What is blockchain and how does it work?
At a time when companies face new challenges in data management and security, this is a way to let companies make and verify transactions on a network instantaneously without a central authority.
A blockchain is a data structure that makes it possible to create a digital ledger of transactions and share it among a distributed network of computers. It uses cryptography to allow each participant on the network to manipulate the ledger in a secure way without the need for a central authority.
Although any conventional database can store this type of information, blockchain is unique, as it is totally decentralized. Rather than being stored in one location by a centralized administrator (like an Excel spreadsheet or a bank database), many identical copies of a blockchain database are stored on multiple computers called nodes that are distributed across a network.
The way each new block is created is the key to why the blockchain is considered highly secure. Most nodes must verify and confirm the legitimacy of new data before a new block can be added to the ledger. If we are talking about a cryptocurrency, this technology makes sure that new transactions in a block are not fraudulent or that the coins have not been spent more than once.
Cryptocurrencies are the most common use of blockchain today, storing and recording data related to currency transactions. The more people use cryptocurrencies, the more widespread the blockchain will become.
We can also find its utility in the banking field. Beyond cryptocurrencies, blockchain is also used to process transactions in fiduciary currency, such as dollars and euros. This could speed up these transactions as they can be verified quickly and processed outside of normal business hours.
Blockchain can also be used to record and transfer ownership of different assets. Currently, this is extremely popular with digital assets such as NFTs, a representation of art property, and digital videos. However, it can also be used to process the ownership of real-life assets, such as real estate and vehicles. Blockchain would make it possible to verify the identity and ownership of a person to transfer the title deed without manually submitting documentation.
"Currently, this is extremely popular with digital assets such as NFTs, a representation of art property, and digital videos."
What are its advantages in today's world?
In the first instance, this technology allows greater transaction accuracy. Since blockchain transactions need to be verified by multiple nodes, this can reduce mistakes. Also, each asset is individually identified and tracked on the blockchain, so there is no chance to spend it twice. Also, using blockchain, two parties to a transaction can confirm and complete it without the need for a third person or entity, which saves time and money. Regarding security and time, a decentralized network like this makes it almost impossible for someone to conduct fraudulent actions. To perform falsified transactions, every node would have to be hacked. While this is not necessarily impossible, cryptocurrency blockchain systems use proof-of-stake or proof-of-work transaction verification methods that make fraudulent transactions more difficult.