“Blockchain” is a term that you probably haven’t heard of until recently. As cryptocurrency and DeFi (Decentralized Finance) have grown in popularity, so has curiosity about how it works. I hired an expert to write an article on this topic, and today I’m going to be breaking it down as we go along. In this article we explain what a blockchain is, why the concept was created, and how it works.
What is a Blockchain?
The blockchain is a single sign-on network in which all linked nodes have a copy of the data. Blocks hold information from previous blocks and convey data to the next block using cryptographic code. Essentially, if the chain was a network of 100 computers, a copy of the data would be stored by each of the 100 computers.
The blockchain was created with the intention of allowing secure and anonymous cryptocurrency transactions, but it quickly became clear that it had many other uses. With the addition of Smart Contracts, it’s evolution accelerated, since it became a critical component in enterprises’ use of this technology.
The blockchain has seen such a quick rise in popularity because the information that is transmitted through this technology is passed and stored with very high levels of security.
Due to this complex encryption system, records made using this technology are immutable, and free alteration of data is prevented.
If you write a document on Google Docs right now and upload it, that data could be altered before it reaches its destination. A hacker could force their way into your account and access the file, change it, or delete it. In addition to this, if they wanted to, Google could do the same thing. Blockchains don’t rely on a central organization’s cloud services, allowing private individuals to have top-tier security without relying on any centralized entity.
How Does a Blockchain Work?
Imagine a ledger where all money inflows and outflows are recorded. This book is made up of a chain of blocks, each one carrying information about a network transaction. Being linked, they allow data transfers where there is no need for a third party to certify the information. Once the information is entered, the items that have been modified or added appear immutably in the global transaction log, without the possibility of deleting those records. The chain is separated into various steps to get an attack-proof and effective result:
● When a transaction is completed, it is placed in the “transaction pool,” and when that pool has enough transactions, a block of data is created. As a result, the information selected, such as what, when, and so on, may be recorded.
● Each block is interconnected with the one before and after it. The set creates a secure data chain that confirms the precise time and order of transactions.
● These transactions are organized into blocks, which combine to form an irreversible chain (a modification in one block affects the validity of all subsequent blocks), which we refer to as the blockchain. At this point, each subsequent block supports the prior one’s verification, and so on, strengthening the entire chain of blocks. This makes the chain tamper-proof, guaranteeing a secure environment.
Why use blockchain technology?
When it comes to record keeping and third-party certification, operations sometimes need a significant amount of effort. Furthermore, they are vulnerable to fraud and cyber assaults, requiring the use of technology such as blockchain to speed up and verify the process.
These are some of the benefits that the blockchain technology gives to businesses:
● By providing trustworthy and shareable data, it increases confidence between the parties involved.
● Reduces the need for external middlemen.It provides more security since all network participants must agree on the accuracy of the data, and verified transactions are irreversible.
● Creates a tamper-proof registry.
● Increases efficiency by reducing time spent on record reconciliation tasks.
● Allows you to track and find items and services all the way through the supply chain.
How is Blockchain Used in Cryptocurrency?
At the start of this article, we said that the blockchain was aimed to facilitate cryptocurrencies’ transactions in a safe and anonymous way. But what exactly does blockchain have to do with cryptocurrencies?
The first thing you should be very clear about is the following: blockchain is not Bitcoin. However, Blockchain technology is a fundamental part of any cryptocurrency, including Bitcoin, as cryptocurrencies rely on this technology for their transactions and operations.
In an environment of digital money, having a digital system to record and reflect all these transactions is becoming necessity. In a nutshell, blockchain is the technology that allows Bitcoins and other cryptocurrencies to be transferred from one individual to another, but as we have seen, its use goes far beyond cryptocurrencies.
When you hear about protocols within the blockchain, you should know that they are that set of rules that allow us to share data between computers. In the crypto world, they establish the structure of the blockchain: that is, the basis for distributing them safely.
Can blockchain technology be applied in education?
As a college student, I couldn’t help but wonder if blockchain could eventually become a part of the education system. Here’s a couple examples of how it could:
Blockchain technology has the potential to revolutionize data-sharing for students. If a college student has to manage an economic transaction, such as in the case of paying admission to enroll in a university, this process could be completed much more safely with the addition of blockchain.
Currently, most forms of higher education accept payment through check or digital payment through their respective institutional portals.
Theoretically, these transactions could be compromised. However, the implementation of blockchain into already existing infrastructure could make the payment process that much more secure, even if the goal is not “decentralization” in this case.
Another possible application of Blockchain technology would be during the application/transfer process.
Blockchain allows for a new system for issuing and certifying official documents and qualifications. With this, the validity of recommendations, awards, and titles that a student obtains could be ensured.
In this case, the technology applied by the system would certify the record in a secure manner and could potentially be used to certify the authenticity of the academic history of each student.
Betting on Blockchain
While it may be relatively new, blockchain has made waves in multiple industries. I can’t predict the future, but I can say with confidence that I believe blockchain is the first of many transformative technologies for the future of finance. Tune back in next week for more of the Toddster Blog. Thanks for reading!