In addition to digitization, IoT and Industry 4.0, Blockchain is currently one of the topics hotly debated in the industry. Often Blockchain is mistakenly equated with bitcoins. Our glossary explains the most important terms about Blockchain.
The blockchain is currently on everyone’s lips as a technical platform for digital innovations. It is a cross-section technology for transparent and audit-proof transactions that do not require a central instance. We explain the most important terms around Blockchain in alphabetical order:
A blockchain is a database that is distributed over a network. So all transactions are stored in many different places at the same time. Its integrity is ensured by storing hash values of the previous record. It was created as a technical basis for cryptocurrencies such as Bitcoin. There are now many advances in the original Blockchain technology. In addition to cryptocurrencies, these enable numerous applications in the area of license management, insurance, logistics or ID management. For many experts, the strength of the blockchain lies in simple transactions that the blockchain network validates-for example, in computationally intensive processes using proof-of-work. The majority of computing power decides which version of the blockchain is correct. This protects them from manipulation and trusted intermediaries would no longer be required to complete a transaction.
The basis of the blockchain is a distributed ledger distributed to all nodes of the network. That is, all data is shared between the participants in a peer-to-peer network. All participants in this network have the same rights and the same information and therefore the same conditions to participate in the system and to add new information. Each node saves the entire information stock. This complete redundancy protects the system against unilateral power, failure and manipulation. The system manages itself and could simplify processes in banks, exchanges and many other industries.
The consensus procedure is the crucial building block to protect the blockchain from manipulation. It prevents a participant from using a value several times – for example, transfers an amount several times even though it exists only once. The consensus process solves this “double-spending problem”: Only when the majority of the connected nodes agree on the creation of a specific new block will it be validated and appended to the previously created blocks.
All transactions are stored in blocks that chain together – like a steadily growing but interconnected stack of post-its. The miners, the participants in the network, create new blocks by grouping and validating multiple transactions in computationally intensive steps. In this so-called mining, each new block is given a hash value, so provided a kind of fingerprint of the previous block and then attached to this. The blocks also contain a timestamp and a nonce, a random string. Blockchain systems use compute-intensive proof-of-work methods, for example, to form the hash value of the current block for the next block. Since each newly created block is attached to it by means of the hash value of the previous block, a linear, chronological concatenation results.
Each computer can become a node and thus a full part of a blockchain network. Because the database itself, so the blockchain, is distributed to many so-called nodes (or clients), each of which stores the entire blockchain. The nodes receive and check each transaction with the appropriate software and send it on. The software contacts other nodes to collect or submit an info and is itself a building block of the network. Anyone can run a node, because the different nodes do not have to trust each other to ensure consistent data.
Instead of trusting in a central instance, a proof-of-work is required within the blockchain, which is resource-intensive to provide. In this process, new blocks are created in compute-intensive work steps whose correctness is easy to check by the other participants. Speed is crucial: the first person to calculate a new block will receive a reward. The new block is only accepted by the remainder of the network if the majority of the computing power in the network confirms the result. At the same time, this is a mechanism of trust, because in the network no one expects faster than the entire network. A fraudulent participant would have to be faster than everyone else and control more than 50 percent of the computing power, which is impossible because the individual participants or nodes do not fundamentally and trust each other. In addition to the proof-of-work process, there are other procedures such as Proof-of-stake or proof-of-burn .
The Blockchain can be used to create simple transactions as well as “smart contracts”. A smart contract is a program that depicts a contract or technically supports the execution of a contract. Smart contracts are not really smart, but they can automatically perform certain actions when predefined conditions occur, allowing for contract execution without human intervention. Thus, contractors can specify in advance that will be paid in the rain on a given day and place a certain amount of money – this would be, for example, an application in the form of a bad weather insurance for filming.
Smart contracts also serve as the basis for more complex applications that no longer require human intervention. This is how Decentralized Autonomous Organizations (DAOs), block-based, autonomous and fully digital companies are created. Actions are also monitored and carried out without any human judgment but purely on the basis of algorithms. Such applications can be designed, for example, with the Ethereum platform . This integrated programming language blockchain provides developers in an open platform with the tools to build smart contracts themselves and use them in a blockchain.
Experts from the professor to the practitioner gathered at the Computerwoche editorial office in early February to dissect the myth Blockchain.
Professor Franz Nees, Karlsruhe University of Applied Sciences Technology and Business: “Is it about new value creation models – or ‘just’ more efficiency?”
“The good thing about the blockchain hype is that we question existing paradigms,” says Olaf Stöwer, Head of Operations at Faizod, a Dresden-based company.
Dr. Robert Bosch, Partner at Bearingpoint: “Many market participants are taming the horse from behind, with the motto: ‘We have a new technology, what can we do with it now?'”
Professor Rainhard Z. Bengez, Senior Manager at Capgemini Consulting: “We are trying to commercialize mistrust.”
Raimund Gross, Innovation Manager Blockchain at SAP: “We move away from centralized systems to the decentralized. This requires new thinking and acting in networks. That’s hard for many. ”
Andrea Martin, Chief Technology Officer at IBM: “We are only interested in use cases.”
Burkhard Blechschmidt, Cognizant’s CIO Advisory: “It’s an ingenious combination of some long known technologies and mathematical models.”
How Blockchain could change the German economy, has the eco – federation of the Internet economy registered association – in the study “the Blockchain in the German middle class”.
Original article and pictures take digitalbodha.com site
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