The term “blockchain” is probably something you have come across several times, considering how much time you spend on the internet. But what is it, really? Well, blockchain is such an invention that has greatly succeeded in how digital information is dispersed without being copied. It is what will provide the backbone for this new internet, where security for data is a priority.
What Is Blockchain Technology?
It was originally developed for the leading digital currency Bitcoin by an entity known as “Satoshi Nakamoto”, but the use of it has gone beyond cryptocurrency.
By concept, a blockchain is just that-a chain of blocks. Each block is a store in a public database called the chain and holds digital information about recent transactions. This structure makes it transparent and secure. More importantly, this technology is decentralized-it is not controlled by any corporation, government, or financial institution, but rather it’s accessible to all users on the network.
Once data has been added to a blockchain, it becomes very hard to change it. The integrity in blockchain results from digital signatures and encrypted storage for the information stored that prevents it from tampering.
With blockchain, a consensus among the participants of the network is reached; hence, data can be digitally recorded and stored on it. It is this consensus model that prevents fraudulent activities and duplicate transactions without any interference from a third party.
The Blockchain Process
1. Data Recording: New data is recorded onto the network.
2. Verification: The information is verified for viability by a network of nodes.
3. Block Creation: Valid records are pooled into a block. Each block contains a unique code, called a ‘hash,’ that includes the hash of the previous block.
4. Blockchain Addition: This block is added to the blockchain, connecting through hash codes to the pre-existing continuous chain.
Benefits of Blockchain Technology
Blockchain may sound like something from a science fiction novel, but its benefits are real and as crystal clear as they come:
1. Transparency: On a blockchain, data is held in a distributed network. Each participant possesses the same data, thus minimizing the chances of any discrepancies. A change in information would mean changing all the blocks in which that data exists, which is practically impossible.
2. Security & Privacy: While centralized systems have a single authority that decides on data, blockchain spreads data on a network and encrypts it. This could reduce data breaches, by merit of its decentralization, adding to security and privacy.
3. Efficiency & Speed: By removing the intervention of third-party interference, transaction and process time is reduced. When participants handle the transactions directly, the process becomes speedier and more efficient.
4. Reduced Cost: With faster transactions, the cost associated with transaction fees and maintenance/management of servers is reduced.
Real-Life Example
Consider sending money to an individual at another location. The traditional means of doing this involve banks and payment apps, where there is typically a third party involved, often with added fees. Blockchain, however, eliminates all that by allowing direct, secure transactions without any additional fees. Because blockchain is founded on a decentralized network, the chances of data corruption and hacking are reduced to almost zero.
Significant Advantages of Blockchain Technology
1. Efficiency: Transactions in a blockchain network are immutable, recorded in chronological order, and thus assist in tracking with integrity of data.
2. Transparency: Blockchain offers transparency through clear, traceable records of transactions in the transaction history, which is particularly useful for sectors looking to increase transparency.
3. Security: Records on a blockchain network are encrypted and immutable; hence, data can hardly be hacked.
4. Traceability: It enables the users to track down their data, hence reducing errors and increasing growth in business.
5. Cost Reduction: This technology reduces the need for intermediaries and maintenance, hence greatly reducing costs.
On the whole, this blockchain technology has provided a complete transformation phase in data management and business operations, opening up new vistas and efficiencies across industries.