Blockchain is a crypto currency’s ledger of past transactions that serves to confirm transactions to the rest of the network as having taken place. It is a revolutionary technology which allows digital information to be distributed, without being copied, to a network of computers. It is like an open ledger which has been placed in an open place to be accessed and scrutinized by anyone who has interest in it. Imagine a spreadsheet which is available in a network of computers. If you can also imagine the same spreadsheet duplicating and automatically updating itself on a regular basis, then you have some basic understanding of how blockchain works.
How it Works
The main idea behind blockchain technology is that it does not require a central regulator. All the information being held on the blockchain is not kept in a specific location but it is hosted at the same time by millions of linked computers. The data or information exists in a shared form, and gets automatically updated regularly. All the data and information in blockchain is public, allowing easy verification. It is not possible for a hacker to interfere with the information on blockchain because it does not have a centralized existence, unlike the traditional hosting systems you have with the likes of Google or Microsoft. With information being stored across the blockchain network, the risks associated with data being held at a central point disappear as hackers have no particular place to target their attacks. To protect our identity the internet currently depends on the less safe usernames and passwords, but blockchain uses encryption technology, which is more secure.
To have a copy of blockchain on your computer, you must join the blockchain network. You can have your computer connected to blockchain by utilizing a client that validates and relays transactions to the network. A computer which is connected to a blockchain network is called a node.
When a transaction is initiated by someone, it is posted and distributed to all the computers in the network (nodes). Using established algorithms, the network of nodes has the ability to validate the status of the user and the transaction. After verification the transaction is bundled with others similar in nature, thus creating a new block of a series of transactions or data. The newly created block is thereafter linked to the blockchain that is already in place, making it unchangeable and permanent.
Stored information on blockchain is based on the entire network. It is public and it is not under the control of any single person. Consequently, the data or information is transparent, incorruptible, and cannot be altered.
Originally blockchain technology was created to oversee, in collaboration with a worldwide computer network, the database that registers transactions pertaining to Bitcoin. Currently, the use of blockchain is more widespread, although its use is still mainly limited to crypto currencies. However, companies such as Uber and AirBnB have used blockchain on their sharing services with remarkable success.
The Future of Blockchain
Blockchain has the potential to enable the following:
- By use of smart contracts, the online sale of intellectual properties will be automated to eliminate their theft and hence establish copyright protection.
- Blockchain technology will in future empower consumers to prove the authenticity of the claims made by companies about their products. Ledgers that the technology distributes across networks give a simple way to check the validity of the stories consumers hear about the products we buy.
- In future file storage in the internet will be decentralized for maximum security. Spreading data across networks keeps the files from getting lost or getting hacked.
- Governments may embrace blockchain technology to make elections more transparent. The technology will make the public to easily access the distributed results database thus enhancing transparency.
- It will give online users the ability to control, manage and exchange for money the data which is generated when they are active online. This will be facilitated by Bitcoin, which supports fractional payments.
- With the understanding that blockchain are ledgers available and accessible publically, property titles could be registered on them to eliminate fraud and reduce labor and administrative costs.
Indeed, some of the uses mentioned above are already being explored by different entities. A cursory look at the Initial Coin Offerings (ICOs) that have proliferated in recent times, will show that blockchain is being put to a great many uses. Despite this, the jury is still out as to whether it is the way of the future or just a fad.