Blockchain is undisputedly one of the major technological innovations in recent years. Although it has been in existence as far back as 2008 when it was invented by Satoshi Nakamoto, many people still do not know what the term “blockchain” means. The important question at this point thus becomes:
What Is Blockchain Technology?
Succinctly defined, blockchain refers to a database which is stored as well as maintained by a network of computers which are completely decentralized. These computers are also referred to as “nodes”. If properly utilized, this ingenious technology will catalyze drastic positive changes in traditional transactions dealing with data and transference of value. As we have already started seeing the blockchain effect on fintech and other sectors.
With blockchain, users will be able to transfer digital currency from the comfort of their rooms. The future of this technology has comfort written all over it and it can also help to do away with the need for middlemen while carrying out traditional transactions. Although the development of the technology is still in the early stages, it is already being utilized in real life transactions e.g. for ensuring security of data by government institutions and the more popular use in cryptocurrency transactions. In fact, blockchain has been considered a viable alternative to traditional voting system, and some countries have conducted elections using blockchain voting system.
How Does It Work?
Quite a handful of books and resources exist on the workings of this technology. Certain factors however underline all these explanations and highlight the workability of the technology. To begin with, the technology holds a record of key transactions including tracing and recording the location from which money was sent down to its designated location. It also keeps tab of the exact figure transferred and takes note of any additional fees and relevant data.
All the information is locked up in “block” chains which is secured by cryptography. Reports for Bitcoin from the latter part of 2017 recorded that each Bitcoin block holds data for approximately 2,000 transactions. A wide range of data types can be stored on blockchains e.g. cryptocurrency transactions details, details of insurance policies, documents evidencing land ownership, etc. The technology can also serve as a mother platform on which other applications can launch.
Features Of Blockchain
- One notable feature of blockchains is that they are generally decentralized. Decentralization in this context implies that no authority exists to control the activities and as such, activities are not exposed to censorship or other regulatory measures characterising traditional database. However, there are certain blockchain projects that operate a centralized system, such as Ripple.
- The process of making alterations to information on blockchains demands high level of computational efforts and so it is not easily alterable. For this reason, it is largely immutable.
- Blockchains run on a transparent system as the data contained on the platform can be accessed by anyone who makes use of the blockchain explorer. It should however be added that most blockchain technologies offer anonymity. This means while anyone can see the transactions on the blockchain ledger, no one can tell who authorised the transactions – the recipients and senders are shielded under the guise of digital alphanumeric codes.
The combination of the above features makes blockchain a welcome innovation which will ensure that most activities are carried out faster, cheaper and are also more effective.
Types Of Blockchains
Blockchains can be classified under two major divisions;
Public blockchain; and Private blockchain.
The major difference lies in the fact that joining the network of nodes on a public system is unrestricted and any interested person can join. Bitcoin is a good example of a public blockchain. On the other hand, one has to get permission before computers can be added to the existing network in private blockchains. This is commonly used by business enterprises.