Blockchain - Technology: Bitcoin & Co.

What is blockchain?

Blockchain, as the name suggests, is a chain of blocks that store information. Once information is added to a block, it is almost impossible to change it again. When one user creates a block, a copy of the block is spread across the computers of thousands of users.

The so-called miners work in a peer-to-peer (P2P) network by checking and verifying the matching consensus before updating it. If everything matches, the new block of information is added to the database, creating an ordered blockchain. This decentralised distribution sounds unusual at first, but it ensures the security of a blockchain. Cryptic methods are used for security, so the records themselves can be encrypted.

How is a blockchain constructed?

Linking the hashes creates a secured chain of the blockchain.

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Why is blockchain considered particularly secure?

Blockchain pursues certain protection goals, which focus on security. Data stored in the blockchain is secured by the chaining of the hash functions so that data cannot be secretly manipulated. Targeted attacks on central offices are therefore hardly possible.

Basically, the longer the blockchain, the more secure it is against failures and attacks. If it is possible to draw conclusions about real people through analyses, this is at most pseudonymity, since users are only visible with keys. Communication partners are authenticated with regard to their identity within the network to ensure that it is really the person specified.

Where is the connection to Bitcoin?

The concept of the blockchain forms the basis of the cryptocurrency Bitcoin, a decentralized and cryptographically secured payment system. The database consists of ordered and unchangeable entries and resembles a public register.

These registry entries represent transactions where bitcoin values can be overwritten from one address to another, like an account number. Users can see all of the account holder's transactions, but cannot assign the account to a real person. This transparency has the advantage that fraudsters can be quickly detected and excluded from the network. To manage Bitcoins, the user needs a Bitcoin wallet. These can be bought on the Internet, exchanged or distributed as rewards to blockchain users.

By now, the cryptocurrency Bitcoin is already accepted by many companies as a recognized means of payment.

What are the advantages and disadvantages of blockchain technology?

*51% Attack: This is a network attack in which the attacker needs an absolute majority to modify block information. However, this probability is very low, as the effort involves high energy costs and the attacks do not go unnoticed.

Conclusion

Blockchain is of course much more complex and extensive, but its strength lies in its decentralized structure, which enables secure data exchange. It also offers high security against subsequent changes by means of consensus algorithms. The new technology is also still quite far in its infancy, but is often described as one of the next big innovations in the digital economy.

It is an exciting topic for many companies, as it offers new business models. Technical development is advancing in the business sector in particular, but blockchain is also already being used in logistics, retail and the healthcare sector. For example, transports of products can be tracked and better controlled, but also sensitive data can be managed securely.

Berlin has become one of the world's leading centers for blockchain startups.