to be recorded and distributed or disseminated without having access so that it can be changed, destroyed, deleted, and deleted.

This makes blockchain get the nickname as DLT or short for Distributed Ledger Technology. The working system of the blockchain is to use bitcoin purchases. In the following, we will present the working system of the blockchain.

– The way blockchain works starts with someone buying a number of bitcoins.
– After that there will be a transaction process, the transaction process will be transferred through a computer network that is installed using the peer to peer method which of course is spread throughout the world.
– After that, the computer network then completes an equation that serves to confirm the validity of the transaction.
– After the transaction is confirmed to be a valid transaction, the next process is that the transaction will be grouped together as a block.
– This collection of blocks will then be combined into one and will be recapitulated to become a record that contains a long history of these transactions that are permanent and cannot be changed.
– After that, the transaction is complete.

Because the blockchain makes transactions more secure, decentralized, safe, and durable or permanent which can attract interest from many industries in the world.

Advantages of Blockchains

As Matobers knows, the fact is that blockchain is very popular and is a favorite of various groups of people in the world. In the following, we will present some of the advantages of blockchain that make it a favorite of various people in the world.

1. Guaranteed Data Security Quality

The database in the blockchain is append only, which can only be added and cannot or does not provide access to repair the data. thus it will make it difficult for hackers who want to hack the data in the blockchain.

2. Using More Transparent Systems

As we explained earlier, that blockchain technology provides advantages in the form of effectiveness in storing transactions and their information traces. This is even proven by the existence of security and transparency of the data stored. This is evidenced by the fact that when there is an ongoing transaction process, public access can be seen by all parties without having to go through the login process first.

Unlike systems owned by banks, systems owned by blockchain are different, by utilizing all the technologies that are successfully implemented in blockchain, all data, information and even funds provided by users will not fall into the hands of other people without the knowledge of the users themselves.

3. Much Better Audit Quality

There is an advantage that blockchain has, where users are given access to be able to find out all the history and traces of audit assets owned by these users. This is very helpful in reducing the risk of embezzlement of funds that is currently rife in the business environment.

4. Can Prevent the Possibility of Middleman Fees

The presence of the blockchain will not only directly help eliminate middleman fees in the blink of an eye. Middleman or what is commonly referred to as a broker often adds transaction fees as a form of payment for their services in replacing the role of something. So, this is the advantage of blockchain where all actions or activities from recording history and traces will become more organized, structured, and directed. It also becomes more immutable and durable.

Blockchain Utilization

The use of blockchain technology can be utilized in all fields, especially in the financial sector. This is because blockchain has always been likened to a digital cash book which only has the advantage of being able to be accessed and visited by anyone, anywhere, and at any time in a very easy way without having to ask permission from a financial institution such as a bank.

The existence of a blockchain can make it easier and provide a sense of security because of the transparency principle that we have explained. Where this principle has uses to minimize embezzlement of funds by certain elements.

Blockchain can also be utilized in the financial sector with evidence that in 2018, McKinsey has created a special blockchain opportunity table that can provide an overview of blockchain opportunities for various other fields, such as media, property, telecommunications, medical, agriculture, and many more.

The difference between Blockchain and Cryptocurrency

The difference between the two things above is that cryptocurrency is a system that has a dispersed nature. What does it mean? The meaning of this nature is that this cryptocurrency cannot be controlled by other people or companies.

So that’s the understanding of blockchain that we can present to Matobers. Please note that this blockchain is very broad and has many uses for various fields, especially in the financial sector.