What is Blockchain Technology? Things You Need to Know

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What is Blockchain? It’s a term almost everyone has heard of. However, very few people truly understand it. In this article, we aim to share useful knowledge about Blockchain, along with an overview of how it works and its applications in various industries.

What is Blockchain Technology?

Blockchain technology, also known as a blockchain, is an advanced database mechanism that allows for transparent information sharing within a business network. A blockchain database stores data in interconnected blocks in a chain.

The stored data is consistent and follows a chronological order. Therefore, you cannot delete or modify the chain without the consensus of the network. Thanks to this technology, you can create things that cannot be edited or altered. This is useful for tracking orders, payments, accounts, and other transactions. The system has built-in mechanisms to prevent unauthorized transaction entries, creating consistency in the overall view of these transactions.

Key Features of Blockchain

Immutability

Immutability is a core characteristic of Blockchain technology. Simply put, immutability means something cannot be changed or altered. No one can interfere with or modify the information because all data is recorded and displayed across the entire network.

Decentralization

Decentralization in Blockchain refers to the transfer of control and decision-making power from a centralized entity—whether an individual, organization, or group—to a distributed network. Decentralized Blockchain networks often utilize transparency to reduce the need for trust among participants. These networks also prevent participants from exercising power or control over each other, thus weakening the network’s functionality.

Consensus

Blockchain technology is a system that establishes rules of consensus among participants. It allows for the recording of transactions. You can only record new transactions when a majority of network participants agree.

The Role of Blockchain in Financial Transactions?

Faced with traditional database technologies, new challenges have arisen in recording and controlling financial transactions. This creates difficulties in ensuring transparency in the recorded data of transactions.

A Case Study to Help You Understand

Imagine selling an asset. After the payment is made, ownership of the asset is transferred to the buyer. At that point, both parties (seller and buyer) can record the monetary transactions that just occurred. Ironically, no source is absolutely reliable.

Because the seller can claim they haven’t received the money, even if they have. Conversely, the buyer can easily claim they’ve transferred the money even if they haven’t paid.

Monitoring and authentication measures are meaningless.

To prevent the cases described above, you would need a trustworthy third party to monitor and authenticate transactions. However, the presence of a third party only complicates the transaction process and creates significant vulnerabilities.

Because if this third party’s database is compromised, both parties (seller and buyer) will suffer losses.

What does Blockchain technology offer?

Blockchain will be a great solution to minimize similar problems. This technology will build a decentralized, anti-counterfeiting system to record transactions. Simply put, when an asset transaction occurs, both the buyer and seller will have a separate ledger created by the Blockchain.

After all transactions are agreed upon by both parties, this system will automatically update their separate ledgers in real time. Therefore, when data is recorded in a separate ledger, no party can interfere or modify it, even if there are discrepancies. The consequence is that previous transactions, if already inaccurate, will lead to subsequent inaccurate results.

Thanks to the useful properties of Blockchain, this technology is applied to many different fields, not just financial transactions. Currently, this technology has also been applied to the creation of digital currencies like Bitcoin.

How do different industries use Blockchain?

After understanding what Blockchain is, we will introduce you to the practical and innovative applications of this technology in a variety of different industries.

Energy Industry

Abroad, energy companies currently mainly use this technology to create energy trading platforms, a peer-to-peer approach that streamlines access to renewable energy.

These energy companies are based on Blockchain, creating a platform for trading electricity for individuals. For homeowners with solar panels, using this platform allows them to sell the electricity they generate to others. The platform’s system operates automatically and through smart meters, generating transactions that are recorded on the Blockchain.

In Vietnam, the application of Blockchain to the energy sector is encouraged to address existing challenges. However, currently, the ambition is to completely replace the existing centralized system with a peer-to-peer electricity trading market as mentioned above.

This will not have a significant impact on the electricity industry in the near future. Instead, not only in Vietnam but also energy companies worldwide should focus on finding ways to apply Blockchain to existing systems to improve electricity trading operations.

Media and Entertainment Industry

This technology is used by companies in the media and entertainment industry to manage copyright data. Copyright verification is crucial for artists to receive fair and transparent royalties. These companies use Blockchain to manage digital rights more efficiently, increasing productivity and reducing copyright processing costs.

Finance Industry

Traditional financial systems, banks, and stock exchanges use Blockchain technology to manage online payments, accounts, and market transactions to increase transparency.

Retail Industry

For companies in the retail sector, it is often used to track the movement of goods as they move from suppliers to buyers.

What are the different types of Blockchain networks?

Currently, there are four main types of decentralized or distributed Blockchain networks:

Private Blockchain Networks

Only a single organization can control private Blockchains. Called the governing Blockchain, this authority determines who can be a member and what privileges they have within the network. Private Blockchains are only partially decentralized, as they have access restrictions.

Public Blockchain Networks

These networks do not require permissions, and everyone can participate. All members of this Blockchain have equal rights to read, edit, and validate the blockchain. The primary use of this type of network is for publicly exchanging and mining cryptocurrencies like Bitcoin and Litecoin.

Hybrid Blockchain Networks

Hybrid Blockchain networks combine elements from both private and public networks. Companies can establish private, permission-based systems alongside a public system. Using this technology, they control and manage access to specific data stored in the blockchain while keeping the rest publicly available.

They use smart contracts so that public members can verify whether private transactions have been completed.

Conglomerate Blockchain Network

A group of organizations controls a conglomerate blockchain network. Pre-selected organizations share responsibility for maintaining and deciding on data access rights. Industries with multiple organizations that share common goals and benefits often prefer conglomerate blockchain networks.

Conclusion

Thank you all for reading this article. We hope that the interesting and useful information we have shared has helped you understand more deeply what blockchain is. Please leave any feedback or suggestions in the comments below for the quickest assistance.

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