What is blockchain?
Most of us have come across all the talk around Bitcoin , with some predictions claiming that fiat currencies and gold can be completely replaced in order to store value or pay for transactions, and due to the limited supply, the value of Bitcoin could reach astronomical heights! In this article, we'll aim to demystify blockchain, the technology that powers Bitcoin, so you can have your say on how revolutionary this technology is!
So we might wonder, what's so special about blockchain ? Why some of the brightest minds, including the CEOs of many major companies, believe that blockchain holds great promise in changing our world and that investments to develop the technology are increasing.
An easy way to understand a blockchain is to visualize it as a database that is shared publicly among many participants (although blockchain technology can also be deployed privately, so access is limited). Each of these participants is connected to the network through their computer, and all of these participants maintain the same copy of the database. Therefore, one of the core fundamental principles of blockchain is that information is transparent and simultaneously available to all participants in the network.
Bitcoin is arguably one of the most famous public blockchains. It primarily uses blockchain technology to provide its users with a digital currency that can be used to pay for products and services, just like regular currency, or act as a store of value. Anyone can join the Bitcoin network because it is open to the public.
Main Features of Blockchain
If a blockchain is just a database, what's so special about it? We have hundreds of different database technologies. To answer this question, let’s explore some special features unique to blockchain technology:
- Information Security
Blockchain is an encrypted and secure database. In order to read or write information to the database, a user must have the correct encryption key. The keys are paired: a public key that identifies the database and a private key that ensures that only the appropriate parties can update information in the database. This ensures that information is available to those who wish to read and/or update it. Additionally, blockchains can also be deployed privately to select participants, further limiting access to who can view and/or update information on the blockchain. - Distributed and Decentralized
Another core feature of blockchain is that it has no single point of failure. If a failure occurs on one or more nodes on the blockchain network, other nodes still retain the data and the network continues to operate. By extension, this means that the blockchain is decentralized; no single entity "owns" the network. Blockchains are often referred to as distributed ledgers because information resides on multiple devices on a peer-to-peer network, where each device replicates and holds an identical copy of the ledger and updates it independently. - Tamper-resistant
Blockchains get their name from the fact that data is stored as blocks of information, and these blocks are linked together in a "chain"-like fashion. New information is essentially updated together as a block and appended to previous versions, creating an immutable, tamper-proof record. This property of the blockchain makes it useful in situations where information must be preserved without any alteration. - Consensus-
driven Information cannot be updated on the blockchain unless a majority of participants check and verify the credentials used. This consensus-driven model basically ensures that no single entity can control the data and create fraudulent transactions.
While blockchain technology may not be able to match traditional databases in some ways, it does have unique features that make it ideal. Let’s explore some of the use cases where blockchain technology can drive innovative solutions and address critical issues facing society.
Key Use Cases of Blockchain
A blockchain can be thought of as a digital log of transactions that can be used for a variety of use cases where digital value has not yet been fully realized. Hundreds of granular use cases are currently being developed around the world. Below, we'll try to point out some key use cases.
- Real-time Traceability
In the real world, it is quite difficult to build the traceability of objects or actions. For example, in the retail industry, having a comprehensive understanding of supply chain processes can sometimes be a huge challenge. When product quality or safety issues occur, it can be difficult to trace and recall affected products, or to find a responsible entity. in addition. Information is often at risk of falsification and alteration. Blockchain technology can solve all these problems by providing a transparent and immutable record of information through a distributed ledger. - Digital Record Keeping/Digital Identity
Many situations require the ability to have permanent digital records. For example, a city may wish to maintain a registry of residents' ownership. Blockchain technology can really help record such information and ensure that it remains intact and accessible to authorized personnel. Likewise, blockchain technology can also be used to create an immutable digital identity of a person or company on a distributed ledger. - Smart Contracts
One of the most promising use cases of blockchain technology is the implementation of smart contracts. Smart contracts can be automatically executed once certain conditions are met, thereby facilitating certain transactions within the contract without any external input from third parties. Smart contracts have a wide range of applications, including financial transactions, asset and securities management, legal affairs, and more.
The application of blockchain technology has truly changed the rules of the game and can solve practical problems in the world. However, it remains daunting for organizations looking to build products and services using blockchain technology due to a lack of resources to build teams and hire the right talent.
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