Over the years, concepts like blockchain technology have been a major subject of discussion. As the conversation keeps growing it’s clear that this innovation is becoming a big deal, as seen in the boom in cryptocurrencies. This means that we can’t avoid or ignore the buzz. Rather, we need to learn about it so we can be a part of the future that blockchain is creating.
In simple terms, blockchain is a decentralized ledger where transactions are recorded in such a way that they can’t be altered. But, there is more about this innovation, and we’ll be examining all of it. Follow us closely in this article as we explore the basics of blockchain technology so you can have a solid and foundational understanding of how it works. Let’s get started!
KEY TAKEAWAYS:
- Blockchain is a decentralized ledger where transactions are recorded.
- A blockchain is made up of blocks that are linked together into a chain through a consensus mechanism.
- Blockchain technology is different from decentralized technology because it is immutable, transparent, secure, and trustless.
- Apart from its use in cryptocurrencies, blockchain has useful applications in industries like healthcare, voting, real estate, and supply chain management.
The Fundamentals of Blockchain
The first thing to know about blockchain is its different components and how they interconnect. Let’s take a look at these components below:
- Blocks: Each block on the blockchain contains a list of transactions. Once a block is completed, it is added to the chain to create a continuous and immutable record of all transactions.
- Chains: Blocks are linked in a linear and chronological order to form a chain. Each new block contains a cryptographic hash from the previous block which ensures the integrity of the entire chain.
- Deentralization: Unlike the traditional centralized method of keeping a database, blockchain is controlled by a peer-to-peer network. Every participant on a blockchain network is called node, and each node has a copy of the record of the entire network, making it resistant to censorship and fraud.
- Consensus mechanisms: To ensure that every node agrees with the records on the blockchain, consensus mechanisms are used to prevent malicious actors from tampering with the network. The most consensus mechanisms used are proof-of-work (PoW) and proof-of-stake (PoS).
How Blockchain Works
Blockchain is indeed a revolutionary technology. While this innovation is still evolving, here is the basics of how it works:
- Transaction initiation: A user initiates a digital transaction or record like sending cryptocurrency to another person.
- Transaction broadcast: this record is sent to every node on the network.
- Validation: Each node confirms the transaction by using the network’s consensus mechanism.
- Block formation: Once the transaction has been confirmed, it is grouped with other transactions to form a new block.
- Block addition: The new block is added to the other chain of blocks and the updated chain is distributed to every node in the network.
- Completion: Once the transaction is added, it is immutable, that is, it can’t be modified or deleted.
Distinguishing Features of Blockchain Technology
Blockchain is an emerging solution that is significantly different from traditional databases and record-keeping systems. Below are some key features that sets this technology apart.
- Decentralization: Because there is no central authority, blockchain has minimal risk of a single point of failure.
- Immutability: Once data is stored on the blockchain, it cannot be altered. This helps to maintain the integrity and reliability of data found on the chain.
- Transparency: Every transaction on a public blockchain is visible to all participants, which promotes transparency and accountability.
- Security: Data on the blockchain is secured using cryptography, thus making it resistant to hacking and fraud.
- Trustlessness: Blockchain allows for trustless interaction between users because the system itself is what guarantees the authenticity and accuracy of all transactions.
Applications of Blockchain Technology
Blockchain technology is the backbone of cryptocurrencies like Bitcoin and it is transforming how many other industries function today. Notable examples of the far-reaching application of the blockchain technology includes:
Finance and Banking
Blockchain allows for faster, cheaper and transparent cross-border payments, which reduces fraud. By using smart contracts, many financial processes can be automated and streamlined. Ethereum is the most popular platform for creating and deploying smart contracts.
Supply Chain Management
Blockchain can provide end-to-end visibility of the supply chain. By recording every transaction and movement of goods on the blockchain, companies can ensure authenticity and streamline their logistics. Walmart and IBM’s Food Trust blockchain are good examples of this.
Healthcare
In healthcare, blockchain can securely store patient data across different medical institutions. This technology can also be used to prevent the sale of counterfeit drugs by tracking the production and distribution of pharmaceuticals. Projects like Medicalchain and MediBloc are already exploring this application of blockchain.
Voting systems
Blockchain-based voting systems allow for transparent and temper-proof elections. This technology reduces the risk of fraud and ensures that every vote is counted. Sierra Leone conducted a blockchain based election as far back as 2019, making it the first country to do so.
Real Estate
Blockchain can streamline real estate transactions by reducing the need for intermediaries, which helps to speed up the process while lowering costs. Property titles and deeds can easily be tokenized and recorded on the blockchain to provide a transparent and immutable record of ownership. Propy is one of the frontliner in blockchain for real estate.
Conclusion
Blockchain technology is indeed a fundamental shift in how we record, verify and share records today. Moreso, it is paving the way for more innovations in different industries. As humans continue to explore the potential of blockchain, we can expect that it will further revolutionize how we live and interact in the digital world.
