Everyone feels an increased need for trust and security in the digital world. When you sell items online, buyers don’t know who they’re directly purchasing from, and sellers don’t know their customers. As more businesses shift online, more transactions will take place online, which means everyone from the buyer to the seller needs to have trust.
Blockchain technology is a network that promotes trust and allows people to interact with one another because it’s decentralized. We can easily transact, record, and share data with ledger technology. In addition, blockchain offers structure, security, and privacy.
You may have heard of blockchain from the news or a blog, but very few people know what it means and how it works, although there are several Fintech and blockchain patents getting registered on a daily basis. Here’s everything you need to know about blockchain technology.
What is Blockchain Technology?
Essentially, blockchain is a ledger that makes recording and tracking transactions easier through a peer-to-peer network of computers. The computers all have a copy of a ledger, and these copies are simultaneously updated. Blockchain technology makes transactions efficient, secure, and reliable. Not only that, but it ensures the security of data to eliminate the need for a third party.
Blockchain is one of the most talked-about topics, especially in the cryptocurrency investment industry, but crypto is just one application of this technology.
Blockchain technology has many applications and uses, generating more interest from businesses and the government over the last few years. Because it is decentralized, it can be used for many businesses, including financial, healthcare, and government.
How Does Blockchain Work?
As more people work and shop online, many large transactions occur over networks, which makes any activity, especially transactional activity, susceptible to cyber-attacks and hackers. Cybercrime typically occurs because the transactions take time to complete due to the mediator that confirms the transaction.
Blockchain solves this problem and increases security because it’s distributed and decentralized. Each transaction is irreversible and nearly immediate. After a transaction is complete, it is recorded on the blockchain while the parties’ identities, including the senders and receivers, are anonymous.
Ultimately, blockchain technology allows two parties to transact with one another digitally without the use of a third party to validate the transactions. Instead, the ledger records the transactions encrypted to protect data from hackers.
Blockchain can be compared to a type of digital database. However, it differs in the way it collects and handles data. Instead of maintaining data in files, blockchain stores it in blocks that are linked together like a chain.
The chain gathers data in blocks and stores it. The blocks have storage capacities, but they are closed and attached to another block to present data in a continuous chain when they’re full. The data that follows the blocks are added to a new block and added to the chain once storage runs out.
Essentially, this data chain creates a chronology of data that’s irreversible; nobody can edit the data in any way as blocks are given a timestamp when they join the chain.
Importance of Blockchain
Blockchain’s most significant advantage is that it offers sellers’ and buyers’ trust. As we become a more digital society, we need the ability to protect important data to protect individuals from identity theft, credit card fraud, employee data, and hackers.
As per Bitcoin and Cryptocurrency Statistics by CoinSutra, 33% of organizations worldwide use blockchain technology primarily for managing digital currencies.
Blockchain eliminates the need for third-party validation to automate operations, allowing businesses to save money on labor while accelerating accounting and e-commerce sales. It can also be used to protect employee data to ensure security for improved employee retention.
As fintech, financial institutions, and government agencies continue to expand, they’re interested in exploring blockchain technology to facilitate virtual currency exchange. Several businesses can benefit from blockchain-based applications to record digital transactions.
Features of Blockchain
Blockchain has become more popular over recent years and is one of the most promising innovations in the tech industry. There are many pros and cons of utilizing blockchain technology, but it’s a unique technology with many features, including:
The current financial system is centralized in which customers give banks control over their assets, and centralized networks store the data in one location. Blockchain relies on decentralization. Decentralized networks distribute customer data between hubs, employing a peer-to-peer network; essentially, everyone in the network performs the same function with the same level of control.
Centralized networks use a client-server with a hierarchy of authority consisting of one central provider. Unfortunately, client service is slower and prone to failure when compared to peer-to-peer networks.
Decentralized networks offer permissionless ownership so customers can access them on the platform. Meanwhile, the consensus is used to ensure the transactions are accepted. Decentralization ensures that breaches can’t impact the entire system.
Blockchain is immutable, making it difficult to edit or tamper with once the data chain is linked to a new block. Each block has a unique identity, making it difficult for hackers to identify with a single block without tampering with the entire chain.
Immutability doesn’t mean the data within the chains can’t be changed; it just makes it more difficult to touch that data without alerting the entire system.
Blockchain technology is private and anonymous while providing ultimate transparency. The data stored in a buyer’s blockchain and the identities of the data owners are difficult to hack or change, but the data in the copies of the records are visible to anyone in the network.
Blockchain is also the foundational tech used for smart contracts that allow users to exchange and transfer funds, assets, and shares.
As we’ve mentioned, blockchain is distributed, which means it eliminates the need for a mediator. Instead, all transactions occur between the sender and receiver. Transparency solves the problem of trust between parties that don’t know one another to ensure transactions are valid.
The Future of Blockchain
Blockchain has many potential applications that can help businesses become more innovative while reducing costs. It can also ensure sellers and receivers that transactions are secure while anonymous. Blockchain is a unique technology that can help solve major challenges for businesses and government institutions.
Matt Casadona has a Bachelor of Science in Business Administration, with a concentration in Marketing and a minor in Psychology. Matt is passionate about marketing and business strategy and enjoys San Diego life, traveling, and music.