About blockchain in simple terms
Blockchain technology emerged concurrently with the first cryptocurrency – bitcoin. Bitcoin has different names: distributed ledger, transaction block chain, secure record repository, decentralized transaction ledger – all these definitions are right and synonymous. The technology can change the world, but prior to describing the advantages, one should understand the notion.
What is blockchain?
Talking about blockchain in simple terms, imagine small, connected cloud repositories that store data, which cannot be erased or changed. That is blockchain, and small repositories represent blocks.
Blocks do not store photographs or film files but text information. The information can be of different character: data about property owners, paid administrative charges, disease history, or bank transfer data. When data appears in the block, it cannot be changed or destroyed, because blocks are protected cryptographically.
It seems that blockchain is an advanced method of data storage.
How blocks are created?
Blocks are formed by computers, connected in a single online network. Computers perform mathematical calculations, gradually building new blocks. Owners of such computers are called miners. In fact, they rent out the computing power of their computers, but not for free. For every newly mined block, they receive remuneration – cryptocurrency. Cryptocurrency type depends on blockchain type, used by the miner. It can be bitcoin, ether, litecoin, and others.
Besides, miners’ computers support the working capacity of the chain. They organize transaction entries in blocks.
Why blockchain is so good?
- The main advantage of blockchain is the transparency of transactions. All cryptocurrency transactions are publicly open and everyone can see how much funds were transferred from one wallet to another. However, all data about owners of wallets and the reasons for making a transaction are closed. It brings us to the next advantage.
- All blockchain transactions are anonymous. Participants of blockchain can see the number of transaction, wallet address and the amount of transfer. All other data is available to transaction parties only.
- Data security. As written above, entries made in a block are impossible to change. The thing is that blocks are stored on all chain computers rather than on one server or computer. Therefore, to change the information in a block, malefactors will need to hack all computers at once. Even if such situation happens, blockchain will reject the block, seeing the changes.
- This paragraph will appeal to those who do not like to pay fees. In blockchain, all transactions are conducted between two parties without intermediaries. Thanks to that, there is no need to pay for third-party services.
- Management decisions are taken by all participants of the network rather than a leading company or a board of directors. If a suggestion to change the blockchain algorithm is proposed, it will be supported in case the majority of miners accepts it.
Blockchain now and in the future
Today, the business audience and governments take a cautious approach to blockchain. Therefore, the technology is more often tested than applied. However, companies and state institutions are gradually realizing that the future lies behind blockchain.
Potentially, the technology can be applied in all fields, where some records or operations with currency are needed: healthcare, insurance, education, logistics, law, manufacturing industry, defense, etc.
Blockchain has obvious and unprecedented advantages. The use of the technology can give rise to changes that in terms of importance can be compared perhaps with the changes inflicted by the arrival of the Internet. Blockchain has the potential at least to reduce the number of mistakes if not to eliminate them. Fraud probability will also go down. Moreover, transparency will be ensured and corruption will decrease.