There are certain expressions you MUST know when talking about blockchain. In this article, we introduce 2+2+1 must know words from blockchain and the cryptocurrency market. The first two expressions are closely connected, while the last one by itself is too important to miss.
P2P Network and Decentralization
Peer-to-Peer (P2P) is a network of members communicating straight with each other, without a central entity. The members make desired transactions with each other, following the technology established methods and rules, without the necessity of an intermediator.
Currently, most of our systems are server-based: we need a central entity to perform a transaction with another entity. For example, to pay our friend online, we need to reach out to our bank to make the transfer for us.
Our world right now is very much centralized, where corporations act as an intermediator of our transactions and gain benefits from connecting us. This means that a lot of power, information and profit is collected by these institutions. For example, three very powerful companies today are famous intermediators, profiting from connecting us to other parties.
Google connects us to any information, learning every step of the way about us. Amazon connects us to vendors, while Facebook to our friends. These central organizations, in the end, possess more power and profit than the parties on the network.
Blockchain brings the possibility of building P2P networks, without the necessity of any central entity, connecting peers directly and more efficiently. With blockchain, we can establish decentralized networks, where the majority of the network’s benefits are not gathered in the hand of one company.
Shared ledger and transparency
General ledgers to account for transactions are used by all companies and have been around since the 13th century.
Blockchain brings us the possibility of a distributed ledger, where all members of the ledger can easily access and add to the shared records. This means, that a copy of the ledger exists on all the servers of the network (Network Nodes), and all of these copies are updated with all the changes happening on the network.
The ledger reduces multiple entries by all parties, significant amount of work, and becomes one single source of truth when it comes to transaction history.
As all parties see the same ledger, blockchain technology can establish a new form of transparency, where all network activity can be seen by any participant.
The information on the blockchain network is registered in blocks, and all of these blocks are connected to the previous one. Changes in a block would require, that all of the connected blocks are changed as well. Thus, blockchain makes sure, that the transactions registered cannot be edited, removed or modified, without modifying the whole chain.
By Barbora Juhaszova