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Blockchain Explained

by Team Ohai General Dec 5 2017

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Blockchain Explained

Blockchain is a technology that isn’t exactly new but is gaining momentum and relevance with time. So what’s it all about?

It is a special technology for peer-to-peer transaction platforms that uses decentralized storage to record all transaction data. The first blockchain was developed in the financial sector to serve as the basis for the cryptocurrency “Bitcoin”. More and more new applications have recently been emerging that add to the technology’s core functionality – decentralized storage of transaction data – by integrating mechanisms that allow for the actual transactions to be effected on a decentralized basis. These mechanisms, called “smart contracts”, operate on the basis of individually defined rules (e.g. specifications as to quantity, quality, price) that enable an autonomous matching of distributed providers and their prospective customers.

Blockchain technology changes the way we transact, with the underlying transaction model shifting away from a centralized structure (banks, exchanges, trading platforms, energy companies) towards a decentralized system (end customers, energy consumers). Third party intermediaries, whose services are needed today in most industries, are no longer required in such systems – at least according to the blockchain theory – given that transactions can be initiated and carried out directly “from peer to peer”. This can cut costs and speed up processes. As a result, the entire system becomes more flexible, as many previously manual work tasks are now carried out automatically through smart contracts.

How does it work, though?

When a provider and a customer agree to enter into a transaction, they determine the variables of this transaction by specifying the recipient, the sender and the size of the transaction, among other things. All information relating to an individual transaction is then combined with the details of other transactions made during the same period to create a new block of data. This is comparable to sending emails, which are also split into separate data blocks. Blockchains are different in that this process relates to a single standardized transaction. Each transaction is encrypted and distributed to many individual computers (peer-to-peer), each of which stores the data locally. The members of the network automatically confirm (verify) the transactions stored on the individual computers. of many other network participants. Traditional intermediaries, e.g. a bank, are no longer required under this model, as the other participants in the network act as witnesses to each transaction carried out between a provider and a customer, and as such can afterwards also provide confirmation of the details of a transaction, because all relevant information is distributed to the network and stored locally on the computers of all participants. Individual transactions are combined to form a block. The data contained in each block is verified using algorithms that only produce the correct hash only if the right combination is found. The new block is added at the end of the continuously growing blockchain.

The data stored on each blockchain (across all blocks) is also continuously verified. A provider and a customer agree to a transaction. The transaction is combined with other transactions made during the same period to create a data block. The data block is stored in the decentralized global network in a tamper-proof manner and thus verified The verified block is combined with all other blocks previously verified, thereby creating a (continuously growing) blockchain The transaction is confirmed to both parties 6 Blockchain – an opportunity for energy producers and consumers? The data stored in a block is verified using algorithms, which attach a unique hash to each block. Each such hash is a series of numbers and letters created on the basis of the information stored in the relevant data block. If any piece of information relating to any transaction is subsequently changed as a result of tampering or due to transmission errors, e.g. the exact amount of the transaction, the algorithm runs on the changed block will no longer produce the correct hash and will, therefore, report an error.

In theory, blockchain systems no longer require either intermediaries or a central authority. Conflicts are to be resolved using “swarm” principles, i.e. based on the collective opinion of all parties involved. But it is still difficult today to put such models into practice. In addition, there are a number of legal and regulatory requirements that blockchain projects must also comply with. In any case, the actual technology behind blockchains has not yet reached maturity and is therefore still being developed.

Blockchain technology shows a lot of promise. Other than being used to execute energy supply transactions, it could also provide the basis for metering, billing and clearing processes. Other possible areas of application are in the documentation of ownership, the state of assets (asset management), guarantees of origin, emission allowances and renewable energy certificates. Blockchain technology has the potential to radically change energy as we know it, by starting with individual sectors first but ultimately transforming the entire energy market.

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