Blockchain: What is it?What in the world is blockchain? We’re hearing the word a lot lately thanks to cryptocurrencies like Bitcoin. We know the word but very few seem to understand what’s going on under the hood. What makes this new form of money secure? How can we improve the security of things we already trade and deal with on a daily basis? Blockchain might just be the answer.
What is it? How can it affect our daily transactions? (Source: Blockchain.com)
Blockchain was originally developed for Bitcoin as a secure way to complete transactions. When a transaction is requested, the information is validated by a network of nodes (networked computers). The networked nodes then verify the transaction using known algorithms. After verification, the transaction is added to a new block of data which is addedi to the existing blockchain. Confused yet? Here’s a helpful diagram from Blockgeeks.
Blockchain gives both parties a secure record of their transactions. Each step in a transaction is recorded and then added to the end of the block. Each block connects to the one before and after it, creating a chain that can’t be altered by anyone anywhere in the world. Imagine a spreadsheet where each cell is connected. The spreadsheet is duplicated on every computer on the network and updates each time a change is made. This is the blockchain.
Blockchain is secure. It isn’t stored in a single location, so there isn’t database for hackers to modify. It’s also 100% visible to the public, so each transaction can be verified. The potential for the blockchain is huge. Think of any industry that requires a middle man. IBM uses the diamond industry in their example video. If every step between a diamond mine and the consumer is tracked, we can make sure that the proper taxes are collected, and the customer receives a genuine product without being cheated somewhere along the way. No one owns the blockchain database. A hacker can’t get in to one network and change the data. Even if you could access a transaction, you couldn’t change the information without every computer on the network verifying the change. If you decentralize every transaction and keep all records public, ideally, no one can tamper with any transaction.
Will it work? Many experts believe so, and with good reason. The blockchain seems to address a lot of issues we have today with middlemen and lack of clarity in everyday transactions. And if digital currencies continue their upward trend, we need a system in place that keeps an easily accessible public record of every transaction that takes place. Only time will tell if the blockchain becomes a part of our daily lives, but for now, it seems like a powerful answer to a long-standing problem.
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