The author is an expert in the field of multi-asset trading.
What is Blockchain and How Does It Work?
With digital currencies such as Bitcoin becoming household names due to their astronomic rise in value and public proliferation, the technology that gives the famous cryptocurrency its trademark decentralised encryption, accountability and global scale is also entering the limelight. Blockchain, the underlying foundation behind Bitcoin, is garnering increased interest from the curious public eager for novelty and enterprising innovators looking to disrupt outdated models.
Though the public’s familiarity with the technology has risen, the concept of blockchain still elicits confused glares from those who don’t quite understand the intricacies of its mechanism, and are thus unable to quite appreciate the huge advantages and opportunities it creates. Blockchain-based networks, decentralised applications and distributed ledgers are becoming the foundation of much of our digital lives, and revitalising many stagnant technological spheres.
Blockchain in a Nutshell
In simplest terms, blockchain is a distributed database that maintains a public list of records. These records are called blocks, with each block containing the history of the block preceding it with all its timestamped transaction data. In effect, it chains all these blocks together, hence the name blockchain. A blockchain is constantly growing as the most recent transactions are recorded and added to the chain in chronological order as completed blocks.
This entire operation is end-to-end encrypted and easily verifiable but nearly unfalsifiable. This is due to the logistical nature of blockchain, which is maintained by a scalable worldwide network of computers referred to as nodes. Each node has a copy of the entire blockchain that’s automatically downloaded. What this means is that blockchain is decentralised, has no central authority or third-party processing. This also guarantees that there is no single point of failure nor vulnerability.
Blockchain takes away the need for intermediaries such as banks, as every transaction is independently verifiable through all the records across the network. Blockchain was designed in a way that makes it immutable, meaning that no record can be changed or deleted. And blocks are added cryptographically, securing them from any meddling. In essence, blockchain technology allows to authenticate and transact immediately, securely, and without costly intermediaries.
Another big advantage of blockchain is the smart contract, which is designed to ensure the security and fault tolerance of the system as a whole. Blockchain based platforms use smart contracts as an independent arbitrator to fulfill the obligations of all parties. A smart contract is impartial and doesn’t depend on intermediaries, the agreements exist across a distributed, decentralised blockchain network.
More Than Just Bitcoin
Originally developed in 2008 as the accounting method for Bitcoin, blockchain’s history has been closely entwined with the cryptocurrency, but its vast potential is beginning to be tapped across the digital world. Although currently the technology is largely used to verify financial transactions within digital currencies, in theory and practice it is possible to code and insert any type of document or digital asset into the blockchain. This makes the technology incredibly useful and adaptable.
Companies are already using blockchain for everything from banking and identity to asset tracking and supply chain management. And as more and more industries begin to utilise blockchain-based technologies, we are closer than ever to a future where blockchain will replace outdated modes of transacting money and information across a wide array of applications. Subscribe to our social channels below to stay up to date on these exciting news and developments.
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