Over the past years you have probably heard the term blockchain thrown around when talking about cryptocurrencies, like Bitcoin. However, a lot of people might still be scratching their heads about what exactly blockchain technology is, how it works, why it’s popular, and how it is a vital part of the digital world that we are moving towards.
In order to prepare for the future of digital currency and how it will continue to be integrated and adopted into society it is important to understand what blockchain technology is.
What is Blockchain Technology?
To put it simply, blockchain technology is a digital ledger that stores transactional records based on purchases. This network is stored on many databases that are referred to as the “chain” that resides in a network that is connected through peer-to-peer nodes.
Every single transaction that is recorded on this digital ledger is authorized by a digital signature of the owner. This digital signature is unique to every person and authenticates the transaction, safeguarding it and making it highly secure. This blockchain is unique because it allows anybody to see the data, but they cannot corrupt it.
How does Blockchain Technology Work?
The Blockchain is a combination of three leading technologies.
Cryptographic keys on the blockchain consist of two keys, a private key and a public key. These keys are what make transactions successful between two parties. Every individual has these two keys which are used to create a digital identity reference. This secured identity is hands down the most important aspect within Blockchain technology. In the cryptocurrency world, this identify is referred to as a ‘digital signature’ which controls and authorizes transactions.
Proof of Work (POW)
Proof of Work objective is to extend the chain. The longer the chain is the most believable and safest because it has the greatest proof-of-work invested in it. Through a consensus mechanism where all parties agree, the transactions are valid through a peer-to-peer shared ledger that can be proven and checked. To learn more about Peer-to-Peer Electronic Cash Systems and Proof of Works click here.
A means of computing to store the transactions and records of the network
When two parties authorize a deal, it is then certified by a mathematical verification which records the transaction on the Blockchain and makes it secure between the two connected parties.
Why is Blockchain so popular?
There are three main reasons that Blockchain is becoming popular amongst users and businesses.
1. It’s highly secure
By using individuals’ unique digital signatures transactions are fraud-free on the Blockchain. It is impossible for users to corrupt or change other people’s data without that specific digital signature.
2. The Blockchain is a decentralized system
Typically, you would need approval of regulatory authorities like a government or a bank in order to make a transaction. Through the Blockchain this isn’t the case; instead, transactions are made with a mutual consensus of users resulting in smoother, safer, and faster transactions.
3. Automation capability
On the Blockchain users can generate systematic automatic actions, events, and payments.
Although we just skimmed the basics of Blockchain in this article, there is no denying that this technology is a new interesting way to make secure transactions. With its ability to support various applications related to multiple industries including finance, supply chain, and manufacturing we are seeing the adoption rate rise at a steady pace.
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