If you follow news about banking, finance, investments, or even cryptocurrency, you have undoubtedly heard of Blockchain or the digital storage technology behind the Bitcoin network.
This article will define the Blockchain and its underlying technologies while looking at its applications and growing importance in the digital world.
Blockchain: Definition
This technology stores records of transactions called blocks in multiple databases called chains through a peer-to-peer network of nodes. This storage is referred to as a digital register. Each transaction in this register is authorized by the owner’s digital signature, which authenticates the transaction and protects it from hacking. Therefore, the information contained in the digital register is highly secure.
In simpler terms, the digital ledger can be compared to a Google spreadsheet shared between many computers on a network in which records of transactions are stored based on current acquisitions.
The Benefits Of Blockchain
Suppose you want to transfer money to your family or friends from your bank account. You need to log into the online banking platform to transfer the amount to the person using their account number. Once the transaction is completed, your bank updates the transaction register. It sounds simple, but there is a potential risk that a majority overlooks.
Indeed, this kind of transaction can easily be falsified. People familiar with this type of risk are very cautious in using this transaction model, hence the evolution of third-party payment applications in recent years. Moreover, this type of vulnerability represents one of the essential reasons that it was created. Keeping records of data and transactions is a crucial part of doing business.
Often, this information is managed internally or entrusted to a third party such as brokers, bankers, lawyers while increasing costs and processing times. Fortunately, the Blockchain makes it possible to avoid these too-long processes while making it possible to carry out transactions more accessible and faster by saving time and money.
Blockchain And Bitcoin
Many people believe that Blockchain and bitcoin can be used interchangeably, which is not the case. It is the technology that supports various applications related to different industries like finance, supply chain, production… While bitcoin is a cryptocurrency whose security depends on this technology.
Blockchain And Security
It uses a digital signature element to carry out secure transactions without the risk of fraud. This feature makes it impossible for other users to corrupt or alter an individual’s data without a specific digital signature.
Blockchain And Decentralization
Usually, one must have the agreement of a bank or government type regulatory authority to carry out transactions. However, with it, the transactions are carried out with the mutual agreement of the users, which results in more flexible, faster, and more secure transactions.
Blockchain And Automation
It is programmable and can systematically generate actions, events, and automatic payments when the trigger criteria are met.
How Does The Blockchain Work?
In recent years, many companies have adopted blockchain technology. But questions about how this technology works and its impact on business operations persist.
Blockchain is a compilation of 3 advanced technologies:
- Cryptographic keys
- Peer-to-peer networks containing a shared ledger
- Mathematical and computer calculations to store network transactions and records
Cryptography
Cryptographic keys come in the form of the private key and public key. These keys help in making successful, secure transactions between two parties. Each individual has these two keys, which they use to produce a secure digital identity reference. This secure identity represents the most critical aspect of blockchain technology. In the crypto blockchain world, this identity is a digital signature used to authorize and control transactions.
The Peer-To-Peer Network And Calculations
The digital signature is merged with the peer-to-peer network. The latter consists of many individuals who act as an authority using digital signatures to agree on transactions and other exchanges. When a transaction is authorized, it is certified by a mathematical verification, resulting in a successful, secure transaction between the two connected parties. In summary, blockchain users use cryptographic keys to perform different digital interactions through a peer-to-peer network.
The Implications Of Blockchain Technology
Blockchain technology has a broad impact on society, including:
- Bitcoin is the primary reason why the Blockchain was developed to optimize digital wallet-type financial services. Indeed, this technology had made microloans and micropayments possible when the economic circumstances were difficult.
- Securing transactions, especially at an international level and when it comes to risky business environments, bitcoin represents a compelling alternative avoiding the intervention of unreliable intermediaries
- Decentralized networks that allow services like Airbnb and Uber to perform even better
- Securing sensitive data such as medical records allows medical industry stakeholders to create centralized databases with controlled and authorized access.
Conclusion
Blockchain technologies can be configured and deployed in different ways and through other mechanisms to secure transaction agreements that only authorized users can view. Bitcoin remains the best-known example of blockchain use and the most representative of the degree of security this technology offers.
Also Read: Blockchain: Hype Or Overhyped?