What is Blockchain Technology?

Category: Bitcoin
Last Updated: 15 Jul 2020
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Blockchain Technology

The invention of Bitcoin made a lot of racket but even till nowadays no one knows whether Satoshi Nakamoto, the founder of this wonderful technology, is a real person or just the group of developers. This fast and secure method of payment in digital currency prompted the development of online shopping and financial industry in general. The appearance of digital currency opened new opportunities to entrepreneurs and simplified business relationships all over the world – with the help of Bitcoin people can safely transfer money to any part of the world without being monitored by any government. The heart of this invention is the revolutionary blockchain technology that makes it all possible. Soon it became obvious that that is that new digital platform that should be paid the utmost attention and not the digital currency itself – on the basis of this blockchain ledger developers can elaborate numerous cryptocurrencies. So what is Blockchain and how does it work?

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The blockchain technology itself is not a new invention – the way it was connected with private key cryptography and implied in Bitcoin triggered a big change. A blockchain is defined as a virtual independent and transparent database, which includes records of information arranged into special clusters called blocks. Every block is interconnected with the previous one, hence the word chain in the name, in an unbroken unity and protected via special encrypted code. If any kind of modifications is being made to one of the blocks, it immediately influences the history of the whole chain and can't go unnoticeable. This is the reason why blockchain was an ideal platform for digital currency transactions through Bitcoin payment system. The blockchain is often called the backbone for the transaction layer.

Several important features of the blockchain protocol can be specified to explain the innovative nature of this technology and how it allure new followers. These are the peculiarities that allow the blockchain technology to be applied in various fields and industries. This list can be considered a brief Bitcoin guide – the main principles of its operation are explained.

Shared database.

Instead of traditional databases that depend on their administrative centers like banks or governments, this ledger is not bound to one location or managed by a certain body. Being a decentralized database, it is located all over the Internet on millions of different computers at the same time. Every computer has a replicated version of the database that is being updated every time new records are created, or old are amended. The information is publicly available to everyone in the network making it too complicated to be hacked. The blockchain is sometimes called a mutual distributed ledger (MDL).

Security implementation.

Due to the work of the chain that unites blocks of data, this technology is very useful in providing the secure way of digital money transfer. Every transaction made on Bitcoin is preserved and stored in its database forever. When new transactions are conducted, they are added to already existing to continue the chain. It eliminates the possibility of fraud or tampering with the records – it is very easy to check whether the transaction can be done and the person really has what is claimed.

Peer-to-peer communication.

A peer-to-peer network is used in cases when new blocks need to be validated. Trust is a very risky enterprise, and at the time when the whole financial world is absorbed with suspicion, blockchain provides an answer. With the help of this technology, it is elementary to prove the identity of any person and grant someone the permission to make a  transaction. This is when private key cryptography is used – a person possesses the private key that can be compared with an ID card. In such case, information is given only to those who should be aware of it. No one wants to share important financial details with unknown people that can use them in a deceitful way.

Obsolescence of any mediators.

When trusted connection between two parties is guaranteed, the necessity of third parties to conduct a proper deal falls away.  People can trust each other having a reliable, secure, and decentralized platform to conduct their business.

Currently, the blockchain technology has become a much more important enterprise than the Bitcoin from which it was born. After hitting the mainstream and getting worldwide recognition, it demonstrates that the nature of the very network is changing. We are slowly moving to the Internet of Value which will allow people to exchange assets. The potential of blockchain is immense and, maybe, one day it will become the norm of financial operations. Due to its dependable nature, this innovation can be used in many ways when a secure and protected ledger is needed – smart contracts, electronic voting, and digital health records are not the only implementations. The more societies will use this technology, the more impact it will leave on the global economy.

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What is Blockchain Technology?. (2018, Mar 08). Retrieved from https://phdessay.com/what-is-blockchain-technology/

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