Understanding Blockchain Technology [infographic inside]
When it comes to innovation, no one beats blockchain technology. It has completely changed how we perceive our understanding of the world. It is built around the idea of decentralization and providing a platform where everyone can be benefitted.
What exactly does blockchain technology stand for?
There are many confusions when it comes to understanding blockchain technology. Some people think that bitcoin is blockchain. However, that’s not true.
Blockchain technology is best described as a distributed ledger technology(DLT). Distributed ledger technology provides nodes(users) within a network to transact using a peer-to-peer connection. This simple idea completely transforms how we do business, store data, or even do research.
The absence of a centralized authority also means more possibilities regarding innovation and problem-solving. Blockchain technology can be implemented in almost any sector you pick off. Few of the key examples include banking, medical, finance, education and many more!
What makes blockchain so useful?
In the era of innovation, only the best survives and thrives. Blockchain has all the features that make it an indispensable tech of the future. Let’s list some of the key benefits that it has to offer.
- Trust: A network where entities can trust each other without centralized control.
- Transparency: Each node and transactions can be traced back.
- Security: Transparency leads to security. Blockchain also uses advanced cryptographic algorithms.
- Cost effective: Blockchain provides cost-effective measures by eliminating the middleman.
Apart from the above features, blockchain technology offers immutability, traceability and increased efficiency.
How is a consensus reached without a centralized entity?
Excellent. You now know a lot about blockchain technology. However, you might be wondering how transactions are validated or how a network agrees on the certain decision? They use consensus algorithms. Once a transaction is generated, it is assigned to a block. The block is then validated either by mining or using other methods. Once done, it is pushed into the blockchain ledger and cannot be changed. This gives blockchain immutability.
The two popular consensus algorithms include Proof-of-Stake(PoS) and Proof-of-Work(PoW).
Cryptocurrency: The Byproduct of Blockchain Technology
Even though we can always say the opposite, but in a true sense, cryptocurrency is what utilize blockchain technology at the core. Cryptocurrency is the medium through which value can be stored, created or exchanged. It can be used to buy items or sell services. It is completely decentralized. The first cryptocurrency was Bitcoin and it is still going strong.
Cryptocurrency has no physical form. Also, it has no intrinsic value associated with it. This means that its price fluctuates more than traditional currency.
Ethereum, Litecoin, and NEO are prime examples of cryptocurrency.
“There are three eras of currency: Commodity based, politically based, and now, math based.” -- Chris Dixon, Internet entrepreneur, and investor
Unknows and the Future
Even though bitcoin is a promising technology, it is not free from flaws. There are many unknowns associated with blockchain. For example, the technology is complex and hard to implement. Also, it lacks regulatory implications in major countries which can lead to issues in its wide-spread implementation and adoption.
Blockchain technology has the ability to change our problem-solving approach. It is already transforming finance, banking, and other sectors. The key challenges include global adoption. To do so, governments have to take the step forward and educate the population about its usability.
For business, it is all about taking advantage of and keep themselves competitive in the market. Many big corporations have already started implementing blockchain in their system. The only thing that they need to do is educate their workforce and make them ready for the future.
So, what do you think about the blockchain technology future? Will it become ubiquitous? Comment below and let me know.