TL;DR:

1. Blockchain is a technology that supports the DeFi movement
2. It is a technology that is related to data transactions processing and storage that is often compared to traditional databases

Blockchain Technology, created by Satoshi Nakamoto, is the technology that is supporting the entire DeFi movement. If you haven’t read my article on DeFi you can do so here: https://www.publish0x.com/leroi/2721-welcome-to-defi-xzqgkvm?a=pnel24wgbK

How It Works?

Traditionally, the internet operates on a simple principle: centralized databases housed on central servers. Think Google, where all your data resides snugly in their vast database. However, blockchain disrupts this paradigm by introducing a decentralized approach to data transactions and storage.

In the blockchain world, data is organized into blocks, each resembling a digital ledger of transactions. These blocks are not stored in a single, centralized server but are instead distributed across a network of computers, forming a chain of interconnected blocks, hence the name "blockchain." This chain of blocks is akin to an immutable accounting ledger, where chronological order is paramount, and any changes result in the addition of new blocks rather than overwriting existing ones.

The core philosophy of blockchain is encapsulated in what's known as the trilemma, representing the delicate balance between security, scalability, and decentralization.

Is It Safe?

Security stands as the bedrock of blockchain technology. In a distributed ledger system, the authenticity of each transaction is validated through various mechanisms, namely:

• Proof-of-Work (PoW): The most archaic yet foundational method is Proof of Work (PoW), popularized by Bitcoin. Miners employ computational power to solve mathematical puzzles, confirming the latest block of transactions. This verification process, known as consensus, ensures that only accurate data is added to the blockchain.
• Proof-of-Stake (PoS): On the other hand, Proof of Stake (PoS) emerges as a more energy-efficient alternative. In PoS, validators are chosen to create a new block based on the amount of cryptocurrency they hold and are willing to "stake" as collateral. This shift towards energy efficiency addresses one of the trilemma's challenges while still upholding the security of the blockchain.
• Proof of Authority (PoA): A lesser-known but equally valid validation method is Proof of Authority (PoA). In this simplified approach, predetermined individuals or entities, known as authorities, validate transactions. While this method sacrifices some decentralization, it offers enhanced scalability and security, particularly suitable for private or consortium blockchains. PoA leverages the reputation and identity of designated validators. These validators have the exclusive right to create new blocks and confirm transactions based on their recognized authority in the network.

It is clear that blockchain is not a one-size-fits-all solution. Each consensus mechanism caters to different needs, reflecting the adaptability and versatility of this technology.

Blockchain vs Traditional Database

Content above is purely my understanding and opinion at the point of publishing. It does not necessarily represent absolute accurate information but merely sharing of knowledge on my part. Comment below for any inappropriate/misinformation.

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