One of the growing topics in technology isn’t so much the devices or gadgets for some. In some cases it’s currencies. Things like Bitcoin, Ethereum, NFTs, and other cryptocurrencies. There are dozens upon dozens of these things and financial experts are saying now that it’s smart to be paying attention to where this is going.
The technology – albeit ahead of its time due to energy demand – is transformative but so is the underlying aspects of it too. It relies on something called blockchain which is where all cryptocurrencies rely on.
But many believe that blockchain technology isn’t just a system where we can generate new money though. People believe that this technology can change every facet of our lives if it could.
Even people who are skeptical about cryptocurrencies themselves and the value of it, know that at least blockchain itself is appealing, very real, and holds a lot of potential.
Blockchain itself has at least more staying power than the popular cryptocurrencies that are around which have the potential to die out. But while blockchain can be transformative and that sounds nice, a lot of us are still lost about what does all this mean?
Well here is a rundown.
What Is It?
The best way to describe blockchain itself is that it’s a novel – or rather a ledger. It’s something digital that can keep records of everything.
The reason blockchain is the underlying technology for cryptocurrencies is that it’s being used as a safe way to record transactions. However blockchain’s unique way of recording safely and transferring information has a broader application that stretches beyond digital currencies.
A blockchain is merely a type of distributed ledger where records are kept across multiple computers – that the system calls “nodes”. This is why it’s so secure because hackers would need to hack literally every computer in the planet to gain access to the blockchain.
Any user of the blockchain can be a node, however it takes a lot of power to do anything with that. Nodes are able to verify, approve, and store data within the ledger. It’s all a stark comparison to our traditional record-keeping methods which just store data in a central server.
Where the blockchain comes in is that it organizes any information added to the ledger into blocks or clumps groups of data together. Each block holds a certain amount of information and can then be built upon with more blocks creating a chain.
Each block itself has it’s own unique identifier and blocks anyone from accessing it unless they have the required code. However the technology also protects the block’s place along the chain as well by identifying the block that came before it too so it can never be misplaced.
This entire process guarantees that once any information is added to the blockchain, it’s encrypted, permanent and can never be changed. On top of that, each node has its own record of the full timeline of data along the blockchain starting from the very beginning.
In other words, if someone ever hacked or tampered with a single computer to try and manipulate the data, it wouldn’t be changed. Any altered record could be distinguished and corrected easily.
How It Works
To see all this in action, here is the process that the blockchain will go through to verify and record a single Bitcoin transaction:
- Someone buys Bitcoin;
- The data from that transaction is then sent across the decentralized network of nodes of Bitcoin.
- The nodes then validate the transaction.
- Once the validation is approved, the transaction is grouped with other transactions and forms a block. That block is then added to an ever-growing chain of transactions.
- The completed block will then be encrypted and the transaction record is permanent. No one can remove it or alter it ever.
All these transactions are available to the public as well so people are able to see who owns Bitcoin and can view transaction records as well. The only catch it that it’s tough to identify who is behind each account as wallets are identified only by numbers rather than actual names.
Public blockchains are also beneficial for crypto as computers with enough power that can approve and record transactions do get small perks – typically a small amount of the cryptocurrency they’re processing as a transaction fee.
Despite that though, not all blockchains are made public. Of course, the number of transactions in that area will be smaller, but it’ll still behave in a similar manner to above. It’s decentralized and maintains high security since data stored in there will use the same encryption methods.
That particular aspect of a secure and decentralized permanent record of information has gotten plenty of interest across multiple industries. That alone potentially holds solutions to security concerns, data ownership, and record-keeping processing issues that we are all dealing with today.
It’s A Way Forward
As time goes on, businesses and governments around the world will be trying to test and implement this technology in some fashion. Even though many countries have taken stances on cryptocurrencies, they’re not dismissing blockchain technology.
Though we shouldn’t be holding our breath about government currency that’s blockchain-based or even medical records being converted into a blockchain. That won’t happen for a while.
In the meantime, it you’re looking for this technology to be developed more, a good idea would be to add Bitcoin into your portfolio or even investing in companies who are developing blockchain technologies. You don’t need to have bullish behaviour like many crypto enthusiasts have to make a difference in this technology.