What is Blockchain Technology and How Does It work?
You might have heard of cryptocurrencies such as bitcoin and ethereum being a hot topic of discussion on news and social; media. But what if I tell you that the most significant opportunity for businesses of any kind is related to the technology that underlines Bitcoin- Blockchain.
Blockchain, which records all bitcoin transactions, is more than just a passing trend; it is revolutionizing how we live today.
Blockchain has the potential to disrupt everything from accounting to voting, but still, other than monitoring cryptocurrency transactions, it is unclear how to take advantage of this disruptive technology.
This article will try to answer your questions such as What is blockchain and how does it work?
What is Blockchain?
A blockchain is a decentralized, distributed, and public ledger used to record transactions across several computers in a way that prevents the records from being changed retroactively without also changing all subsequent blocks and obtaining network consensus.
Blockchain technology, also known as distributed ledger technology (DLT), uses a decentralized network and cryptographic hashing to make the history of any digital asset transparent and unchangeable.
A straightforward illustration of how blockchain technology functions is comparable to how Google Docs documents function.When you create a Google Doc and share it with a group of people, the document is distributed instead of copied or transferred.
This enables the development of a decentralized distribution network that enables simultaneous access to the base document by all users. No one is locked out waiting for changes from another party, while all document modifications are recorded in real-time, making changes completely transparent. The Blockchain adds an extra layer of security because original information and data cannot be changed after being written, unlike Google Docs.
How does Blockchain technology work?
Blockchains are shared databases in which each party on a blockchain has access to the entire database and its complete history. No single party controls the data or the information. Every party can verify each transaction against its copy of the Blockchain, making it nearly impossible to forge records. As a result, a reliable system free of intermediaries that is appropriate for all transactions involving assets, products, money, or content is created.
Since blockchains are entirely transparent, anyone can see every transaction ever made. There is no longer a need for an intermediary person because all transactions are completed between individual users.
You might wonder how a user can make transactions if the blockchain is transparent ?. Blockchains are transparent, but a user's identity need not be; instead, each user is given a public address that they can use in place of their name during transactions.
As blockchains operate online, their users can use algorithms to automate future transactions, just like how you can automate paying for your Amazon prime subscription every month.
Advantages of Blockchain
- Blockchain technology has several advantages over traditional financial technology. For example, transactions made with cryptocurrencies are secure, and it is impossible to make any unauthorized transactions or double-spend funds because all purchases are recorded on a public ledger.
- Other features of blockchain technology include fraud prevention through widespread sharing of information, effective tracking of digital assets, transparency and traceability, fast transaction time and low cost of implementation.
The present and future of the blockchain seem promising as blockchain technology is being used far beyond just its roots in cryptocurrency. Every modern industry is being evolved by blockchain technology in some way. Blockchain technology is revolutionizing a wide range of industries, including banking and finance, as well as healthcare, voting systems, supply chains, record-keeping, and many more. All of the potential uses of Blockchain are still undiscovered, despite the technology's ever-expanding capabilities.