Blockchain simply explained – for all those who still can’t quite understand it.

Blockchain is currently on everyone’s lips. And if you are as concerned as I am, the large number of articles on this subject does not help you to really understand how this technology actually works. I needed a very pictorial explanation from a colleague to understand the principle. I would now like to pass on this illustrative description. I will not dwell on the technological details, so I will probably present them in a somewhat shortened and trivial way through the pictorial language.

Blockchain is a chain of transaction blocks

Blockchain means in English translated block chain. And so it is. It’s a string of blocks. These blocks contain transactions from which a code is calculated. Using the example of a cryptocurrency such as bitcoin, this can be outlined as follows:

Block 1: Person A / gives / person B / 100 Bitcoins = code (1)

Block 2: Person B / Gives person C / 50 Bitcoins = Code ((1)2)

Block 3: Person C / Gives Person D / 25 Bitcoins = Code (((1)2)3)

What illustrates the sketch: A new code is generated in each block, which is derived or calculated from the code of the previous block and the new transaction. The transactions are therefore updated continuously. Updating in an analog cash book helped me to understand this as an example: I write in my cash book on the first line the transaction from block 1 and get the „code (1)“ attributed to it. Then on the second line I write „Code (1)“ and the transaction from block 2, resulting in „Code ((1)2)“. On the third line I write „Code ((1)2)“ and the transaction from block 3, which is called „Code ((1)2)3)“. In this way, a new code is generated for each transaction, which is always derived from the transaction blocks beforehand and thus represents a complicated nesting.

Why block chain technology has high potential

The special thing about blockchain is that this cash book is not in the hands of an intermediary, but rather that a large number of such „identical“ cash books (virtual) and stored decentrally.  This has the advantage that manipulation in the cash book is hardly possible any more, because there are many such cash books. In addition, changes in previous blocks are immediately recognizable by the concatenation of the transaction blocks, because the subsequent codes no longer correspond to the original in the other cash books. This means that transactions that are processed with block chain are virtually impossible to falsify due to their decentralized nature and the chaining of previous transactions.

Block chain transactions are therefore safer than those that are controlled by an intermediary (such as a bank) and can only do without such intermediaries. For this reason, the technology is also said to have a high disruptive force. Of course, especially in the financial world, where banks earn their money as (more or less) trusting intermediaries from financial transactions. But also in other sectors such as insurance or contract law, Blockchain can make intermediaries superfluous, as transactions are not limited to the transfer of money. Instead, all imaginable (virtual) transactions can be programmed through a block chain.

The interesting question now is: Where is it economically reasonable to use Blockchain. I hope to have opened up this question to even more intelligent minds by briefly explaining the technology.


Disclosure
This article has been fully translated by the AI of DeepL.com
Dieser Artikel wurde vollständig von der KI von DeepL.com übersetzt


 

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