Blockchain technology is becoming a popular topic in the public due to its association with Bitcoin and other cryptocurrencies. Many people think that cryptocurrencies and Blockchain technology are something only computer geeks should be interested in. However, the concept of Blockchain technology is not as complex as it may sound. Here is a simple beginner’s guide to what Blockchain technology is.
What is Blockchain Technology?
A blockchain is a series of dated records of data that are immutable and decentralized. Thus, data contained in a blockchain cannot be altered. Moreover, the data records in a blockchain are not hosted in a single server or host, as in a centralized network. Rather the blockchain is located and managed by multiple servers around the World.
Blockchain technology is thus a technology system that relies on decentralized storage and management of data, without the need for an intermediary to allow parties to act. Since the data is located on multiple hosts, an intruder can’t hack and change or access the data. Moreover, blockchain technology requires cryptographic authentication through millions of anonymous computers and servers around the World.
Blockchain technology does require extensive infrastructure. However, it is completely free to use. To better conceptualize the idea of blockchain technology, think of the bank and the purpose it serves. If you wanted to send money to your friend, you have to go through the bank. The bank will facilitate the transaction and levy some fees for that transaction. The bank acts as a centralized means of making money transactions and charges you for it.
Imagine a situation where you can directly send money to your friend without going through the bank as an intermediary. Awesome, right?
How could Blockchain technology revolutionize the World?
Blockchain technology could have diverse applications other than just in finance through Bitcoin and other cryptocurrencies. Imagine the use of Uber and Airbnb, which facilitate transportation and booking of accommodation. The two companies charge you fees for booking transport and accommodation.
Imagine a situation where you could directly book your rides and accommodation by encoding your data through blockchain technology. The rides and accommodation cost would be much cheaper than now since you will deal directly with the taxi drivers and accommodation places through Blockchain technology.
Banks and other business models that work on a centralized network would collapse. Even music or art would be much cheaper and easier to access. Musicians could directly sell their music to their fans without going through companies like Spotify, which charge high fees on them. Withdrawing / Spending Bitcoin and other cryptocurrencies would also be much easier since normal currencies will be no longer used. In essence, the World would trade in a single digital currency without government regulation or greedy intermediaries to facilitate transactions or activities.
The Three Pillars of Blockchain Technology?
Blockchain technology is powerful and revolutionary because of three things:
- Decentralization- Blockchain technology stores and manages data through millions of nodes across the World. A node is a computer. These nodes are all peer-to-peer, in that they all have an equal management role in the system. As a result of these multiple owning systems, one node’s corruption does not affect the other nodes, and the data remains intact.
- Transparency- Blockchain technology gives both privacy and transparency by encrypting data millions of times in cryptography. The person’s identity is hidden, but their transactions and records are available for everyone to see through the assigned special code.
- Immutability- Since the data is encrypted and stored in millions of computers, it is impossible for a hacker to hack them. Moreover, blockchain technology uses a cryptographic hash function, which basically means that a single change to the data in a single computer automatically changes the cryptography stored in the other levels of the data and the other computers. This makes it impossible for a hacker to access the data since it is ever-changing.
Blockchain technology is the next big thing. Whether your interest is in spending Bitcoin or in other things like crowdfunding and file storage, Blockchain technology is the thing for you.