By now, we are sure that everyone has heard of cryptocurrencies and Bitcoin, but not everyone knows about blockchain or understands what exactly it is.
Most of the cryptocurrencies that exist out there are powered by this highly secure and transparent technology that is run on a peer-to-peer network.
A basic way to think about it is as a public ledger of all the transactions that took place in the cryptocurrency (be it Bitcoin or any other cryptocurrency that uses the blockchain technology to record transactions).
Essentially, blockchain is a decentralized and publicly available register of all data in the network that is open for viewing to all users at all times, but no one can edit or alter any of the information that has already been recorded in the database. This is achieved by cryptographically securing the network which makes it practically unbreachable and is exactly what makes the blockchain technology so powerful.
It’s a fully transparent database of all the transactions and there is literally no space for any sort of falsification to take place. The blockchain ledger is constantly updated as new transactions are recorded and is automatically distributed to all of its users. Thus, the information is not stored in one central place as in traditional databases, but rather it’s decentralized and everyone who uses the network has a full copy of the ledger. Therefore, it’s impossible to alter any bit of the data in it without everyone taking notice.
Cryptocurrency transactions that use the blockchain technology are recorded in blocks with a finite (digital) size. Once enough transactions are completed and the maximum size is reached a new block is created and the previous block is added to the chain of completed blocks. Thus, this is how the term blockchain was formed.
In the case of Bitcoin specifically, everyone has a public and a private key to their account. The private key is used to access personal coins, and the public key is used as an address to which other users in the network can send coins. Once a transaction is completed between two accounts, it’s instantly broadcasted to everyone in the network and added to the blockchain.
The blockchain technology is the core value of cryptocurrencies and is without a doubt their most valuable and most fascinating aspect. While many people and experts constantly debate whether cryptocurrencies have value or not, blockchain is the only point where everyone agrees that it is truly valuable and has tremendous potential to change many areas of our lives.
Bitcoin is the most famous and the first example where the blockchain technology was utilized, however, blockchain is not only tied to Bitcoin or cryptocurrencies. Literally, the blockchain technology can find use in all forms of legal contract or any place where some form of verification is needed – making the process faster, cheaper and more secure. Corporations, banks, and even state electoral systems can all be secured and improved by adopting the blockchain technology.
Blockchain has the potential to completely eradicate illegal acts like document forgery and election frauds. And, it is estimated that, in the banking industry, the technology could save billions of dollars per year in transaction costs. Given all this, it appears that a very bright future is ahead for the blockchain technology and those who will be among the first to adopt it.