Blockchain is the backbone of cryptocurrencies and a term that 90% of internet users have crossed over with. You have already heard it 100% somewhere. In this material, we will tell you in simple and understandable words about a term that has already begun to change our lives.

Such attention to him is due to the revolutionary spirit that he brought. In this guide, we will reveal in understandable language the essence and concept of blockchain, its role in the world of cryptocurrencies, and talk about its application in other areas of life. If you want, this is a kind of instruction for dummies.

Description of the term

The term Blockchain itself partially describes its tasks and purpose. The "Block" part is the blocks, the "chain" is the "chain". It turns out that Blockchain is a chain of blocks. And not just a chain. It maintains a strict sequence.

What are these blocks and what is the chain? Blocks are data about transactions, deals and contracts within the system, presented in cryptographic form. Initially, blockchain was (and still is) the backbone of cryptocurrency. All blocks are lined up, that is, they are interconnected. To write a new block, it is necessary to sequentially read information about the old blocks.

All data in the blockchain is accumulated and forms a constantly updated database. It is impossible to delete anything from this database or to replace / replace the block. And it is "unlimited" - an infinite number of transactions can be recorded there. This is one of the main features of the blockchain.

Blockchain can be compared to Torrent. Torrents function in P2P mode (peer to peer - computer network where all participants are equal). When we download a file from a tracker, we do not use a central server or storage. The file is directly downloaded from the same torrent participant like you. If there are no participants in the peer-to-peer network, then you will not be able to download files either. Similarly, in the blockchain. All operations are carried out directly between the subjects. And they are carried out due to the fact that all participants are connected to one network - Blockchain.

This technology was created along with the advent of cryptocurrency. It happened in 2009. Satoshi Nakamoto is considered the public person who created the new virtual currency and Blockchain. However, this personality is mythologized in the world of cryptocurrencies. This is a pseudonym, behind which is one or more people who decided (s) not to disclose their identity. Obviously, they spent thousands of hours building the blockchain.

There are two types of chaining:

• Public Blockchain is an open, supplementary database. This type of blockchain is used in the Bitcoin cryptocurrency. Each participant can write and read data.
• Private or private blockchain has data writing / reading restrictions. Priority nodes can be set. Private Blockchain subspecies is an exclusive blockchain. In such a chain, a group of people is established to handle transactions.

Summing up the interim results, we list key features Blockchain:

• Decentralization- there is no server in the chain. Each participant is a server. It keeps the entire blockchain running;
• Transparency- information about transactions, contracts and so on is stored in the public domain. However, this data cannot be changed;
• Theoretical unlimited- theoretically, the blockchain can be supplemented with records indefinitely. Therefore, it is often compared to a supercomputer;
• Reliability- to write new data, the consensus of the blockchain nodes is required. This allows you to filter transactions and record only legitimate transactions. It is unrealistic to substitute the hash. This blockchain feature is described in the picture below.

How blockchain works: technical details and nuances

We have partially described the principle of operation of the Blockchain above using the example of a monetary transaction. Before looking at the individual technical details, let's dwell on the design of this entire system. This is a sequence of blocks - a chain, not a vicious circle or anything else. Each of the blocks contains an array of specific data. And all the blocks are interconnected. That is, a new "array" can only be created after the old array is closed.

We have come to the main technical point - the formation and closing of blocks. As you can see from the picture above, each link in the chain contains a specific key. Until it is decrypted, the block (link) will not close. How does this decryption take place? In cryptocurrency, mining is responsible for this. Cryptocurrency miners do it using the power of video cards and processors. Those, in turn, perform computational operations, the main purpose of which is to search for a cryptographic signature to a block in the form of a hash. As soon as it is picked up, the block is closed. And the miner receives a reward in the form of a cryptocurrency for this.

The authors of the book "How the technology behind Bitcoin is changing money, business and the world" tried to describe the principle of blockchain operation in words that are understandable to an ordinary person:

“Bitcoin or other cryptocurrency is not stored in any file. Information about transactions is located in a global, publicly available database - Blockchain. It confirms and accepts the operation of this large P2P network. The whole chain is distributed: it is supported by computers all over the world. There is no central server that can be broken or hacked. The blockchain is public and very reliable at the same time, as it uses encrypted data. "

The functioning of the blockchain and its security is ensured by miners and other blockchain participants. They are also called nodes or nodes. There are full nodes. They mean miners and ordinary users of full-fledged wallets. This means that they have the full version of the blockchain on their computer or other device. Its volume is constantly growing. If in 2015 it occupied 35 gigabytes of memory, then in 2017 it was already more than 100. Because of this, the number of full-fledged nodes began to decline. An example of a full-fledged wallet is Bitcoin-Core. The number of full nodes in the Bitcoin blockchain can be viewed on the Bitnodes service.

The more active full nodes in the blockchain, the faster information about transactions is processed. The blockchain seemingly manages to combine the incongruous. It is very reliable and decentralized at the same time. All participants supporting the work of the chain are equal to each other. There is no server or any processing center here. It turns out that the entire blockchain is not built on trusting relationships. For there is no guarantor, at first glance. However, in essence, every blockchain user acts as a guarantor. Decentralization of the network allows the transfer of data between entities representing different countries, jurisdictions simply by agreement between themselves. Directly. Without any intermediaries or regulators. The blockchain is built in such a way that operations cannot be blocked. So decentralization allows each user to feel independent.

Blockchain technology and its features

We mentioned earlier that information on the Blockchain is open to anyone. This means that you can see the history of the transaction and the path it took. Information about the size of the transaction is also public. In this case, the identity of the addressee and the addressee is not disclosed. This is the transparency of the blockchain.

Access to the Blockchain takes place using special keys that guarantee the reliability of the entire network. Every user has it. A key is a collection of cryptographic records. It is absolutely unique, which guarantees the impossibility of data spoofing and hacker attacks. To do this, attackers need to gain access to all computers on the network.

The mechanisms that ensure the viability and reliability of the blockchain are Proof of Work or PoW algorithms, work done, and Proof of Stake or PoS, proof of stake. Thanks to them, consensus is achieved in the blockchain.

The Proof of Work algorithm is used in the Bitcoin blockchain. The mechanism of its work is similar to the reporting in the office. Employees regularly prepare reports for verification to confirm that they have completed a specific task. Without this, they will not receive a salary, since they did not confirm the fact of the work done.

PoW on the blockchain verifies the computations generated during the creation of a new block. The following model is used here: a block is recognized as correct and closed, provided that its hash value is less than the signature sought by the miners. That is, a certain cryptographic cipher indicates the authenticity of the block. And the nodes act as "auditors" who check the authenticity of the block.

Now a block is created in the Bitcoin network within 10 minutes. At this moment, the signature search is performed. And already the check happens instantly. The algorithm is often criticized due to the fact that it requires a lot of processing power. And it is for this reason that a commission is charged when transferring bitcoins between wallets. This is how the payment for the used computing power occurs.

Against this background, a new algorithm was created - Proof of Stake. One of the associates of PoS is the founder of the Ethereum cryptocurrency Vitalik Buterin. According to him, this algorithm is not as resource intensive, and in general, it is cheaper than PoW. The Ethereum cryptocurrency blockchain is making the transition from PoW to PoS.

While computing power comes to the fore in Proof of Work, wallet balance plays a role in Proof of Stake. The implementation and confirmation of transactions will take place without the active participation of computing technology, but thanks to active coins on wallets. Ideally, all owners of the cryptocurrency on the blockchain with PoS will act as investors. The role of mining will recede into the background. However, the algorithm has significant disadvantages- it is possible to carry out duplicate transactions.

A combination of PoS and PoW may be the best algorithm option for blockchain. So far, this mechanism has not been finalized, although it is used in some altcoins: KATZcoin, Blackcoin, Espers.

At this stage of its development, blockchain has both advantages and disadvantages. We have systematized them in a table.

Benefits	disadvantages
Decentralization - network participants are equal and can exchange data directly	Scalability - if the Bitcoin blockchain accounted for the share of Visa transactions, then its size would reach hundreds of terabytes
Reliability - data substitution and hacker attacks are excluded, since special encrypted keys are used	Fraud - the transfer of blockchain data is irreversible. Because of this, the operation cannot be rolled back, even if it was carried out by mistake.
Transparency - all blocks are available for public viewing. You can check the traversed path for any transaction	51% attack - if 51% of the computing power in the Bitcoin blockchain belongs to one device, the integrity will be violated
Versatility - blockchain can be applied not only in the financial sector, but also in other areas of life (law, real estate)

Where blockchain is used

The blockchain emerged alongside the pioneer of all cryptocurrencies, Bitcoin. About him functionality and "responsibilities" we talked about above. The blockchain guarantees transactions and stores all data about them.

Vitalik Buterin and his associates tried to make a qualitative step forward. Blockchain cryptocurrencies are often referred to as second generation. It has its own architectural features.

If the Bitcoin blockchain was originally modeled for financial transactions, then the Ethereum developers managed to implement a peer-to-peer computing network in which programmed algorithms can be executed. They are named or smart contracts. The essence of such contracts is that their execution occurs when certain conditions are met.

Smart contract on the example of a real estate purchase transaction:

Obviously, blockchain technology is relevant not only for cryptocurrency transactions, but for the entire fintech industry as a whole. Anything related to transactions can be supported by the blockchain.

The prospects of Blockchain in the financial sector have been recognized by the largest banks in the world. Back in 2013, the R3 consortium was created. It includes such banks as J.P. Morgan, Goldman Sachs, Santander, ITG and others. The group is testing a decentralized ledger in the banking sector. Individual banks are also investing in blockchain startups that have sprung up regularly over the past few years.

Banks' interest in technology stems from the potential threat cryptocurrencies pose to them. Blockchain will help reduce transaction costs and make them safer. However, the implementation of a fully decentralized protocol in the banking sector will undermine it from the inside.

The practicality of blockchain is undeniable when it comes to data storage and authentication. This decentralized data system has the potential to destroy. The blockchain can record the dates of birth of people, financial transactions, fingerprints. Store information about documents such as diplomas, passports, driver's licenses. In the long term, this can help in the fight against all kinds of fraud.

Examples of blockchain application in various spheres of life, in addition to finance:

• Personal identification. Services in the field of identification and confirmation of access rights work on the basis of blockchain technology. They create a digital equivalent of an identity card. These startups include HYRP, BlockVerify, OneName, and others.
• Copyright. The Ascribe platform uses an augmented registry in which artists, musicians, inventors can store copyrights using encrypted identifiers.
• Voting. For now open register used only in private polls. However, the University of Virginia wants to implement blockchain-based technology. This will reduce the chances of tampering to zero.
• Management and jurisprudence. Blocckhain's potential in this area is endless. Ideally, a system with reporting by representatives of local and state authorities, storage of budget data can be created. There are already projects like Borderless that combine legal and economic services.
• Music. The Bittunes project allows songwriters to retain rights and sell their own work. There are other services aimed at distributing independent music and promoting artists.
• Charity. Blockchain, with its ability to record and store data, is very effective in the field of philanthropy. So the GiveTrack platform provides open information about donations to funds and their costs. It is an effective tool in the fight against charity terrorists.
• The property. The introduction of blockchain into the real estate industry can significantly improve it. The process of buying and selling will speed up, a tool will appear for the reliable storage of data on property rights, and so on. Blockchain technology is used in the service sector, exchange and ordinary trading. Potentially, it can be useful wherever reporting, authentication of something, data storage is needed. The potential is limitless.

Conclusion

Is it realistic to know all the subtleties and capabilities of the blockchain? Not. 99.9% of the world's population does not need this. It is more important to understand the very principle of technology and how it works. And with this will come an assessment of the potential of the blockchain. It may even change your life.

A world without banks, notaries, registrars, regulators - blockchain technology makes you take a fresh look at the exchange of values, documents, money. It removes middlemen and allows users to send sensitive data to each other directly. Some already call it a breakthrough of the 21st century, the greatest invention comparable to the discovery of the Internet, others look with apprehension.

Let's consider the blockchain for dummies in simple words

To explain it on the fingers, the blockchain is often compared to a standard diary or file cabinet, where records are made in chronological order about what has been done - sleeping, eating, washing, walking, borrowing, paying $ 100 for dinner, etc.

So that no outsider can make changes to the diary at his own discretion, all information is encrypted in a special way, and the cipher is well thought out. If the diary is in one copy, anything can happen to it - the house burned down and he, along with it, was stolen, deciphered with a great desire and corrections were made.

Therefore, for reliability, the diary has many copies that are stored in different places. Moreover, when new information is entered into the diary, it is updated on all copies after verification.

This is where the lyrics ended, let's get down to business.

What is blockchain and what is it for

Blockchain comes from the English. blockchain (block chain), which literally means "block chain". In other words, it is a database, which in the literal sense of the word is a continuous chain of blocks and is stored simultaneously on many computers.

New blocks in this chain base are constantly being created. Each newly created block contains a group of recently accumulated and ordered records (transactions), as well as a header.

Transactions are any actions that users perform on the network, whether it is sending funds, registering property rights, buying a game item, etc. When a transaction is formed by a user, it is sent to the so-called mempool, where it waits until it is added to one of the blocks and is confirmed by this.

When the block is formed, it is checked by other participants in the network and then, if everyone agrees, it is connected to the end of the chain. Once this has happened, it is no longer possible to make changes to it. In addition to new information, the block also stores data about previous blocks in encrypted form.

The database is updated on all computers connected to the system, and the miners (validators) begin to form the next block.


Basic principles of blockchain:

• decentralization and distribution;
• safety and security;
• openness and transparency;
• immutability of what has already been written down.

Distributed storage

Any significant information related to a particular area of ​​people's life is stored somewhere. Buying a house or a car, taking out a loan, registering a marriage, transferring money - all data on these transactions are recorded and placed centrally on the servers of government agencies or private companies. This often leads to abuse - if you want, you can climb into any database and make adjustments to it.

Blockchain technology is fundamentally changing this approach. Its essence lies in the fact that the database is stored not in one place, but distributed on thousands, or even tens of thousands, and sometimes even millions of computers scattered around the world.

The likelihood that all of them will be incapacitated is negligible and looks fantastic. And as long as at least one computer on the network is working, the blockchain-based system exists.

Safety

As already mentioned, any centralized database can be hacked and modified. This number will not work with the blockchain. It makes no sense to hack one of the blocks and change the information in it, since all the blocks will have to be broken, and this requires enormous computing power - as we remember, new blocks contain encrypted data about the previous blocks. Therefore, the hacking attempt will certainly be noticed by other network participants.

In addition, a powerful encryption algorithm using hash functions will become an obstacle to falsification, as well as digital signature... The signature uses two keys - public and private. The first is necessary to verify the signature itself, the second is used when creating it and is secret. Keys provide participants with access to certain information.

At first glance, the hash function looks like a sequence of random numbers and letters. It is she who ensures the immutability of all recorded data.

As you can see, the operation of the network is based not on the mythical trust of users to each other, but on strict mathematical calculations.

Openness

The entire database is publicly available, and therefore anyone can view the data of a particular block. For example, one user transferred 10 thousand dollars to another - everyone can find out about it if they want to. The question is, who transferred the money and to whom remains a mystery. This information is available to the direct participants of the exchange, if they themselves do not wish to disclose it.

Interaction without intermediaries

An important point, we constantly need to deal with intermediaries - we carry out financial transactions through banks, payment systems, exchangers, we certify documents with notaries.

There are often situations when money may not reach the addressee, since the bank will not like the transaction and will be interested in it. Forgery of documents is also not uncommon. Thus, although we do not fully trust all kinds of intermediaries, we are forced to use their services, often at our own peril and risk, since there is no alternative.

Blockchain allows direct data exchange. The authenticity of transactions in the system is verified directly by its participants.

Network device

The network is formed by users interested in using this or that type of information. Participants are divided into two types:

• ordinary users;
• block builders or, as they are also called, miners, validators.

Regular users send new transaction records to the network. For example, user X wants to transfer 100 conventional units to user Y ". And miners from these transactions are already forming blocks. Entries are confirmed and entered into the block only if the majority agrees with it. The rest are ignored and not considered valid until they fall into the content of one of the subsequent blocks. Only the owner of the key that opens access to it can use a particular record in the blockchain.

To become a miner, it is enough to allocate the power of your computer to generate new blocks. They are connected to the network using special software.

There are also systems in which, instead of traditional mining using the Proof-of-Work algorithm, other protocols are used, for example, Proof-of-Stake, when validators need to reserve a certain number of cryptocoins on the account to confirm transactions.

System types

Blockchain technology builds different types systems. there is public supranational systems, to which anyone can join and become a simple user or miner. The community itself is in charge of administering such an association.

There are private or the so-called exclusive blockchain networks that are maintained and controlled by their creators. To become a member, you need to complete certain conditions established by the organizers. A well-established certified circle of persons can mine new blocks in such systems.

Areas of blockchain application

As you can see, the blockchain platform is a distributed database for general use, in which there is mostly no centralized supervision over the process. Using the blockchain, you can keep records, store data, and make transactions in any area of ​​life:

• financial operations;
• real estate transactions;
• insurance;
• logistics;
• traffic violations;
• registration of marriages and much more.

The first application of blockchain in practice occurred in 2009, when the bitcoin cryptocurrency was created on its basis. Later, a great variety of such cryptocurrencies appeared for a wide variety of tastes.

Today, states are actively considering ways to introduce blockchain into the voting system in elections. China wants to transfer the work of the National Social Security Fund to blockchain.

This technology will be closely woven into the system of “smart cities”, which are actively being implemented in the PRC.

On the basis of blockchain, startups are already being created in the field of medicine, protection of intellectual property, copyright. Based on the technology, identification systems, web browsers, decentralized cloud storage, and social networks are being developed.

Moreover, a whole virtual nation has already been created - BITNATION, which opens embassies in different countries. Anyone can become its citizen.

The so-called smart contracts, or in other words, which operate on the blockchain and greatly simplify the procedure for signing contracts, are becoming more and more popular. They first appeared on the Ethereum network.

In this case, there is no need to involve a third party in the process, which would act as a guarantor of compliance with the conditions. Here, the program code, based on pre-written conditions, automatically decides what to do with this or that asset. All interested parties to the process can audit the transaction at any time.

In international trade, the technology was first tested in early autumn 2016. Then, on the Wave platform, the British bank Barclays carried out a letter of credit for 100 thousand dollars, ensuring the export of a large consignment of dairy products from Ornua, Ireland to the Seychelles company. Typically, such a transaction takes at least a week, here it took about four hours.

Pros and cons of technology

As you can see, blockchain is a universal technology applicable in different spheres of life, which is its definite plus. In addition to the openness, security and security already discussed above, the blockchain also:

• Reduces transaction costs.
• Reduces the time of transactions from several days, or even weeks, required for data verification and exchange of documents, to several hours.
• Allows organizations, institutions to get rid of unnecessary items of expenditure.

The disadvantages include scalability. Today, the blockchain is unable to provide a huge number of transactions in a short time. For example, MasterCard or Visa payment systems process about 45 thousand transactions per second, while Bitcoin has only 7. The weight of the database, which is stored on the computers of the network, also grows daily.

Do not forget about the load on electrical networks when it comes to networks operating on the basis of the POW algorithm. All these complex calculations make computers consume large amounts of power.

Speaking about the invulnerability of the blockchain, experts also point to the probability of the so-called "51% attack". In other words, if a group of network participants concentrate 51% of the computing power in their hands, they can start to act in their own interests, confirming only beneficial transactions for themselves. However, this will require such powerful resources that it is extremely difficult to put this idea into practice.

Blockchain in Russia and Ukraine

In the Russian Federation, the technology is going to officially legalize and begin to implement in 2019, having adopted by that time the necessary regulatory and legal acts. So far, the country's large banks, together with the Central Bank, have created the Masterchain platform in order to improve the efficiency of the financial system.

An interesting blockchain project operates in Moscow. The platform is called "Active Citizen", and with its help all kinds of votes are held to improve life in the capital.

In Ukraine, the State Land Cadastre has already been partially transferred to the blockchain. In particular, the process of checking the statement is based on this technology. At the second and third stages of the blockchain cadastre, the existing database will be transferred to a distributed ledger, and then they will start hashing all ongoing transactions. The next step is also the State Register of Property Rights to Real Estate.

Save

At its peak, 1 bitcoin is worth more than 1 million rubles. It skyrocketed by December 2017 and then collapsed as well. The word "blockchain" is still surrounded by hysteria: companies that simply wrote it in their name soar in price by 400%. Half of Russians would like to receive a cryptocurrency as a gift for New Year, while bitcoin is called "the largest bubble in the history of mankind." A dozen new terms, some fascinate with innovation, others - frightening, resembling a scam. The Village explains in simple terms why bitcoin and blockchain are not the same, how technology will make the world transparent and who will benefit from it.

What is blockchain in general, on the fingers

Explain to me what is the point of blockchain?

Imagine an amusement park. At the entrance, everyone is given tape recorders, and they are constantly included for recording. You can buy cotton candy and a roller coaster ride here for tokens, but no one gives you them. Suddenly you hear the seller shout: "Vasya gave Oleg four tokens!", "Lesha gave Anna 100 tokens!" - and so on, without stopping. Every time someone exchanges money for tokens or pays with them, the seller yells about it to the whole crowd. The dictaphones of everyone in the park are recording this cry. If you finally want to pay with tokens, the seller will start comparing your dictaphone records with him. This is the key point of the park's safety: you cannot suddenly "invent" a couple of extra tokens for yourself: the scam will quickly open up, because no one’s dictaphone record will have a shout from the seller who would have handed these two tokens to you earlier. Physically, no one at all has the tokens themselves, even the owners of the park: they are not needed as an object, because any visitor has a history of all programs.

The tape of any dictaphone in the crowd with the same screaming recording is the blockchain, a kind of replicated universal diary. If such a park were real, it would take sellers a long time to compare the films with each other. But in the digital version, the blockchain is fast and safe, because the Internet speed is now high, the processors are powerful, and data can be transferred in large volumes. The main benefit of blockchain is decentralization. Each has a duplicate history of all transactions, as it would be if everyone collected paper checks on their account transactions, and then posted them on the Internet. Then neither you, nor the owner of the amusement park, nor the sellers can deceive.

I understood the analogy. How does the real blockchain work?

Any data transmission system requires the actual transmitters themselves and their special language. In analogy with a park, these are voice recorders and magnetic tape. Blockchain is the name of an endless list in which, like on a dictaphone tape, transmissions of information from one person to another are recorded, and each of them owns a copy of the general list. There are many different blockchains. It's like an internal combustion engine. The principle of operation is the same, but the incarnations and the fuel are different: the locomotive runs on a diesel engine, the Formula 1 race cars run on gasoline. The rules for maintaining the blockchain are set by programmers who write the code of the client program (create a dictaphone) through which information will be exchanged. If you want to connect to one of the already working systems, then together with the client program you download the entire blockchain or the "fresh" part of this register of transfers (for example, the blockchain of the bitcoin cryptocurrency (BTC) now weighs more than 170 gigabytes). Each line in it is a record that some information has passed from one addressee to another. The main transfer rule does not change: do you want to send a digital token from A to B? First, you need to prove that someone passed this token to you in the past.

Blockchain- history of all transmissions of information in a preprogrammed system. Moreover, this story is completely duplicated for each participant in the system. Cryptocurrencies are just a special case of blockchain application, where programmers decided that the unit of information for transfer would be a "coin".

Sometimes the blockchain as a whole is called the circle of technologies that are associated with the use of such "distributed ledgers".

Wait, where are my tokens stored on the blockchain?

Nowhere. In the blockchain itself, there are no wallets or accounts, like in a bank: there is no information at all, except for the open history of transfers. You only own the key from your "previous" transaction, which says where your "tokens" came from and how many. The Private key is your only proof of ownership of the tokens mentioned in the blockchain. It is usually a hexadecimal number — a set of random numbers and letters that is generated by a computer (so the “mother’s maiden name” option will not work here). Only by presenting this key at a new deal, you can transfer tokens to another. By the way, in most cryptocurrencies, the entire blockchain can be viewed even manually: Bitcoin, for example, has convenient browser sites.

It is important to understand that if you lose your private key, you will also lose tokens and no one else will be able to use them. It is impossible to "pick" an encrypted private key: it will take more time to iterate through all the options than the Universe exists. That is why the American James Howells from the already famous history has been trying for several years to find in a landfill HDD with keys from 7.5 thousand bitcoins (at the peak rate, it cost about 7 billion rubles). Remark about secrecy: if all transfers can be tracked, this does not mean that all your names and appearances are recorded in the blockchain. The sender and recipient can also be encrypted in the form of random numbers (blockchain addresses), which will also change with each transaction - then the network becomes completely anonymous.

There are no wallets or accounts in the blockchain itself, like in a bank.
You only own the key to the translation, which says where the tokens came from

Why can't the blockchain be hacked? It is publicly available.

Remember the amusement park seller who compares your dictaphone tapes to him for identity? In the digital blockchain, this task is performed by computers of miners (from English mining - extraction of minerals). It is the miners who collect transactions into "blocks", which are then added to the blockchain. To understand how miners are protecting the blockchain, we will have to draw another pictorial analogy. If you find it odd, remember that this is a technology that pays millions of dollars for.

There is constant competition in the crowd of miners connected to the system. Imagine that in some cafe behind the counter there are ten bartenders with their mixers: they compete in who will be the first to make a cocktail of fruits and berries - a smoothie. They do not choose the composition of the smoothie, their task is simply to hold the buttons on the mixers. Whoever was the first to mix fruits and berries to the desired consistency won - he gives the glass to the guest. The skills of the bartender do not play a big role here, it is only important how powerful his mixer is. The guests of the establishment do not want the smoothie recipe to be violated, so the villainous bartender will be the one who adds a new ingredient to the original composition. But he will not be able to do this imperceptibly. First, guests can easily sense that the taste has changed. Secondly, the villain needs to have the most powerful mixer of all and turn the shenanigans faster than any other bartender. And this will be almost impossible if several bartenders decide to join forces to quickly collect one glass of smoothies from several small portions, which each interfere with separately.

Miners- special participants in the blockchain system. Their computers are configured to check the translations of other participants. The check itself is the solution of a simple mathematical problem in a fixed time. In many cryptocurrencies, miners are rewarded for this work in the form of new coins (PoW emission mechanism). But this is not necessary for blockchain! There are also other ways of issuing.

A glass of smoothies is a block in the blockchain. Translations are cherries, grapes and banana pieces. Each transfer has a unique number. When added together, these numbers form the block name. This process of addition is called "hashing", and it is on this process that thousands of miner's computers are connected to the system all over the planet. They mix the numbers of all transactions to get the block hash, that is, the taste of a smoothie. Whoever received the hash sum first adds a new block to the blockchain. Then his work is rechecked by several more miners, and the block is considered "valid", that is, confirmed. If suddenly some miner wants to add a non-existent transfer to the block, the "hash" of his block will be different, just as the taste of the smoothie is different, into which something has been mixed.

This is why everyone loves blockchain so much: the more participants, the higher the security. Together with new transactions, miners also add up the hash sum (that is, the name) of the previous block, so it will not work to falsify an old block either - through this simple trick, all the blocks are interconnected. A caveat should be made here: technically, the process of calculating a hash is a slightly more complex mathematical operation, but we have explained its properties and effect.

Okay, but I still don't understand who is issuing the new tokens?

It depends on the rules of the particular system. Let's not forget that blockchain is just a technology for organizing data. If the tokens recorded in the blockchain play the role of money, the system is called "cryptocurrency". Now, in most cryptocurrencies, new coins automatically appear just at the miners who have written the next block in the blockchain: the system automatically compensates them for the time and electricity costs. This principle is called PoW - proof of work. Miners can also receive a microscopic commission from each transfer. Thanks to this, cryptocurrencies do not need central banks - responsibility and work are separated, and no one can print themselves a little money, because the speed of issuing new tokens that are distributed to miners is fixed in the cryptocurrency code, it cannot be changed. The degree of control here can also be determined only statistically: for example, most bitcoin miners are in China, but there is no such polarization. By the way, in June the Moscow cryptocurrency miner The Village about his work and earnings.

Mining is only one of the emission options, that is, the release of new coins. Such rules are laid down in the source code of bitcoin and several other cryptocurrencies by their creators. In, where other people wrote the code, the role of miners, for example, can be performed by those users who have the most coins on blockchain addresses. That is, those who are "richer" add new blocks to the blockchain. They are called "forgers", and such a system is PoS (proof of stake). They receive a reward for "forging" in proportion to the number of their coins - almost like the interest that drips onto the deposit. You can read about other blockchain protection mechanisms, for example,. There are systems where new "tokens" do not appear at all: they were released limitedly at the start of the system, distributed among the participants, and then only transferred to each other. This is convenient if your blockchain is not a currency, but, for example, a register of land rights or some kind of licenses.

Block- several lines of the blockchain, collected in a group. Each line is a separate translation, which has a number.

Each block has a "name" or "hash". It contains all the translation numbers of this block, as well as the hash of the previous block. Thus, all blocks are linked, and the hash of each block is unique. The process of computing a hash is called "hashing" and is the responsibility of the miners.

Usually a block has a fixed "weight" in megabytes.

Mining pools- combining several miners into a group in order to calculate the hash of one block together, and divide the reward equally.

The information that A transmitted to B through the blockchain can also be a "coin"
and "license", and "signature", and other value of the company

Why blockchain is called a revolution

What does “blockchain is not a currency” mean? And what else can he be?

“Blockchain is to bitcoin what the internet is to email,” explains Financial Times columnist Sally Davis. - This is a big electronic system where you can create applications. Currency is one such application. " The information itself, which A transmitted to B through the blockchain, can be a "coin" (that is, used as currency), or a "signature", and a "license" or some other internal value of the company. It depends on the area in which the technology is being applied. For example, the American service Blinded allows photographers to transfer copyrights to images through the blockchain, and the blockchain of the Austrian startup Ascribe protects the rights of artists to paintings and drawings. In both cases, as an author, you first need to digitize your work and upload it to the system. Suppose a magazine now wants to print your photo. You conclude a deal through the blockchain - cryptocurrency coins are sent to you, and you send a copy of the snapshot. Now the journal will have a private key to the translation, with which it can always prove the legality of the publication. And whoever does not have the key has stolen the picture.

Similarly, in another startup, London-based Everledger, the unit of information is the exact passport of a diamond, which encrypts 40 parameters of the stone. Different owners send this passport to each other via the blockchain when they are resold. Each new owner has a private key to the last shipment of the passport. If someone tries to sell a stolen diamond, the buyer can check it through Everledger by driving a few parameters into the service. If the stone is found on the blockchain, the seller will have to present the private key. Whoever does not have the key has stolen the stone. In September, Everledger had 1.6 million registered gems worldwide. Estonia, for example, decided to implement the new technology on a larger scale: in 2016, Guardtime, commissioned by the Estonian government, began to transfer the medical records of one million of the country's patients to a blockchain-based system.

What's in the blockchain breakthrough?

The most important effect: values ​​within the blockchain are transmitted directly, over any distance - and banks or other "trusted hands" are not needed for this. In the grotesque 2006 film "Hottabych" by Pyotr Tochilin there is scene when an IT specialist makes fun of the extortionist, claiming that he sent him money "by email". In 2017, the joke is no longer relevant: the private key to any cryptographic property can now indeed be sent even by email. “If you are Gazprom, then you have a thousand drivers on your staff who carry things all over Russia,” explains crypto enthusiast Vladimir Smerkis, founder of The Token Fund. - You issue a thousand powers of attorney a day. They need to be signed by Tatyana Mikhailovna, then Nadezhda Petrovna, then San Sanych, although you can simply write it into the corporate blockchain: "CEO Sergei Palych gave the thing to Arsen" - that's the whole document flow. " The chain of transfers will continue further - from Arsen to the new owner of the thing and further, and the blockchain will preserve history.

No powers of attorney can be forged, and this greatly simplifies the state apparatus. For example, cadastral registration in Georgia was already transferred to blockchain last year. How it works, says Vladimir Smerkis: “Let's imagine that a lonely grandmother has been living on Rublevka for ten years. Then she dies, and the grandchildren do not know about it. A certain person comes to the official, gives him a bribe, the official rewrites the grandmother's paper power of attorney - that's it, the land has changed its owner. The Georgian real estate register on the blockchain is not an experiment; more than 100 thousand documents have already been issued through it. If you sold an apartment to your friend on Rustaveli Avenue in Tbilisi, the power of attorney for it will be transferred from one addressee to another directly, and it will be impossible to forge it. " In addition to Georgia, Sweden, Ghana and even Honduras have already modernized the real estate register, and Ukraine has decided to introduce the technology on a large scale, in the entire government.

Why is it said that blockchain will kill bureaucracy, and what are smart contracts?

“When programmers come to power, entire ministries will be replaced with a small script,” - in 2011, this phrase of the user “Habrahabr” spread across the Web. It is now clear that the role of the abstract "script" will be played by the blockchain. People have long dreamed of replacing the paperwork of officials with automation: it will be faster, cheaper, and at the same time the human factor will disappear. In 2013, Russian-Canadian programmer Vitalik Buterin invented Ethereum, and a year later Microsoft, IBM, Lufthansa, the legendary American bank JPMorgan Chase and many others wanted to cooperate with it. Ethereum is another cryptocurrency like bitcoin, only better. In addition to manipulating your coins - "ether" (ETH), the Ethereum code allows you to program transactions that will be "executed" automatically when the conditions specified by the programmer are met. It's like teaching a coin to go to a new owner at the right time. These deals are called “smart contracts,” and they are similar to postponed posts on social media.

For example, if you conclude a smart contract with an insurance company for life insurance, then your relatives will be paid automatically when a certificate of your death appears in the registry office (if the registry office has, for example, a website). There are also market examples on a small scale: the French service Fizzy, through smart contracts, insures flights against delays longer than two hours. The airline simply will not be able not to pay money in the form of cryptocurrency: if all its insurance contacts are recorded in the blockchain, then it is impossible to falsify their conditions. The simplest example of an algorithm in government is an auction. If you teach a smart contract to quickly compare public procurement bids and choose a winner, people-evaluators in tender committees will simply be unnecessary. Unless a smart contract should be drawn up by a “smart lawyer”. The vacancies of such developers on Headhunter are now estimated at 200-400 thousand rubles.

How to implement a blockchain somewhere using tokens and ICOs?

Usually, in order to teach a company or a government agency to work with a new technology, outside specialists are involved. To "implement" the blockchain, programmers need to write the code of a new system individually for each customer's task, be it government procurement, product trade, or presidential elections. Companies that use blockchain can be divided into three groups - depending on how "hysterical" they are implementing it.

Smart contracts- programmable pending transactions, the transfer of which will occur automatically when one of the parties confirms the fulfillment of the conditions. Cryptocurrency smart contracts were invented by Vitalik Buterin, founder of the Ethereum blockchain platform and Ethereum cryptocurrency, the person of 2017 according to Bloomberg.

When voting day comes, the person sends their token
to a special account of Sobchak, Putin or Zyuganov

The former actually use blockchain regularly to transfer or store important corporate data. For this, the company issues a lot of "tokens" - this is a synonym for "token" in the blockchain. Some value is assigned to the token. The powers of attorney in the example of Vladimir Smerkis about Gazprom are also tokens. Another real-world example: tokens in the Dutch Dentacoin system, which users receive every time they leave a review of a private dental clinic about its services. This information is important for both clients and investors of the clinic. Then, with these tokens, you can, for example, pay for an operation in other clinics from the system. Tokens here are part of the infrastructure. According to the same principle, elections can be transferred to the blockchain, says Smerkis, founder of The Token Box: “The simplest thing is that at birth each citizen is given one voting token. When voting day comes, the person (if he is an adult) sends his token to a special account of Sobchak, Putin or Zyuganov. All statistics are open, all transfers can be tracked, it will not be possible to artificially multiply votes. Everything is transparent. "

Anyone can issue their tokens. The already mentioned blockchain platform Ethereum was the first to provide such an opportunity to everyone. Why create small, unreliable blockchains when you can tie your new coins directly to the ancient and huge blockchain of Ether (ETH)? Physically, it happens like this: your token system is created by a programmer "on top" of the ether blockchain - as if you and a friend decided to use colored lighters instead of figures on a chessboard. It means that new system, as it were, an "add-on" needs a sum of several ether coins so that tokens can be transferred to someone else. This “shadow” technical amount of coins is called “gas”. It is like fuel in a gasoline engine, and tokens are the wheels of a car. The minimum gas volume for tokens on Ethereum is one ether. In general, "gas" is called the fuel for any smart contract, because the issuance of tokens is also programmed with their help.

Despite the availability of technology, developers who are able to implement and customize blockchain for other companies can now be counted on one hand. Among the most notable: the American-Georgian BitFury, the already mentioned Guardtime in Estonia, of course, the Ethereum Foundation, as well as the Russian designer of blockchain projects Waves Platform Alexandra Ivanova with her eponymous cryptocurrency. According to the former vice-president of VKontakte, Ilya Perekopsky (founder of Blackmoon Crypto, another Russian platform for tokenization of businesses), a full package of work to create an "exclusive" blockchain costs at least $ 1-3 million.

Token is a unit of information for transmission through the blockchain, which corresponds to some value. Coins in cryptocurrencies are a particular example of a token.

Tokenization- the process of introducing blockchain into any company, business or government. structure. To do this, programmers create a separate blockchain for a specific task of the customer. A kilogram of ore, a stool, a travel ticket, and a vote in an election can become a token, depending on who decides to use the blockchain and what it will be needed for.

Gas- this is the name of the cryptocurrency coins that are needed by the add-on blockchain systems for processing tokens. That is, for companies that have implemented a blockchain using the Ethereum code, ether is fuel, "gas", without which tokens will not be transferred.

Physically, it happens like this: your token system is created by a programmer "on top" of the ether blockchain - as if, instead of figures on a chessboard, you and your friend decided to use colored lighters

Other startups are issuing their tokens in order to raise money from a wide range of people who like a certain innovative idea. In fact, this is a classic crowdfunding, only it is called ICO (Initial Coin Offering). These tokens are also distributed through the blockchain, but they may not participate in the work of the company itself. Typically, one token during the ICO corresponds to a unit of the product that the company promises to release if the business is working to its fullest. On the appointed day, the ICO opens, and people buy a limited number of company tokens for other cryptocurrencies, for example, for bitcoins or ether. Then the depositors will be able to return the money by selling their tokens back to the company, or even make money on the resale - often the tokens increase in price after the opening of trading. One of the most notable ICOs in Russia this spring was held by a startup ZrCoin. The company has raised $ 7 million and is now building a plant for the production of zirconium dioxide in the dysfunctional Magnitogorsk - this is a material in demand in metallurgy. One ZrCoin token was equated to a kilogram of dioxide. By the way, in Russia there are also companies that conduct ICO "turnkey", that is, "to order" for other companies. For example, in July, the co-founder ModernToken Alexander Garkusha said that the entire ICO cycle will cost 310 thousand dollars.

There are less criminal, but equally useless examples of blockchain “implementation” even in large corporations. The already mentioned Waves Platform in 2017 created a ready-made blockchain infrastructure for Burger King in Russia. The corporation has released its own cryptocurrency "whoppercoin" (after the name of the branded burger), but does not use it in any way, says Smerkis: “It's not enough just to create a token, then you need to build an ecosystem and a community in which it will be used. Burger King, on the other hand, which is famous for its flamboyant marketing, simply made the media write news about itself for free. He does not use his cryptocurrency in any way. This is a vivid example of when companies need blockchain just for the hype. " Bloomberg experts agree: "realistically" - that is, for the functioning of blockchains within companies - only every tenth token is used out of all those issued after the 2017 ICO.

ICO- Initial Coin Offering, that is, the initial placement of coins - tokens. During the open ICO, the company issues a limited number of tokens and sells them to everyone. At the same time, the price of one token can both fall and rise if there is a great demand for it or the company is promising. If the ICO is closed, tokens are issued for the internal work of the blockchain in some company (then the blockchain is called "exclusive") and are distributed only to employees.

What Happens to Bitcoin and Cryptocurrencies

Let's go back to cryptocurrencies. What is Bitcoin?

Technically, Bitcoin is simply the first digital currency to use the blockchain. This explains its incredible popularity. Bitcoin was invented by a person or a team under the pseudonym Satoshi Nakamoto, back in 2008 describing the whole principle of operation on nine A4 sheets, and already in 2009, presenting the first working client program. Many investigative journalists are trying to find Satoshi, because, judging by the blockchain, he never spent almost a million of his bitcoins (about 900 billion rubles at the peak rate). Now over 10 million people use bitcoins all over the world. A characteristic difference between bitcoin and many cryptocurrencies is the limitation of its emission. This means that in total the miners will "mine" the final number of bitcoins - 21 million coins. This is programmed in the bitcoin code from the very beginning (see details). Source bitcoin is open - that is, anyone can write their own client program to it. These clients are often called "wallets", although only the same private keys are stored in them (different variants of wallets are described, for example,). Now the market price of bitcoin is hovering around $ 16,000.

What is happening with the bitcoin rate now?

Last week, bitcoin lost about 40% from its highest price in December, when it was worth $ 19,000. This caused panic for many investors. But other traders noticed: this year, the price of bitcoin has already dropped by more than 30% six times, and then started to rise again. Such a temporary drop in the rate of any security is called a "correction". During the correction, the currency is sold by those who bought it cheaply earlier - in order to have time to sell it at a higher price. Therefore, the exchange rate drops sharply, and everything looks like a catastrophe. In fact, the prices of all cryptocurrencies are now growing much faster than the blockchain technology itself is being introduced into the business - this is the main reason for the short-term “inflation” of the market, notes Timur Nigmatullin, financial analyst at Otkritie Broker: “Analysis of most of the global“ bubbles ”of the century shows that they collapse with a pullback of several tens or even hundreds of times, when their capitalization approaches 0.8-3.5 trillion dollars. Now the capitalization of the cryptocurrency market is about 0.65 trillion (the share of bitcoin is 50%), although at the beginning of 2017 it was less than 18 billion. " The current correction will end soon, the analyst sums up: "The market will enter the range in which new sales can start already at the beginning of 2018".

How much is bitcoin really worth? Does it have a ceiling?

The growth limit of any currency is determined by the size of the market in which this currency is popular, explains Nigmatullin: “If we assume that Bitcoin in the future will replace all money in the world and will be used as a single means of payment, the total value of all issued Bitcoin coins (its capitalization. - Ed.) will strive for the size of the entire money supply in the world. Now it is about $ 80 trillion. Bitcoin capitalization is about 270 billion. That is, in this scenario, bitcoin will rise in price by at least two orders of magnitude. Another option is to build on the popularity of bitcoin, for example, on the black market. Its global volume is now $ 1.8 trillion (not only drugs and weapons, but in general everything in the shadows). That is, so far it is still more than the capitalization of bitcoin, and it has a clear growth prospect, ”the analyst concludes. Economist Robert Schiller, who received the Nobel Prize for his assessment of the bubbles, recently said that bitcoin has signs of “inflated”, but they are connected precisely with the passion of the crowd. Schiller did not question the very revolutionary nature of the blockchain. This means that many people, investing in bitcoin, simply realize their belief in the new technology in general, they do not think about the properties of this particular cryptocurrency. In order to trade cryptocurrency, the same licenses and capitals are not required as for the classic stock market, therefore there are so many "nervous" traders among Bitcoin buyers who greatly increase the rate fluctuations up and down.

Bitcoin has "crashed" 30% SIX TIMES in 2017. Each "crash" has been followed by an increase of: 76%, 237%, 183%, 165%, 152%. Bitcoin takes 7 steps forward, 2 steps back, 7 steps forward, 2 steps back. Every 2 steps back is heralded as the end of #bitcoin... Relax! pic.twitter.com/bV5ZFeucTp

Robert Reid (@robertreidmd) December 22, 2017

40% of bitcoins are in the hands of just one thousand people.
They are called "whales" and they all probably know each other.

What problems does Bitcoin have? For example, 40% of his coins are in the hands of just one thousand people, Bloomberg. They are called "whales" and they all probably know each other. This means that, having united, "whales" can strongly influence the price of a cryptocurrency. If you remember that the main Bitcoin mining facilities are located in China, decentralization looks strained. Another unpleasant news: mining itself, that is, the confirmation of bitcoin transactions already takes a lot of energy - the whole country of Ireland now spends less electricity - and this cryptocurrency will require more and more.

Most traders still agree that Bitcoin is a direct competitor to gold. All the gold in the world is now worth approximately $ 6.5 trillion - that's 20 times the current capitalization of bitcoin. They have the same main property - limited resource. The mass of gold on the planet is finite, as is the amount of bitcoins by 2140. Therefore, bitcoin will inevitably rise in price over time - the demand for it increases, while the release of new coins slows down. This effect is called the "deflationary spiral" in the economy.

In the future, Bitcoin will not be very convenient to pay for purchases (as it is now in gold), and it will probably play the role of just a security. American investor and founder of hedge fund Morgan Creek Capital Management Mark Yusko in an interview with Bloomberg News said that in the long term, Bitcoin will cost $ 400,000 per coin. At the same time, Timur Nigmatullin clarifies that the entire cryptocurrency market is likely to grow, but not the share of a specific bitcoin on it: “Several currencies separated from bitcoin at different times, that is, several of its“ forks ”occurred. Some of the wallet owners founded their own cryptocurrency Bitcoin Cash, and then also Bitcoin Gold. From the point of view of the code (that is, the technology itself), they are all objectively better than the original bitcoin: faster, cheaper - but their price still grows more slowly. "

What is a fork? This is scary?

No, a fork is not scary, but you need to understand the physical meaning. Remember the metaphor about miners-bartenders who all together interfere with smoothie mixers in order to get the desired taste - the hash of the block? Then we did not tell what happened to the villain who tried to give the visitor a smoothie with a different recipe. In fact, no one punishes him: a block that has not been confirmed by the blockchain remains, as it were, "on the sidelines." The cryptocurrency client program does not see it, because it is configured to consider only the longest chain of blocks as real. The “villainous” block will never be the freshest, because the villain will not be able to outrun all the other miners.

But what if the renegade miner deliberately wants to create a parallel block, with new parameters? For example, suggesting to include more transactions in it - as if by changing the size of the smoothie glass - or using another, improved encryption?

The division of the blockchain into several branches is called a "fork" (fork - literally "fork"). Fork is provoked artificially if some part of cryptocurrency users wants to radically change its properties. For this, the developers write a new client program. The history of the blockchain up to the date of the fork remains the same, but miners insert all subsequent blocks into a new, independent branch with different properties. Old client the new branch will not be seen, but the new one will work only with it. As a result, old transfers are duplicated, but a new cryptocurrency appears. As if you were given another smoothie in addition to the ordered glass of smoothies, and then the seller took off his apron, said "I am opening my cafe" - and left, beckoning you with him. Typical examples of a fork are the Bitcoin Cash branch on August 1, 2017, and the emergence of Bitcoin Gold on October 24. Crypto media are now claiming that Bitcoin has four more forks planned by the end of December.

What are the dangers of a fork? On the one hand, it does not affect your number of coins in the original cryptocurrency in any way. First, for the first time, they are being traded through cryptocurrency exchanges. The exchange also sets the starting price for them, and no one knows exactly by what principles this price is calculated. In addition, forked currencies with the original currency always have a common history of previous transactions - and hence the number of coins issued. But the owners of these coins may never come for them if they are simply not interested in the new currency. Cryptocurrency exchanges ignore this fact and consider the capitalization of new currencies, taking into account the "inactive" blockchain addresses too.

Fork- splitting the chain of cryptocurrency blocks into two branches with a common history of past transfers, but different parameters of the last block. From the moment of separation, blockchains become independent from each other - a new cryptocurrency appears. To use the breakaway cryptocurrency, you need to install an alternative client program.

Why do we need other cryptocurrencies?

There are a lot of cryptocurrencies - 1,300 names (according to the Coinmarketcap listing). There is technology behind everything, and it is innovation that drives the demand for them - as if carved wooden planks were used as money in your country, and scientists would suddenly come up with a banknote made of ultra-thin plastic, which is also impossible to counterfeit. All cryptocurrencies different way emissions, different speed transaction confirmation, commission, different mining principles (PoW, PoS and others), but all use the blockchain principle - that is, decentralization and multiple copying of history. Currencies born after the fork are also traded on cryptocurrency exchanges along with everyone else. The TechCrunch portal recently published a list of "Top 100 Cryptocurrencies with a description of four words for each" (Russian version is available). We will tell you a little more about several of the main players.

The cryptocurrency of the Ethereum Platform project, Russian-Canadian programmer Vitalik Buterin, appeared in 2015. The second in terms of capitalization after bitcoin, and it is also faster, and the commission is also lower. Smarter - because ether is used like. That is why in one day via ether rather than bitcoin: the majority of ICOs are now being carried out on the Ethereum platform, the most tokens are issued. However, the emission of ether is not limited and new coins are being issued constantly, so the value of one ether does not grow as fast as bitcoin. Its price is influenced by the partnerships that the Ethereum Foundation concludes with large companies, in 2017 there were even Russian Sberbank, VTB and VEB among them.

Litecoin - when Bitcoin ceased to be a “niche toy” in 2013, investors began to look for alternatives to it in a very young cryptocurrency market. Litecoin was invented by the former Google programmer Charles Lee, and for several years it became the "second cryptocurrency", although now it has dropped to sixth place in terms of capitalization. By its properties, Litecoin is faster than Bitcoin - hence its name. Lee recently sold all of his coins, ostensibly to stop influencing the price of the cryptocurrency.

Bitcoin Cash and Bitcoin Gold are the already mentioned bitcoin forks that happened in 2017. Bitcoin Cash is faster because it has increased the block size from 1 to 8 megabytes, and more reliable because it uses slightly different encryption. Bitcoin Gold allows mining only with the help of "home equipment" and technically does not allow mining on an industrial scale: thus, the creators of the new cryptocurrency want to get rid of the influence of China and increase the degree of decentralization.

Ripple is a blockchain platform with a cryptocurrency of the same name for interbank transfers. Since 2014, the development company Ripple Labs. is purposefully working on convenience for banks: among the partners are such large official structures as the National Banks of Abu Dhabi and Australia and the UniCredit Group. Traders pay attention to the fact that Ripple is not a classic "open blockchain for everyone", but corporate development. Due to its current centralization and management priorities, cryptocurrency author Jed McCaleb himself left Ripple Labs. Curiously, during the December market fall, Ripple, on the contrary, rose.

Monero is a promising cryptocurrency, primarily for the black market. Monero is distinguished by its absolute anonymity: you cannot simply view either the amount or the address of the transfers. It is impossible to trace the recipient, although all the security principles of the blockchain are preserved.

Together with cryptocurrencies, tokens of various blockchain projects, such as TRON, IOTA, EOS, Tether, Golem, Waves and many others, are traded on exchanges. Often, after ICO tokens skyrocket in value, leaving conventional cryptocurrencies behind in the overall top 20.

Stop, what other "cryptocurrency exchanges" ?! So someone controls cryptocurrencies after all?

In fact, yes. You, as a consumer, can use the blockchain only if you buy tokens or cryptocurrency for rubles or dollars. Crypto traders call regular money "fiat". The exchange process itself is a "dirty" and primitive procedure that has nothing to do with distributed ledger technology. Cryptocurrency exchanges are a classic intermediary that often does not even have ordinary banking licenses. That is, in order to take advantage of the gifts of decentralization within a specific blockchain system, you still need to trust some unknown person on the Internet, transfer fiat money to him and just wait.

Cryptocurrency exchanges are powerful. In addition to the fact that they determine the starting price of new currencies (that is, they seem to put them on the showcase), any problems with the withdrawal of funds and the service cause sharp jumps in rates. An exchange always has its own owners, one or more blockchain addresses through which payments are made, and an administration. It is with her that new blockchain projects agree to hold an ICO - it's like renting a point on the market where you are going to sell tomatoes. The largest exchanges are the old Californian Poloniex, Hong Kong Bitfinex, South Korean Bithumb, as well as Binance and Bittrex. Basically, the exchange takes place between different cryptocurrencies or with the dollar, euro, yen and South Korean won. Ruble pairs are now available only on the Ukrainian exchange Exmo. There are frequent cases of bankruptcies, for example, when the management of the exchange cannot cope with the outflow of funds, or as a result of a banal hack, as it happened for the second time with the South Korean Youbit quite recently, on December 19 (the exchange was hacked for the first time in the summer, having stolen more than 4 thousand bitcoins).

Electronic payment systems are another type of intermediary that you can come across if you want to buy cryptocurrency. The fact is that many exchanges may not support transfers from specific regional banks or require too much commission. Then traders resort to "fiat gateways" - these are electronic payment systems (like WebMoney or "Yandex.Money") through which you transfer money, as if through a pad. Most of these payment systems like Perfect Money or Payeer are “omnivorous”. They enter into wholesale partnerships with both exchanges and, for example, with real financial pyramids. Listing of all fiat gateways can be

What is blockchain and how big are the possibilities of using it? Many people cannot answer even the first part of this question, let alone tell what types of systems exist, and on what principles blockchain technologies are based. Blockchain can be used not only in the field of cryptocurrencies. What other areas is blockchain used in? What are the pros and cons does it have? What is the meaning of blockchain technology? What principles does it work on? We will talk about all this right now.

Today, the term blockchain is used at least as often as the term cryptocurrency. But even more often they can be heard together. And many people who are not too far from the cryptocurrency market can confirm that blockchain and cryptocurrency have a very close relationship. No digital currency can exist without blockchain technology. As for the possibility of blockchain in terms of existence without cryptocurrency, such an existence is quite real. After all, if you forget about the existence of blockchain technology, cryptocurrency will never be able to claim the role of the phenomenon that it is today. And so, let's move on to considering the blockchain in more detail.

How the technology works

Blockchain is an information base in which data is stored in the form of a continuous chain of blocks, while all data is encrypted using cryptographic methods. And, despite the fact that this method of storing data was tested back in the nineties of the last century, for some reason all these tests turned out to be doomed to fail.

The first to successfully create and implement the technology was Satoshi Nakamoto. It happened in 2008. It is Satoshi who is the author of the article “Bitcoin: A peer-to-peer Electronic cash System”, which describes the essence of the decentralized digital currency Bitcoin. The Bitcoin system is based on blockchain technology. But even then it was clear that it would not be the only one of its kind. So, a little time passed, and tens and even hundreds of other cryptocurrencies began to appear, which in their essence were based on the principles of bitcoin. However, some of these digital coins were significantly different from the first cryptocurrency in the world. But, one way or another, blockchain has always been at their core.

What is the principle of blockchain technology? The fact is that the stored information is sent to every user of the network, which is why the network is called decentralized. The second feature is that each subsequent block necessarily stores the data of the previous block. Due to the presence of this feature, it becomes impossible to make adjustments to already existing data, because in order to change one block, you need to change all subsequent ones.

1. Block header. Its "body" includes data such as the time and date of the block formation, the hash of the current and previous transaction blocks, as well as other necessary information, which is also called service information.
2. Information about new transactions that were carried out in the network during the period of time while the new block was created

And here we are faced with a new concept "hash" for us. A hash is a specific value that we get as a result of transforming the incoming information using a universal algorithm. In any case, the hash consists of a certain number of characters, while it is enough to correct only one sign in the incoming data in order for the entire hash to be completely adjusted.

Suppose, if at the input we have an ordinary number and a list of all numbers, starting from 0 and ending with 1000, in this case, we will get two sets of characters at the output. But what if we accidentally forget to specify 0? In this case, we will get an absolutely unique hash, which has nothing to do with the previous hash. Transactions represent the final result of all transaction hashes that are included in the block. In view of the above, it can be concluded that:

1. Initially, it is necessary to determine the hash of each transaction that was included in the block
2. Then the deals are divided into pairs, the hashes are determined by addition. You should get an even number. In the event that the number of deals is odd, its duplicate will be added to it. One way or another, each transaction will have its own pair.
3. The hashes that were obtained as a result of past actions are again divided into pairs, after which they are added again
4. This process can go on for a very long time, until there is only one hash left, which will be included in the block.

It is due to this hash that the process of monitoring adjustments in the network becomes feasible.

It is important to understand that transactions on the bitcoin blockchain are not content with just moving a certain amount of coins from one user to another. The process itself is more complicated.

Feature of transactions

Imagine that you have a certain amount of bitcoins in your wallet. Let's say there are 6. You see only this number, but for the system itself it is the sum of all the coins that are included in the wallet, that is, you received 2 coins from Lena, 4 coins you received from Andrey. When you transfer 5 btc to Valery, the transaction will contain the following record: we take 4 bitcoins from Andrey, two bitcoins from Lena, transfer 5 bitcoins to Valery, 1 Bitcoin is returned to the sender. Thanks to this feature, we can understand what path a particular coin went through before ending up in the end user's wallet.

Mining and blockchain technology

The word mining is familiar to everyone, but not everyone knows its meaning. It consists in creating new blocks of the network. When will mining cease to exist? The answer is simpler than ever. After all, a lot of miners generate new and new blocks every day. But we remember that the network is decentralized, and therefore none of the miners will have an advantage when looking for new blocks. In order for this consensus to be resolved, a proposal was put forward to use the Proof-of-Work consensus algorithm.

The new block adds nodes to the network that were able to complete the task faster than the others. At the same time, other nodes can always check the correctness of the task. Thanks to this, the formulated task was to select a certain number that could be added to an already existing block so that a new hash was obtained, which at the beginning will have a certain number of zeros. It is very difficult to accomplish such a task, and it will require considerable computing power. But it is quite easy to check the correctness of the solution to the problem. How difficult the task will be will directly depend on the total capacity of the network. There is already a difficulty check in the bitcoin protocol, which is programmed there. It is carried out after the next 2016 blocks have been found, every two weeks.

In order for miners to be interested in finding blocks and thereby supporting the entire network, a reward for finding blocks was established. The node that found a solution to the problem and helped create a new block received 50 bitcoins. But this was the case before, because the creator provided for the option of halving the reward every 210,000 blocks, therefore, today this reward is 12.5 bitcoins per block. In addition, miners receive additional funds for including a transaction in a block. Each of the miners wanted to get as much profit as possible, so they focused on adding transactions with maximum commissions to the block.

Yes, the task of finding new blocks seems very difficult. However, there are situations when two blocks at once could solve the problem at almost the same time, then the chain splits. A certain number of nodes selects the first node for themselves, and another - the second. Then we get a situation in which there are two parallel chains with valid blocks in the network. However, over time, one of the chains becomes longer and the other shorter, after which the second is rejected by the network. Most often this happens on the fifth block after the division. That is why, in order for a transaction to be considered complete, it is necessary that the network finds 6 blocks, then the money will be transferred from one wallet to another, and changes will occur on the balance of the wallets.

However, mining does not always bring profit to network participants. In order to effectively mine bitcoins, you need to purchase special equipment and configure it correctly. Therefore, all the risks associated with mining are borne by the user.

System types

The classification of the blockchain according to certain types is more formal, because distinctive features here they can be traced exclusively in the options for accessing registry information by certain users, therefore we divide the blockchain into the following categories:

• Distributed public open registry. Transactions are not controlled, while all users are able to take part in the coordination of actions, and each participant can view all the information stored there
• Public and private distributed ledger. Here, the actions are confirmed and agreed by the network nodes that have the necessary permissions for this.
• Distributed private closed ledger. Any process is under the full control of one centralized body

To classify any blockchain as a specific type, you need to do just a couple of very simple steps. To do this, it is important to understand which users have the right to view transactions, who can create new records, and who depends on keeping the entire network up and running.

Blockchain application example

Up to this point, we have considered the blockchain as the basis for the information stored there. However, not all users are aware of the fact that the blockchain can also execute different programs. You don't have to look far for examples - these are smart contracts that are at the heart of the Ethereum blockchain. How do smart contracts work, what is their essence? Let's consider a concrete example:

You have a truck and you plan to rent it so that the transport does not stand idle. For this, you want to receive $ 1000 per month, while receiving half in the form of an advance payment. Without smart contracts, the further development of the situation is as follows:

You go to a lawyer in order to draw up a lease agreement, find a person who wants to rent your vehicle, and also require a certificate from him, which will indicate that he has $ 3,000 in his account as insurance in that case if it causes damage to the vehicle.

The renter transfers the prepayment to your account, you give the car to him. However, a month passes and he refuses to return your vehicle to you. You also cannot get money for the rent from it, while you also learn that the car got into an accident and is now seriously damaged. To resolve this issue, you turn to a lawyer and submit an application to the court.

Thus, we will have to go through a huge number of intermediaries, including a lawyer, attorney, banks, and so on. Smart contracts allow you to resolve the issue without their participation. To do this, you just need to compose special program and indicate the following data in it:

1. The renter transfers $ 500 to the vehicle owner's wallet
2. The vehicle is handed over to the renter. If this does not happen, the money is returned back to his wallet.
3. A month passes, and another $ 500 is automatically debited from the renter's account in favor of the vehicle owner.
4. If the renter causes damage to the vehicle, the insurance amount of $ 3,000 will be deducted from it.

This is what a smart contract is. Now all that remains is to add it to the blockchain, and then wait until the conditions are met. As soon as the time for the execution of the contract expires, it will be automatically executed, and the result will depend on what conditions were fulfilled. But a natural and logical question arises: how can you prove that the property has been damaged, because the program will not see it? In order to prove the damage to property, the Ethereum platform provides a dapps application that uses actuators and sensors in order to guarantee the exchange of data between the environment and the blockchain.

Areas of use of the blockchain

Having analyzed all of the above information, let's list those areas of use of the technology that are at the heart of the blockchain. On the this moment it is used in such areas:

1. Copyright protection. Thanks to a special startup Monegraph or Ascribe, authors can quickly and easily secure the right to unique content by setting special conditions and a sequence of payments for the use of the product of their intellectual work.
2. Transportation. La Zooz service makes it possible to offer transportation services directly to customers, or, on the contrary, to find a person who will deliver your cargo to any city
3. Identification. UniquelD Wallet and Civic are just a few interesting services, thanks to which you can create electronic documents using the blockchain, protected from the possibility of forgery. There are already rumors that such documents can replace traditional identity cards.
4. Huge databases with information, access to which has a huge number of participants, each of whom is a potential fraudster. In this case, blockchain technologies are used in order to protect databases from possible fraudulent activities. An example of such a base is a land registry or a charitable foundation.
5. The world of gambling. Online bookmaker Augur invites its clients to place bets on sports and be completely calm about the timely payment of winnings in case of victory.

This is only a part of the areas in which blockchain technologies are actively used. But if you think about it, today we can find very few areas of activity in which we would not use the services of intermediaries. All these services are not free, and, moreover, lead to unnecessary waste of time. Thanks to smart contracts, and blockchain technology in particular, we get the opportunity to get rid of intermediaries, and hence the waste of time, money and energy. However, blockchain has both its pros and cons. It is due to these very disadvantages that the blockchain still cannot completely become a part of our modern life, making it easier and more convenient.

Advantages and disadvantages

We can list the obvious advantages of blockchain technologies:

1. Decentralization. Each user of the network has absolutely identical rights, and there are no advantages over other users. They can communicate with each other directly without resorting to intermediaries.
2. Reliability. It is very difficult to correct any piece of information that is stored on the blockchain. This will require incredible computing power. An even higher level of security is guaranteed by encryption methods. All this makes any attempts at fraud meaningless, since the attackers themselves will receive significantly less than the resources that they will have to spend in order to achieve their goal.
3. Exceptional transparency. Any user of the network has access to information that is stored in the blockchain
4. The data transfer rate is high. Due to the use of the capabilities of blockchain technology, transactions are carried out in seconds, while the user does not bear any additional commissions and costs. Especially when compared with the classical methods of making transfers
5. Versatility. This technology is so promising that every day a new sphere of its use is added, while the largest structures and corporations, including state ones, take part in the development of blockchain technologies.

However, this technology did not remain without drawbacks:

1. The need to use a huge amount of free disk space. The Bitcoin blockchain alone weighs 100 gigabytes, while transactions are constantly being added, which further increases the requirements for free hard disk space
2. The legal status of the blockchain has not yet been determined. Both cryptocurrency and blockchain have only been officially recognized in selected countries. The rest took a wait-and-see attitude, and are watching how blockchain technologies will develop in the future, slowly giving official permission for their use.
3. Irreversibility. If fraudsters steal the user's money, or he mistakenly transfers his funds to another user, he will no longer be able to return them.
4. Scalability. The more users, the longer the delays in transactions, and the higher the commission. Many developers have faced this problem, however, to their credit, it is worth noting that they do not sit idly by, but constantly introduce new technologies that can eliminate these minus.

Conclusion

In this article, we examined the principle of operation of blockchain technology, the peculiarity of transactions, the mining process, the main types of systems, and, using a specific example, we analyzed the use of blockchain technologies. We were also able to highlight the advantages and disadvantages of blockchain technology. It is very important to understand that the development of blockchain technology will make a major breakthrough in many areas, but at the same time it also has its drawbacks. Many opponents of this technology accuse it that, like Bitcoin, it is nothing more than an ordinary “bubble”, and this bubble may burst in the very near future. However, most experts agree that these technologies can seriously change our world, and for the better. We have only one thing left - to wait for what will actually happen.

Hello dear readers of the blog site. What is blockchain? Many (and me at first) immediately have association with bitcoins(or cryptocurrency in its general sense). On the one hand, these associations are correct, but on the other, they are not. Why is that? Let's figure it out.

This is partly due to the fact that the most popular service in the world designed for - this is where the bitcoins are stored in tens of millions of users, only strengthens this connection.

First, let's go over the etymology of this word. It is derived from the English BlockChain, which means "block chain". But this does not tell us much - just the name of the technology. However, we used the same keyword, which should explain everything.

What is BlockChain and what is the essence of this technology?

But virtual money is only one of many use cases, although it very successfully demonstrates the capabilities of this technology (there have not yet been cases of hacking or theft of bitcoins). Thanks to such an infallible reputation, blockchains predict a great future in other areas of human life, which are as critical in security issues as money circulation (information storage, transparent elections, etc.).

Probably, you already have a kind of confusion in your head - how can you connect electronic money and elections? But here everything is easy to explain. Blockchain is in fact, just distributed and perfectly protected from hacking database... The trick is how this whole thing is organized.

True, if you go into details, it will turn out tedious, and therefore I will try to convey the essence in simple words and concepts. By the way, the girl from the following video will help me with this, which clearly illustrates the process using blockchain to create cryptocurrency and not only:

Are you probably familiar with such technology as BitTorrent (at least indirectly)? How is it remarkable (besides the fact that most of the exchange is now taking place on its principles, including those with copyright infringement)? And the fact that the data in it is stored in a distributed manner - there is no central server, but everything works fine (quickly and reliably).

The advantages of blockchain

So, the block chain is somewhat similar to it (distributed structure and popularity), but it also has a number of other advantages:

1. There is no central server here either - the entire database is distributed among the participants, which means that it is almost impossible to hack it (other copies will immediately reject unauthorized changes made in one or a number of copies - more than half of all users of this system need to be broken).
2. Each of the users will have a complete copy of the database (containing the entire chain of transactions) in encrypted form. Copies are synchronized, (this is a decision-making algorithm for a conflicting version of the blockchain).
3. Anyone can track any transaction (data operation) - the system is completely transparent (how do you think the media knew the exact amount of bitcoins listed to the owners of the recently sensational viruses?). This alone is worth it!

Information is added to the database built using blockchain technology as new blocks... Moreover, the addition is coordinated with other network users. If we take bitcoin, then a new unit of this is through resource-intensive calculations (in fact, enumerating numbers and calculating a hash for them in order to fit into a predetermined template).

So, the mined new unit of bitcoin (in fact, a new block of information) checked by other members of the system(the hash is recalculated) and only after that a new block is added to all databases of all users of the system.

4. All illegal attempts to make changes to the blockchain-based database (add new blocks, assign them to oneself, etc.) are suppressed by comparing them with copies of the databases stored by other users of the system. Hacking a system is very difficult due to decentralization and multiple copying of stored information. It is similar to DNA in human cells - there are many of them, they carry the entire completeness of information and easily cope with failures in individual copies.

Analogies and an example of using Block Chain to create a cryptocurrency

If the above description has not clarified your heads about what BlockChain is, then I'll try to explain with an example with simple associations.

Imagine a cloud storage available to everyone in full indiscriminately (or its outdated analogue - FTP server with files in the public domain), where there are thousands of folders with files. On it you can view everything that is currently uploaded and know where which file is located, who uploaded it and who downloaded it. But ... You cannot download everything yourself, but only what you have the right to. Likewise, it will be possible to upload files only after fulfilling the conditions specified by the system.

Other an example from the realm of money, which will be closer to bitcoin... Imagine that there are no individual wallets in the electronic money system (the data of which is available only to the owner of the wallet and the system's employees), but there is only one wallet, but with statistics completely open to everyone. You can see that Vasya transferred so much money to Petya, and he transferred so much to him. But you cannot interfere with the exchange process or steal something.

You can only receive money intended exclusively for you. They are tied to special addresses, between which the transaction (transfer) takes place. The transfer is confirmed by a secret key (signed by it) compatible with this address (in fact, this is an analogue of a login and password). Data that you have transferred money is sent to all copies of the database. Money is considered to be transferred when the records of their sending and receiving are verified.

The process is described in more detail at the end of this article, but for now I give the floor to a young man who tells a very in simple words about a complex block chain and implementation of cryptocurrencies based on it.

Looks very easy, doesn't it?

Is BlockChain our future?

Now a technology called blockchain is undergoing a fairly successful test as a tool for virtual money, such as Bitcoin and other cryptocurrencies. Actually, this was the beginning of her triumphal procession, but it is unlikely that it will end there.

Blockchain is not the same as Bitcoin

As conceived, cryptocurrency is not even money, but a complete analogue of gold in the virtual world - their number is limited (calculated for many years to come and the amount of "mined" is regulated by increasing / decreasing the complexity of the mining process), but you can get them (for example, c) or, or by mining (in a mine, which can be your computer or a specially assembled powerful system).

But Bitcoin itself is quite a controversial thing. It appeared in 2009 and since then has grown a thousandfold and continues to grow to this day (even at a faster pace).

Doesn't it look a lot like a bubble? Will it burst? Very likely. In addition, there is an ambiguous attitude towards the state's cryptocurrency.

But biktcoin is just a product created on the principles of BlockChain, and all its shortcomings have nothing to do with the technology itself. Cryptocurrency is essentially a blockchain testing ground and from a technical point of view, everything is going just fine. And here the further fate of bitcoin is not at all important, because it is just a "trial balloon".

On the basis of BlockChain, you can easily create another cryptocurrency, for example, fully secured and legalized at the state level. Will it be? We'll see, but very likely. The thing is convenient and not only due to the technical features described above.

Why is everyone talking about this technology now?

Let's take a look at the benefits that blockchain technology will bring to our lives:

1. “A violinist is not needed” - remember this phrase from the legendary film? So, it is very applicable here. When using this technology, there will be no need to involve a "third party" when making a deal, because the system, as I said, is completely transparent to everyone. Thus, overhead costs and the timing of transactions (transactions, i.e. operations with data) can be significantly reduced.
2. Blockchain is suitable for those systems where there is a risk of fraud and information security. In total, a lot of money is being spent now. Indeed, in addition to transparency, the technology has incomparable security and safety of use by all parties. Moreover, there is protection against fraud (and "keeping in check") on the part of the system organizer due to decentralization (as in BitTorrent - technically there is no way to prevent downloading).

Therefore, now they are active experiments to implement BlockChain, for example, in the electoral process. This is because transparency, security and safety are very important. Including from fraud on the part of those in power, the spiteful and other mind-builders. And then no further talk about interference in the elections (a priori). Beauty.

Also, this technology can be remarkably adapted for maintaining various cadastres, medical bases, legal bases, any logistics, as well as for banking operations (this is certainly "the doctor ordered" - costs and transit time will be reduced significantly).

The whole question is that a strong-willed decision is made (many are not satisfied with the impossibility of "imperceptibly" intervening in the operation of the system after its implementation), and all this to implement and apply the blockchain in practice will be a secondary matter (fortunately, bitcoin gave an excellent base).

Problems of implementing BlockChain in life

1. For example, to maintain a high level of security, the system needs constant complex calculations, which can only be done with a very large resource base. In Bitcoin, this problem was solved simply - a commission was assigned to those who provide their resources (computing power of computers or specially assembled systems - mining farms) for this purpose (based on this principle, the main way of earning bitcoins is built - mining).
2. It is also extremely important for the security of the entire system that these resources are distributed and not under the control of some group (for example, united by collusion), which can use the power concentrated in the hands for various bad manipulations.
3. All this can deprive someone of work or profit (various intermediaries), and therefore they put a spoke in the wheel even at the initial (most difficult) stage of introducing technology into life.

Blockchain on the example of Bitcoin

BlockChain is just a simple, singly linked list of blocks with information about transactions. Each new block changes the state of the entire distributed database. This means that if something is changed (with intent), then the hashes of the next blocks will change and the replaced piece will not replace the old one.

The universally accepted measure of integrity. For any number, you can calculate the hash (according to a certain formula), but it is impossible to recover the number from the hash, which means that a fake in such a database becomes impossible.

Now real an example of how BlockChain works in the bitcoin system... Further thesis:

1. Transactions in this system are signed (considered valid) in batches (i.e. blocks).
2. The periodicity of the appearance (addition) of new blocks is laid down in the distributed algorithm of the system: in order to sign one block (to issue a new currency), you need to find the required hash (by brute force, because it is impossible to recover the number from the hash a priori and it remains only to calculate the hash without end for numbers taken at random until you accidentally run into the desired hash variant).
3. In this case, the complexity of the hash search is set algorithmically, depending on the tasks of the system (the complexity of the template in which the hash must fit is changed). In Bitcoin, the frequency of mining a new unit (the appearance of a new block) is approximately ten minutes. Accordingly, the greater the power of the miner's system, the higher the likelihood that he will add the next block to the system and receive a reward for this.
4. Clients of the system can generate at least a million transactions (transfers) per second, but the network of nodes will accept them only from the moment the next block is signed (production of the next unit).
5. Moreover, the transaction will be considered unconfirmed until several new blocks appear (generation of monetary units), to protect against a fork (proliferated cryptocurrency units on the "side branches of the block chain" that appeared, for example, in local network but then rejected by the main chain of blocks).
6. In order to avoid its uncontrolled growth, the size of the transaction database is compressed (in fact, cut) in a special way due to “checkpoints”. Consensus algorithms periodically confirm the so-called "pivot" block, before which you can not store the block chain. Such control blocks are periodically created (marked). Otherwise, the bitcoin base would be overwhelming.

I want to emphasize that cryptocurrency is not a thing in itself... In any case, bitcoins are quite freely convertible currency.

For their quick exchange for rubles, dollars or other electronic money, you can use the services of online exchangers, for example, these:

And for a more subtle game on the courses and additional earnings, you can advise crypto exchanges:

This is how the great and terrible blockchain looks like, if you try to describe it in more or less simple language. Although words have to be used not entirely simple, but what to do - technology 🙂

Good luck to you! See you soon on the pages of the blog site

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