If you spend any time at all online, you have likely heard of blockchain, or at the very least bitcoin. The two practically go hand in hand. Blockchain refers to a digital public ledger of cryptocurrency transactions. These completed blocks, or the most recent cryptocurrency transactions, are recorded and then add to the blockchain in chronological order. This allows participants in the market to keep up with their digital currency transactions without worrying about central bookkeeping services. Computers that are connected to the designated network are provided with a copy of the blockchain, which can immediately be downloaded.
With regards to blockchain and bitcoin being related, they are. Blockchain was originally designed to be the method of accounting for bitcoin. Blockchains use DLT or Distributed Ledger Technology, which is used to verify the transactions.
Blockchain was invented to power bitcoin in 2018. Bitcoin was developed and launched in 2009. Since its development, blockchain has been used for a number of tasks including copyright protection, sexual consent and many others.
How Blockchain Works
Again, each block is a record that is recorded to show new transactions. These transactions can include the actual location of the cryptocurrency or could include voting records, medical data and any number of other transactions. Once a block has been completed, or filled, it is added to a chain which then creates a serious of blocks in the chain, or a blockchain.
Processing Blockchain Transactions
Cryptocurrencies are encrypted. This is done to ensure the safety of the cryptocurrency, sort of like SSL servers protect internet shoppers when they are providing credit card and persona information online. Because they are encrypted, processing a cryptocurrency transaction is not easy. There are several complex math problems that must be solved before the transaction can be processed, and this only gets more difficult as the blockchain receives more information. Anyone who has the knowledge of how to process or solve these equations are known as miners. Processing cryptocurrency is known as mining.
If you do own cryptocurrency, you basically own a long password that has an address on the blockchain. You can use this password, otherwise known as a private key, in order to withdraw currency that you want to spend. Note however that if you happen to lose the password or cryptocurrency key, you absolutely cannot retrieve it. There would be no way for you to get your cryptocurrency back. Every single account holds a public key and that allows others to send cryptocurrency to an account but it does not allow anyone else to withdraw from that account. The only way that you can withdraw is to keep your private key.
Information that is stored on a blockchain is available to the public. It is decentralized, which simply means that it does not require a single computer to function. It is not stored on a single computer and does not rely on one, either. If and when you sent any form of cryptocurrency, such as bitcoin, the information regarding that transaction is then available on the designated blockchain. While other people may not know who you are, your personal information is protected, they will be able to see just how much cryptocurrency has been transferred from you to someone else or from someone else into your own account.
Replacing Existing Banking?
Many believe that blockchain could be a viable alternative or even a complete replacement to traditional banks. Instead of heading out to your local bank in order to transfer money, many believe that this technology would allow for you to use blockchain and transfer the currency yourself, thus eliminating the middle man, or in this scenario, the local bank. Just as the internet made it very easy to share and access data online, many believe that blockchain could do the same for money. Decades ago, there was no way to access the news instantly from your living room or office. You did not have the convenience of being able to read what you wanted or when you wanted, watch various videos or otherwise distribute or receive data. The internet made this possible just as blockchain makes the transfer of money possible, without worries of banks and other financial institutions. Currency can be transferred all over the world without going through banks or governments.
More Than Bitcoin
Blockchain is very useful for bitcoin but it goes far beyond that. It is not at all uncommon to rely on a third party. Trusted third parties such as banks, lawyers, courts and even governments are used in order to process and then store certain records. Blockchain takes away the need for these third parties. All of the transactions done on blockchains are not necessary currency related. Blockchain is also used to transfer physical assets, certifications, digital rights and a number of other documents and records. Some feel that blockchain is no more trustworthy than a local politician but there are many who believe enough in the technology to trust it. A thorough understanding of software technologies would be needed in order to really trust blockchain technology. You would also want a better understanding of market incentives, those that influence the behavior or the processing nodes that run these blockchains.
How Are Blockchains Used
Blockchain technology is still relatively new, even though it has been around for the better part of a decade. Because it is still so knew, it can be difficult to determine just how beneficial it can be and how it can be used for the most benefit. As with anything, there are risks involved, but understanding these risks and the limitations faced by blockchain could help to better determine how it can be used in the future. A recent UK company did some research to see just how blockchain could be used to store information. They used a blockchain to store information about the ownership of individual diamonds and other items of similar value. Instead of the blockchain recording the transfer of digital currency, it simply recorded the transfer of ownership in the specific physical assets. Many believe that this could help to reduce theft in the future, as well as fraud in some cases. Blockchain could offer the same benefit to retail establishments as well as pharmaceuticals, to help lower the dependency drug epidemic in the world.
Understand that blockchains do not eliminate the need for certain third parties. Banks will still be needed for certain transactions, just as the government will be needed. Blockchains are only digital records but can help to ensure that the original records actually match the physical assets that are associated with those records. Data integrity is still highly important as it protects digital records. This means that even if blockchain technology is used to say, replace your traditional bank account, you would not be able to spend money if you did not have any money in the bank to spend. You would not be able to acquire records of ownership for assets that you do not actually own.
Will Blockchain Last?
Many have wondered about whether or not this basically new technology will stand the test of time. Of course, there were those who thought that computers and the internet were just a passing fad. Digital technology tends to last longer than many believe in the initial development states. This type of technology could significantly benefit the entire world and a host of different industries if it is used properly. It may simply be up to time to tell.
Blockchains are simply like little folders of information that can store all sorts of records, including digital currency transactions. While this blockchain technology was originally developed as a means of helping to keep track of bitcoin, blockchain has since outgrown bitcoin technology and is now in a field all on its own. Today, blockchains are being used in a number of facilities in order to safely store and record information that would otherwise take a trusted third party to retain. While this technology is certainly not going to replace those third parties, it can help to make things easier with regards to record keeping and should certainly be a consideration for things like personal asset records, certifications and even medical records, all of which should be encrypted in order to be protected from hackers and other digital thievery. Blockchain technology may not make it impossible for someone to steal certain information but it can certainly make it much more difficult. In order to process the information contained in the blockchain, one would need to possess a high enough level of intelligence to be able to solve the most complicated math equations in the world, and most people, even those of somewhat above average intelligence, simply do not have this ability. Blockchain can help to protect certain personal records just as it has protected bitcoin transactions for the past nine years or longer. Given a few more studies and a bit more research, blockchain could potentially solve a number of digital security issues.