What is the Blockchain Technology?

Introduction

Blockchain technology has a big role to play in the cryptocurrency world. It is a new-age technology which has made possible the world of cryptocurrency. It has made possible the transfer of money without any interference from third parties like banks or financial institutions.

It has made possible secured transactions between two parties who don’t know each other. Apart from cryptocurrency blockchain technology is being used to explore medical research, supply chain systems and the finance world. In this article, we will study in detail about blockchain technology.

Meaning of Blockchain Technology

Blockchain is a shared immutable ledger which helps in recording transactions and tracking assets in a business network. A blockchain is one kind of distributed database which is shared on the computer network. It stores the information electronically in a digital format and makes transactions secure.

Important Elements of Blockchain Technology

Here are some of the key elements of the blockchain technology: –

1. Distributed Ledger Technology

Only network participants are given access to the distributed ledger.  This shared ledger makes it possible to record the transaction only once. This eliminates the duplication of transactions which happens in the traditional business.

2. Immutable Records

No participants can make changes to the transaction after it has been recorded on the shared ledger. If there is an error then a new transaction needs to be added to reverse the error. Both transactions will then be visible.

3. Smart Contracts

To speed up the transactions, a set of rules are created called smart contracts. These are the programs that are stored on the blockchain system. This will run automatically if pre-determined conditions are fulfilled. For example, a logistics company can have a smart contract that will pay automatically when the goods arrive at the port.

How does Blockchain Technology work?

With the occurrence of each transaction, it is recorded as a block of data. These transactions show the movement of an asset which can be tangible or intangible. The data block records the information as per your choice. It can also record the condition such as the temperature of food shipment.

Each new block created is connected to the next and previous one. These blocks of data form a chain that moves from one place to another. The blocks give confirmation about the timings and sequence of transactions. The blocks are linked securely together. This restricts any block from being altered or a block being injected in between two other blocks.

The additional block that is created makes the verification of the previous block stronger. This makes the blockchain tamper-evident and delivers the strength of immutability. The possibility of temperament reduces due to this and hence it builds a ledger of transactions that other network members can trust.

Who invented Blockchain Technology?

A person or a group of people with the name Satoshi Nakamoto published a whitepaper online in which he/they explained the principles of digital money called Bitcoin in 2008. The majority of cryptocurrencies which has evolved to date have been invented based on the idea laid out in this paper.

Nakamoto’s main aim was to create digital money that would make online transactions between strangers possible without any requirement of a third party. This would require a system that can eliminate the double spending problem. The solution was to bring a system that could constantly verify the movement of Bitcoin. This network is defined as a blockchain.

Each of the bitcoin transactions is stored and verified by a global network of computers beyond the control of any person, company or country. The database that has all the information is called the blockchain. Bitcoins are mined with the help of a network of computers which keeps on verifying the accuracy of the blockchain. Miners for their contribution are rewarded with a small amount of cryptocurrency.

Use of Blockchain Technology in Cryptocurrency

Blockchain currently is most commonly being used in the field of cryptocurrency. Bitcoin, Ethereum and other popular widescale cryptocurrency coins make use of blockchain technology to process and record transactions securely. This technology ensures transparency and protects the financial information.

Advantages of Blockchain Technology

1. Anonymity

With the help of blockchain technology, you can create transactions under pseudonyms and hence hide your original identity.

2. Decentralization

The decentralized nature of blockchain means records remain consistent throughout the nation. Hence the discrepancy reduces and people can have access to the same data.

3. Advanced Security

Blockchain technology provides an advanced level of security. Blockchain uses the principles of cryptography, decentralization and consensus to create a system that is difficult to modify or tamper with.

4. Improved Efficiency

B2B transactions take a lot of time due to the involvement of third parties. Transparency and smart contracts in blockchain make business transactions more efficient.

5. Cost

Blockchain technology can help reduce the cost of international transactions. This is because there is no involvement of third parties for transaction verification.

6. Permanent Records

Each data block is protected by a cryptographic signature which ensures that the information is not tampered with. As the blockchain information exists on many devices the data record remains forever.

Disadvantages of Blockchain Technology

1. Energy Consumption

Many blockchain networks consume a lot of energy for mining. This can be a big concern for the environment.

2. Scalability Issues

The more the transactions are added to the blockchain, the greater would be the size of the database. This results in slower transactions and higher fees.

3. Regulatory Uncertainty

The legal and regulatory environment of blockchain is still in the initial stages. Hence there is a lot of risk for users and businesses.

Blockchain Application Beyond Cryptocurrency

Blockchain usage is not limited to cryptocurrency but can be used in many other fields.

1. Payment Processing and Financial Transactions

By making use of blockchain in the financial industry transactions can be made more efficient. It can help streamline international and domestic transactions, save on transaction fees, and increase in transparency.

2. Recording of Property Records and Real Estate Transaction

Property records and real estate transactions can be recorded through blockchain technology. This will give the public access to property ownership records.

3. Securing Patient Information

Blockchain technology can help in securing patient data, track outbreak diseases and hence create accessible medical information.

4. Streamlining the Supply Chain

Manufacturers, shippers and customers can have access to the latest data about the shipping process. This can also help in the improvement of coordination between supply chain partners and reduce execution errors.

Conclusion

The blockchain has helped in creating the cryptocurrency. It is based on a decentralized system hence there is no involvement of third parties for transaction verification. This makes the transaction faster and more secure. In the coming days, you may see usage of blockchain in fields of healthcare, finance, logistics etc.