Updated: May 26, 2018
What is Blockchain?
Blockchain is a decentralized public ledger of all cryptocurrency transactions which are secured using cryptography. Continuously growing list of records called blocks are recorded in blockchains. It allows market participants to keep track of digital currency transactions without central recordkeeping. Each computer that is connected to the blockchain network gets a copy of the blockchain, which is downloaded automatically.
Basically, blockchain is the technology that enables the existence of cryptocurrency, a digital monetary medium of exchange. Bitcoin is currently the most popular cryptocurrency. Bitcoin is currently the most popular cryptocurrency. Blockchain technology offers the ability to create businesses and operations that are both flexible and secure. Potential applications include fund transfers, setting trades, etc.
How do Blockchains work?
It starts when someone request a transaction. The requested transactions are broadcasted to a P2P network consisting of computers that are connected with a blockchain network which is known as node. The network of nodes validates the transaction and the user’s status using known algorithms, then the transactions is verified. The transaction is combined with other transactions to create new block of data for the ledger and the new block is then added to the existing blockchain, in a way that is permanent and unalterable.
After all that, the transaction is complete. Each time a block gets completed, a new one is generated. There are countless numbers of blocks in the blockchain, connected to each other that links in a chain in chronological order. Blockchains were designed so these transactions cannot be deleted. The blocks are added through cryptography, ensuring that they remain meddle-proof: The data can be distributed, but not copied.
Advantages of Blockchains
Blockchains make it possible for businesses and banks to streamline internal operations, reducing the expense, mistakes, and delays caused by traditional methods for reconciliation of records. These are some of the advantages of blockchains:
Electronic ledgers are much cheaper to maintain than traditional accounting systems.
Accurate thinking. Far fewer errors and the elimination of repetitive confirmation steps.
Minimizing the processing delay also means less capital being held against the risks of pending transactions.
Increased transparency. Transparency data is embedded within the network as a whole, by definition it is public.
Investing in Blockchain
Now, thanks to technology, it is easier than ever to invest in blockchain. Companies took interest in the technology so much that some of them have come up with the idea of creating their own private blockchains. Nonetheless, the realization of private blockchains is not without dispute. Many past experiences prove that most consumers are plainly confused about how blockchains work. It is quite understandable, since those who do not have background in finance usually do not have the supporting knowledge around blockchains.
In order to overcome this difficulty, companies will need to educate their consumers about blockchains. The concept needs to be explained in fairly comprehensible language even for those who are not of finance background. Companies also need to demonstrate how they intend to manage with issues such as consumer privacy and online transactions.