Blockchain: All You Should Know
Electronic currency has been one of the most misunderstood products of the digital age. With the images of Bitcoin and Ethereum built on an extraordinary exaggeration of being something peculiar and entirely different from the contemporary financial entities, the true potentials and benefits of cryptocurrency are shadowed behind suspicions. It is not entirely false to say that cryptocurrency is far different from ordinary currencies pegged to gold standard or the US Dollar; Bitcoin is the start of a new era of banking and digital economy that is decentralized, foolproof and safe in terms of long-term investment.
In conjunction with the trading and exchange system of Bitcoin, Blockchain is very important as a means of cryptocurrency exchange, transfer and business. Blockchain, in its essence, is a banking system for cryptocurrency. Launched in 2011, it acts as a cryptocurrency storage system (Viz Wallet) and also provides service for transactions in cryptocurrency, supporting a plethora of Internet currencies such as Bitcoin, Bitcoin Cash and Ethereum. In addition, Blockchain also acts as a marketplace and analysis system that calculates cryptocurrency trajectories, makes market predictions and overlooks a large component of the cryptocurrency business worldwide. Although launched quite earlier, Blockchain has taken some time to clarify itself and develop itself as a mainstream platform, not earlier than 2016.
What is Blockchain?
Peeking in the details, Blockchain is a peer-to-peer system that is based on independent servers situated globally, storing transactional information in more than one place; the term used for describing such systems is DLT (distributed ledger system). in this way, Blockchain ensures that the transactional data is stored at more than one storage sites, and in turn ensures that taking over such a system and manipulating it for committing forgery and fraud is extremely difficult. One can think of Blockchain as an open-source software system that can be modified at once by servers anywhere in the world, maintaining security and accuracy in the process, because of the fact that every transaction is overlooked and cross-checked by everyone present on the system.
How does Blockchain work?
Blockchain works as an online currency exchange platform much like an ordinary wire transfer service but stores the transactional information in units called “blocks”. Each computer connected to the system can choose to act as a secondary server (node), one of the hundreds of thousands of servers connected on the network. Like a website feed, each transaction is sent to each node of the system, and copies are made within systems of each server connected to the network. Although the individual blocks might differ from one another, each transaction has a crypto-signature attached to it which cannot be manipulated. However, addition of a block is not that easy: computers are required to perform complex mathematical operations to provide proof of work for registering a transaction in the blockchain and mining cryptocurrency in the process. For breaching such a system, a potential hacker would require the ability to manipulate every single node present on the server network, making it very difficult to sabotage the system.
Although the Blockchain network might have a structural similarity to the ordinary banking systems, the differences are large: Blockchain is can be altered by programming: its high programmability is based on valid software programs known as smart contracts. Each transaction is linked with a cryptocurrency stamp (known as a hash) which can not be liberally altered once created. The transactions on Blockchain have an associated timestamp with them, ensuring that each transfer can be accounted for in terms of time and date of the business. In addition, Blockchain has an additional benefit of maintaining secrecy of the parties involved, with them being either completely or partially anonymous. These transactions are topped with the quality of being completely secure and accurate, with the record being unalterable once tallied on the network.
How is Blockchain different?
Blockchain is different from past attempts of bringing cryptocurrency to mainstream public levels; all previous attempts are marred with widespread skepticism regarding legitimacy because of less inclination of people to trust an online system whose watchdogs cannot be tangibly seen by the people. Blockchain excludes such third-party financial guardians out of the equation: the whole system is maintained and managed by the peers using the network, making the system work because of mutual cooperation of the hundreds of thousands of users. This mutual trust decentralizes the banking transactional system and makes the likelihood of any breach very less.
Much has been said about the working of Blockchain, but the most important aspect to look at it is its potential uses in our daily lives: the privacy and security of the system allows one to develop safe supply chain systems on the network and even use it as a method of secure passage of data such as healthcare related information, only accessible to the desired recipients by usage of specialized keys. The decentralization of the system also allows removal of banking entities from the picture, adding to the safety of the transaction. To sum up, mainstreaming of such a revolutionary technology will change the structure of the financial system of the world and will have long-term implications on information technology.