Blockchain has become the talk of the town, nowadays. If you feel left out when everyone is going on about it, then do not worry as this article will explain it all to you.
Even though the name might seem daunting, Blockchain is a simple concept to understand. At its core, it is a distributed database. In this database, the data is stored in blocks, and these blocks are connected via so-called chains. Hence, the name, Blockchain.
The concept of a blockchain is not new, it has been around since 2008 when Satoshi Nakamoto used it to publish Bitcoin. After that, however, it took several years for blockchain’s potential to be realized. Most people came to know of it after Bitcoin’s rally to almost $20,000 in 2017. Now that we have mentioned Bitcoin, let’s look at the uses of blockchain.
Uses of Blockchain
The most common and popular use of blockchain is cryptocurrency. The cryptocurrency includes popular digital coins such as Bitcoin and Ethereum. These coins are not controlled by a single organization. Rather their transactions are stored in a distributed ledger on the blockchain. Other growing uses of the blockchain include NFTs and DeFi.
How Does Blockchain Work?
Blockchain vs. A Typical Database
A typical database is generally stored in a single location and the owner of the server has full authority over its stored data. However, the blockchain is based on decentralized storage. What this means is that no single body has full authority over the data stored. We will talk about the benefits of this later in the article. First, let’s go further into how the data is stored.
How Is the Data Stored?
The blockchain is a distributed database. Therefore, the data is distributed among decentralized nodes. A node can be any device that can store the state of the blockchain and maintain the network. On these nodes, the data is stored in blocks. These blocks must be mined using extremely complex mathematical solutions. These blocks are connected as a chain and once a new block is added at the end, the data in the previous blocks are locked and cannot be changed. Moreover, a new block can only be added if the network of nodes approves this newly mined block with complex algorithms.
Now that we understand how a blockchain stores its data, let’s talk about the benefits. It is mainly used as a distributed ledger for financial transactions. You might think it is similar to a bank; however, blockchain is revolutionizing the world of finance. Unlike banks, there is no central governing body in the blockchain. Therefore, no one organization can implement the rules; thus, Blockchain is completely different from any other financial institution. Some of its advantages include:
- 24/7, 365 days a year availability
- Faster transaction speeds
- No discrimination among its users
- No need for formally opening an account
- Better security and privacy
Blockchain is making waves and this technology is promising to be the next big move in the tech industry.