What is blockchain technology? How Does Blockchain Work? The complete guide
What is blockchain technology?
Blockchain technology has created a large amount of attention to people who are exploring the world of the internet. Many people seem to think that it is a complicated topic for a discussion, but it is easier to understand if explained implicitly. Blockchain, in the simplest terms, is a series of immutable records of digital information that is entirely accessible for the public. It is also oftentimes described as a distributed ledger that is regularly updated and shared with people. It is managed by thousands of computers and is not owned by a single entity.
To understand more, “block” in blockchain pertains to the piece of digital information that is stored in the “chain” (public databases). The “block” contains information about the transactions made like date, time, amount of purchase value. Aside from this, it also stores the data of parties who participated in the deed. This “block” will then be given a unique code called hash that is different among other blocks in the chain. These blocks are secured and bound by the cryptographic principles or the “chain.”
Reasons why many want to use blockchain
Many people were not just astounded by this blockchain technology. They are already maximizing the existence of this on the internet, making safe and successful transactions over a few clicks. Here’s why most people are encouraged to do their activities under blockchain technology:
Blockchain, in terms of safety, is considered secure. It is because hackers who want to invade this public space will have a hard time falsifying information in a single block. Since every block is made uniquely in series, its “hash” or unique code is made every after block before it. Thus, if you alter one piece of information in a single block, you will need to change the blocks following it, and it could take forever to do so. Moreover, each computer under the blockchain network has a copy of thousands and millions of the same blockchain. It means that if a hacker wants to manipulate accounts of events, it will need to fabricate every copy, and that is just impossible. This is why it is immutable. Once something has been added to the blockchain, it cannot be changed.
Blockchain carries no transaction costs. It is a space that allows you to have transactions directly to the party involved without being charged for a third party fee. In here, you will not need an intermediary (like Uber) to make successful transactions with your desired party.
Some of you might be confused when blockchain is both described as transparent and private. Well, information is easily accessible to the public that presents its transparency. This distributed database technology can be helpful during elections since data can be verified. However, it is also private. Confused now? It means that your personal information will not be directly exposed. Instead, your identity will be represented by your address through complex cryptography. In this case, if you know the address of big companies, you can easily see their transactions and verify if their service is truthful and honest.
Apart from centralized authority where transactions can take a few days to settle, blockchain allows you to process your transactions in just 10 minutes and secure it in a matter of hours away. Traders from different countries or borders can take advantage of this since there can be an issue regarding timezone difference and the fact that payments must be confirmed first before processing.
How Does Blockchain Work?
When a block stores a new piece of digital information, it is added to the blockchain. As discussed earlier, blockchain consists of multiple blocks that are chained together. However, to add a block into the chain, specific requirements need to be fulfilled.
- A transaction must happen between two parties. It may be a purchase on an online site or a payment for a specific service. Whatever it is, there needs to be an existed transaction so there can be information to record and to verify.
- The transaction needs to be verified. By verifying, your purchase needs to get paid, and the network of computers will confirm the details to check if the transaction happened in the exact way you said it did.
- Once the above two were done, the information regarding the transaction is to be stored in a block. Inclusions in this were said in the first parts like the confirmed date, time, amount of purchase, and the parties involved’s signatures. This block is now ready to be added to the blockchain after it is named uniquely.
4. The block should be named a unique code or a “hash.” Once a block’s transactions were verified, it will have an identifying code called a hash. Once it has it, the block will be added to the blockchain and becomes visible to the public.
The four abovementioned steps must be done entirely to make the blockchain technology work.
Blockchain technology is bound to transform the creative economy than it already is. Traditional industries will experience a large-scale restructuring due to the immersion of Blockchain-based services. As a distributed ledger technology (DLT), Blockchain technology does not only serves as an alternative for financial transactions, but it also permits transactions between parties with no intermediaries. This innovative system is hyped up by many marketers and purchasers as they maximize their usage. Due to its proven safety and fast processing, more people are becoming interested in using it. Now, people can keep track of transactions publicly, which is also useful especially if information needs to be verifiable for legal purposes. It also allows the public to access truth from large companies and probably politicians and see whether they are showing accuracy with their public statements and promises.