Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack or cheat the system. It can also be said to be a distributed digital ledger that stores any data.
A Blockchain can record information about cryptocurrency transactions and ownership of assets like Non-Fungible Tokens(NFTs).
Any normal database can store this kind of information but what makes Blockchain unique and exciting is that it is decentralized. This means that rather than storing data in one central location, many copies of blockchain data are held on multiple computers spread out across a network.
This technology was originally intended to timestamp digital documents to make them uneasy to be backdated or tampered with and was described in 1991 by a group of researchers.
A brief illustration of how blockchain technology works.
Four friends- Phil, Grace, Jack, and David decided to go out for dinner at a restaurant. After the meal, Phil decided to pay the bill.
The next day, Grace, Jack, and David decide to pay Phil back by splitting the expense among themselves using a cryptocurrency (a digital currency) called Bitcoin. They decided to each send Phil two bitcoins each.
Grace had 4 bitcoins in his wallet, David had 6 bitcoins and Jack had 1 Bitcoin. Grace sends 2 bitcoins to Phil. A record is created for this transaction in the form of a block. The transaction details between them are permanently inscribed in this block and the block also contains how many bitcoins each of them has in their reserve.
David sends his own share of Bitcoin to Phil and a block is also created for their transaction.
This chain of blocks is called a ledger and that ledger is shared among all the friends as a public distributed ledger.
So, what happens when Jack who has just 1 Bitcoin left tries to send his own share to Phil?.
The transaction will not go through. This is because all his friends have copies of the ledger and it’s clear that Jack has only 1 bitcoin left.
Jack will need to add more bitcoins to his wallet for his transaction to go through.
A hacker will not be able to alter the date in the Blockchain because:
- Each user has a copy of the ledger.
- Complex algorithms encrypt the data within the blocks.
- Most properties the blockchain sector possesses a distributed, timestamped, anonymous, secure, and immutable.
Some common uses of blockchain.
- Banking — Transactions using Fiat currencies are also being validated on the blockchain. This leads to a more efficient system of conventional payments.
- Cryptocurrency — this is the most common use of blockchain, and it is the core technology behind cryptocurrencies such as Bitcoin and Ethereum.
- NFTs & Asset Transfers — The blockchain can record the ownership and transfer of assets. This includes Non-fungible tokens (NFTs) but also includes real-world assets like cars and real estate.
- Smart Contracts — A smart contract sets out the terms of an agreement. But unlike a traditional contract, a smart contract’s terms are executed as code running on a blockchain like Ethereum.
You can see from this little read that blockchain technology will solve a lot of problems and there are a lot of opportunities and benefits all adopters stand to achieve.
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