What exactly is blockchain technology? This is a question I have gotten from several of my readers, so since it is such a hot topic, I decided to just do a post about it. With Bitcoin, Litecoin, Iota and several other cryptocurrencies being so popular, it’s no wonder people want to know about everything surrounding it. Grab a cocktail and settle in for this one.
Blockchain technology is an invention by a person or group of people known as Satoshi Nakamoto. Blockchains are secure databases by design. The concept was introduced in 2008 and then implemented for the first time in 2009 as part of the digital bitcoin currency; the blockchain serves as the public ledger for all bitcoin transactions.
By using a blockchain system, bitcoin was the first digital currency to solve the double spending problem (unlike physical coins or tokens, electronic files can be duplicated and spent twice) without the use of an authoritative body or central server. Since its development, it has evolved into something phenomenal. By allowing digital information to be distributed but not copied, blockchain technology created the backbone of a new type of internet. Originally devised for the digital currency, which was to allow anyone to buy bitcoin instantly, the tech community is now finding other potential uses for the technology.
Like the internet (or your car), you don’t need to know how the blockchain works to use it. However, having a basic knowledge of this new technology shows why it’s considered revolutionary. The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.
A blockchain is a distributed database, meaning that the storage devices for the database are not all connected to a common processor. It maintains a growing list of ordered records, called blocks. Each block has a timestamp and a link to a previous block.
Cryptography (hence the word cryptocurrency) ensures that users can only edit the parts of the blockchain that they “own” by possessing the private keys necessary to write to the file. It also ensures that everyone’s copy of the distributed blockchain is kept in synch.
Imagine a digital medical record: each entry is a block. It has a timestamp, the date and time when the record was created. And by design, that entry cannot be changed retroactively, because we want the record of diagnosis, treatment, etc. to be clear and unmodified. Only the doctor, who has one private key, and the patient, who has the other, can access the information, and the information is only shared when one of those users shares his or her private key with a third party — say, a hospital or specialist.
How Blockchain Works
On the internet, anyone can publish information and then others can access it anywhere in the world. A blockchain allows anyone to send value anywhere in the world where the blockchain file can be accessed. But you must have a private, cryptographically created key to access only the blocks you “own.”
By giving a private key which you own to someone else, you effectively transfer the value of whatever is stored in that section of the blockchain.
So, to use the bitcoin example, keys are used to access addresses, which contain units of currency that have financial value. This fills the role of recording the transfer, which is traditionally carried out by banks.
So now that I have explained blockchain to the best of my ability, do you think blockchain is the wave of the future? Share your thoughts below in the comments. Also please use the social share buttons and share among your social platforms, please and thank you.