Blockchain technology is one of the most talked about yet misunderstood topics in recent times, commonly associated with Bitcoin and other cryptocurrencies. Blockchain is commonly used interchangeably with bitcoin, even though they refer to two very different things.
Bitcoin is a form of virtual currency, more commonly known as cryptocurrency, which is decentralized and allows users to exchange money without the need for a third-party. All bitcoin transactions are logged and made available in a public ledger, helping ensure their authenticity and preventing fraud. The underlying technology that facilitates these transactions and eliminates the need for an intermediary is the blockchain.
What is blockchain?
Blockchain is a public electronic ledger that can be openly shared among different users and that creates an unchangeable record of their transactions, each one time-stamped and linked to the previous one. Each digital record or transaction in the thread is called a block (hence the name), and it allows either an open or controlled set of users to participate in the electronic ledger. Each “block” represents a number of transactional records, and the “chain” component links them all together with a hash function. As records are created, they are confirmed by a distributed network of computers and paired up with the previous entry in the chain, thereby creating a chain of blocks, or a blockchain.
Blockchain can only be updated by consensus between participants in the system, and when new data is entered, it can never be erased. The blockchain contains a true and verifiable record of each transaction ever made in the system. It is a database that is validated by a wider community, rather than a central authority. It’s a collection of records that a crowd oversees and maintains, rather than relying on a single entity, like a bank or government, which most likely hosts data on a particular server.
How Secure Is Blockchain?
Although there is no system that is unhackable, blockchain is the most secure today. This is because the entire blockchain is retained on this large network of computers, meaning that no one person has control over its history. That’s an important component, because it certifies everything that has happened in the chain prior, and it means that no one person can go back and change things. It makes the blockchain a public ledger that cannot be easily tampered with, giving it a built-in layer of protection that isn’t possible with a standard, centralized database of information. To hack it, you wouldn’t just have to hack one system, you would have to hack every single computer on that network.
Which Industry Can Blockchain be Applied?
Blockchains are being put to a wide variety of uses in several industries like Shipping, Healthcare, Energy and most especially, Fintech.
Blockchain in Fintech: At a high level, blockchain removes third parties from the transaction equation; in other words, a financial transaction on a blockchain needs no bank or government backer, and that means no fees.
Because blockchain entries can be seen in real time, the technology also has the potential to reduce time for clearance and settlement, which can take up to five days. The technology reduces or eliminates the need for reconciliation, confirmation and trade break analysis by instantly sharing data with each organization involved in a blockchain database or ledger. That helps yield a more efficient and effective clearance and settlement process.
The possibilities for blockchain implementation seem endless, as its underlying technology can be leveraged in virtually any field to perform a number of important tasks and new potential uses for blockchain are being discovered on a regular basis. Indeed, blockchain is the most destructive tech in decades.