Everyone seems to be talking about Blockchain these days, yet for many, the technology remains black magic. But the concept is simple and has been one of the best technology milestones in recent years.
Blockchain technology is a type of distributed ledger technology (DLT). It is an accounting system where the ledger (record of transactions) is distributed among a network of computers.
This network of computers all manage the blockchain together without hierarchy. The systems in the peer-to-peer network verify all transactions one by one and add them onto a ‘block’ of information. Then these blocks are added to the blockchain and downloaded onto each computer. So, basically, the web of computers in the network are responsible for keeping the blockchain secure.
Imagine, you want to send money to a family member living overseas. You contact your bank and request them to wire the money to your family member’s account. So, the bank checks for available balance and transfer the money. The bank then creates a record of the transaction. So, in this scenario, the bank acts as a middleman to transfer your money and keep a record of the transaction. And that is the problem of the current systems. Up until now, we have been relying on and trusted a third party entity to manage our money for us. But with the above model, arrives security and trust issue. What if some disaster happens and your records are lost?
Now, imagine the same scenario, but instead of relying on a third party with our money, we ourselves kept and maintained the record. Here’s where Blockchain comes in. Some of the advantages of Blockchain are:
- It’s decentralized, which means, instead of a single authority, it depends on peer network with no single authority over the network.
- Blockchain is transparent. Every transaction on a blockchain are constantly being recorded and stored on the blockchain across nodes. This means that all participants can view all transactions on the network in real-time.
- Blockchains are Immutable which means that records stored permanently data cannot be altered after being added. This makes it an extremely stable and reliable record-keeping system.
- Blockchains are highly secure as it is tough to destroy or alter blockchains because of their distributed nature.
Blockchain and cryptocurrency:
In 2008, Satoshi Nakamoto published a white paper detailing an innovative peer-to-peer electronic cash system called Bitcoin that enabled online payments to be transferred directly, without an intermediary. The white paper talked about the theories of the process. And soon after the publication, Blockchain technology was used to implement the architecture. However, Bitcoin is only one of plenty of applications of Blockchain technology. Blockchain technology was one of the true evolutions in recent years of technology and it has endless possibilities to transform our lives.
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