There is a huge chance you most probably have heard of Blockchain. In simple terms, this is the record-keeping technology behind cryptocurrencies.
While it seems complicated, in the real sense, the core concept is very straightforward. Essentially, it is an open-source database, a collection of electronically stored information on a computer system.
Blockchain technology has surprised everyone as it has shown immense potential to change almost everything around us. With that in mind, in this article, we will discuss what Blockchain is and if the technology has the potential to change the future; or is just another failed invention. Read on to find out!
What is Blockchain?
Before we proceed, let’s first understand what Blockchain is and the basic concept of how Blockchain works. Well, it is a digital ledger that helps to store transactional records.
On this ‘digital ledger,’ the owner authorizes every transaction through a digital signature, authenticating the transaction and at the same time safeguarding it. That means information on this ledger is always highly secure, and no one can corrupt it.
The Blockchain is more like a spreadsheet only in that it’s shared among multiple computers in the network. This spreadsheet contains the recorded transactions of actual purchases. And the fascinating fact is that this information is available to everyone on the digital ledger, but they cannot tamper with it.
Why is Blockchain Popular and How Does it Work?
Blockchain technology’s popularity has been steadily rising over the last couple of years. It is offering solutions to many of the challenges we face these days. And not just for the crypto enthusiast but also for the business minds.
How Blockchain Works
Now that we understand why Blockchain is so popular today, let’s explore how it works. It operates through a series of time-stamped data records managed by a group of computers not under a single entity’s ownership.
These data blocks are joined together by cryptographic principles to form chains. The public blockchain ledgers are usually autonomously managed and used in peer-to-peer networks to exchange data between the connected parties. In nature, there is no need for an administrator.
Every transaction that occurs on the public digital ledger goes through similar steps. We can break down the principal operations of how Blockchain works into four distinct steps;
- Transactional records: This record contains details of the persons making transactions and each entity’s unique signatures.
- Transaction verification ensures validity: Computers connected to the network verify the transactions. Each computer independently checks to ensure the legitimacy of the trade. Before the process is completed, each node on the network needs to agree as this is a decentralized process.
- Addition of the Transaction to the Block. Essentially, blocks are groups of transaction records, each with its uniqueness. However, each block carries a hash value; a code that uniquely identifies each transaction. It also calls out the block’s position on the ledger and ensures no data has been tampered with.
- Addition of the Block to the end of the Blockchain. Once every step is complete, we get to the end of the ledger and the verification process.
In Summary
Most people are still sceptical about cryptocurrencies and blockchain technology. However, if you look at the various stages of how Blockchain works, we can safely say that it is the future. What’s more, it has some excellent capabilities that will transform the world around us.