An Introduction To Blockchain
When discussing the future of technology, there is one concept that tends to appear time and again: blockchain. However, while the term “blockchain” is relatively well known, what blockchain actually means – and what the technology can offer in the future – is often less understood. While most of us understand that blockchain technology has a role to play, it’s fairly normal to be a little unsure of what a future built on blockchain may look like, and why the technology can be so beneficial.
As a result, we thought it would be useful to provide an introduction to blockchain, how it works, and the benefits it may be able to offer in future.
What is blockchain?
Although blockchain technology has garnered a reputation for complexity, the core principle is actually very simple. Blockchains are simply “blocks” of related, encrypted information, which are stored together in a public ledger.
The information in the blockchain is verified as correct by thousands of different computers – known as “nodes” – around the world. As a result, blockchains are not reliant on third-parties to verify that information is correct.
In order to demonstrate how beneficial blockchain is, imagine a scenario where you need to receive an essential piece of information. This information is provided to one person, who then passes the information on to you; however, you have no way of verifying if that information is correct, so if your friend makes a mistake, you’re in trouble. However, if the information is passed to 10,000 of your friends, and all 10,000 of those friends then relay the exact same information to you, you can be confident that it is correct – and blockchain works along the same lines.
What are the advantages and disadvantages of blockchain?
When a block of information – for example, a banking transaction – is added to the blockchain, it cannot be changed or altered. This helps to ensure transparency throughout the entire blockchain, with thousands of nodes verifying the information in each block is correct, all at once.
Secondly, Blockchain decentralizes information; there is no third party that has overall control. For example, if you wanted to send money to a friend via your traditional bank account, your bank would act as the third-party, recording that the transaction took place on your bank statement. If the bank makes a mistake, or fails to record the transaction, you have no way of proving that transaction took place. However, Blockchain allows you to record the deal directly, with countless nodes verifying that the transaction has taken place.
Strangely enough, the decentralized nature of blockchains is also arguably its most significant disadvantage; a public blockchain – i.e. a blockchain that is open to all – can become slow and inefficient due to the sheer volume of users involved in each chain, all of whom have to be convinced of the need for updates or changes to the rules of the blockchain. There is, however, a solution for this issue: private blockchains, which control the blockchain within their organization and can thus adjust the rules as they wish – which may be worth keeping in mind if you run a business yourself, and are looking for new ways to communicate.
Finally, another disadvantage of blockchain is that the nodes that verify this information use too much energy – but work is underway to address this problem in future.
How is blockchain currently being used?
Although blockchain has become almost synonymous with cryptocurrencies – and is indeed used for this purpose – the reach of the technology expands far beyond cryptocurrencies alone. For example, blockchain is being used to store sensitive health data, improve supply chain management for businesses, enhance copyright and intellectual property protections, perform anti-counterfeit measures, and much more besides.
Is blockchain as revolutionary as many people claim?
In a word, yes. Blockchain provides an alternative to many of the issues that companies, and individuals, currently experience in regard to data. If you’re concerned about security, then blockchain is incredibly secure. If you’re worried about information being held by third-parties, then blockchain decentralizes information and ensures it is accessible to all – time and again, blockchain is the best solution for many issues.
As a result, blockchain has a crucial role to play in the management and control of transactions, records, and any other digital information that people wish to store – and as a result, blockchain really can live up to the hype.
The blockchain is an incredibly important technological advancement, and one that could pave the way for a brave new world in future. Hopefully, having read through the above information, you will now feel confident engaging with blockchain and advancements that rely on the technology in future.