What is Blockchain?
Over the past few years, We all must have heard this trending word named ‘Blockchain’ somewhere or the other. Whenever we hear this word, the first thing that comes to mind is cryptocurrencies like Bitcoin, Ethereum, etc. You might be wondering, what exactly is this Blockchain? and why is it gaining so much attention and getting popular day by day? To answer the above questions, let’s understand what Blockchain is.
Blockchain is a distributed database system that is shared and runs across multiple nodes of the computer. Since Blockchain is a database system, it is capable of storing digital data. It is capable of storing any type of data and hence, can play a crucial role in revolutionizing various industries and sectors.
In easy words, Imagine a special digital ledger, like a book for recording transactions, but instead of being kept in one place, it’s stored on many computers connected over the internet.
Each time a new transaction happens, like someone sending or receiving digital money, it gets written in this digital ledger. These transactions are grouped into blocks, and these blocks are linked in a chain. This chain of blocks is the “blockchain.”
Working mechanism of Blockchain
Now that we have an idea of what Blockchain is, let us have a glance at how it works.
Whenever a transaction is initiated, it is broadcast to the nodes of computers to verify whether the transaction is valid or not. In blockchain technology, a transaction refers to the transfer of digital assets or information from one participant to another within a network. These computers use complex algorithms to validate the validity of the transaction. If it is valid, then the transaction is grouped with others into a block, and this block is added to the existing chain.
In Blockchain, each block is secured with complex crypto hashing algorithms which ensures that the data remains secure and nobody can alter the block.
Every participant in the network has a copy of the entire blockchain which leads to the creation of a distributed ledger.
Some advantages and disadvantages of Blockchain:
- Blockchain is highly secure as it stores data in the blocks, which are then linked to each other, which makes it very difficult for anyone to tamper with the data stored.
- Blockchain is a decentralized system, which means there is no single point of control, which makes it more robust as there is no single point of failure.
- Once we insert data into the Blockchain, it is difficult to change it, which ensures that the transaction data is safe and secure and nobody can alter the data.
- Understanding and implementing Blockchain is very complex and not easy, it requires a certain amount of technical expertise to implement the system.
- Once a transaction is done on Blockchain, it cannot be reversed, although it is a security feature it can lead to problems if wrong data is inserted in the chain.
- Some Blockchain networks require high computational power, which eventually requires much power consumption, which creates environmental issues.
Potential uses of Blockchain Technology:
- Cryptocurrencies: The most well-known and popular case where Blockchain is used is cryptocurrencies. You might have heard about cryptocurrencies like Bitcoin and Ethereum getting popular in recent times. These cryptocurrencies use Blockchain which enables secure, transparent, and borderless digital currencies, which can be used for peer-to-peer transactions and as a store of value.
- Healthcare: Blockchain can be used in Healthcare domains to replace the traditional record storing methods by storing them on a blockchain which can enhance data security and patient privacy while allowing authorized parties to access critical information when needed.
- Real Estate: Another major use case of Blockchain is that it can be of great use in the real estate world as Blockchain can streamline and store property transactions by securely recording ownership, title deeds, and contracts. This reduces fraud and speeds up the real estate process and makes the process more efficient and faster.
- Voting Systems: The existing voting system can be improved by the implementation of Blockchain technology. This will improve the security and transparency of voting systems. It can help eliminate fraud, ensure every vote is counted, and make results publicly accessible which will result in smooth and fair elections.
- Non-Profit and Charity: Blockchain can prove to be useful in the non-profit and charity ecosystems. Blockchain can enhance transparency in the use of donations, ensuring that funds are used as intended and reducing administrative overhead.
- Cross-Border Payments: Blockchain can simplify and make cross-border transactions faster by providing faster and cheaper alternatives to traditional banking systems which take more time and resources.
- Supply Chain Management: Nowadays, we all rely on online ordering solutions for ordering goods online. Blockchain has the potential to be utilized in supply chain management (SCM) to monitor the movement of goods. This ensures transparency, reduces fraud, and allows consumers to track their orders and get the exact details of the journey of the products as and when required.
- Gaming: In the gaming industry, Blockchain can be used to create digital assets that players can own and trade across games. This digital asset can be of many types like skins, themes, special items, and many more which will increase the player ownership and the value of in-game items that the player has.
As we’ve explored, what Blockchain is, how it works, and what its advantages and disadvantages are, the uses of Blockchain extend far beyond cryptocurrencies like Bitcoin and Ethereum. From revolutionizing healthcare record-keeping to streamlining real estate transactions and enhancing the transparency of voting systems, Blockchain’s impact is vast and diverse. Blockchain can be used for tracking goods in the supply chain. Its potential to simplify cross-border payments and even revolutionize the gaming industry by empowering players with true ownership of digital assets makes Blockchain the force with the potential to reshape various industries.