So you want to get to grips with Blockchain? Then you’ll be happy to hear that being an IT wizard or a cryptography guru is not a requirement!
This no-nonsense guide aims to explore:
What Blockchain is
How Blockchain technology works
Some of the practical uses of Blockchain technology
What is Blockchain?
Just as the name suggests, Blockchain can be imagined as a chain of blocks. The ‘blocks’ (digital data) are organised into chronological ‘chains’ (public databases).
Blockchain platforms operate as a synchronised global database (or public ledger) full of shared, distributed and replicated digital data that can be accessed by anyone with an internet connection.
Unlike most other databases, Blockchain has no central administrative body and no centralised data storage. It functions through an interconnected online network of computers and devices, meaning that it isn’t owned by anyone or any single entity.
Being a decentralised, tech-based solution to commercial and business problems is what truly sets Blockchain apart.
How does Blockchain technology work?
What makes Blockchain technology especially unique is how it works. The data contained inside a block can be programmed to record or track any information of value, from financial transactions to medical records. This makes Blockchain a robust tool for a variety of user purposes.
Each block contains up to 1MB of data, its own distinct ‘fingerprint’ (called a ‘hash’), and the ‘hash’ of the previous block in the chain. The ‘hash’ can be used to identify a block and all of its content.
Once data has been recorded in a block it then becomes extremely difficult to change or erase it. Any newly added information is stored in a new, separate block. A block is never rewritten. If the ‘hash’ of a block changes, it is no longer the same block. It is this approach that makes Blockchain so secure.
By design, creating a new block is not an effortless process either. Before a new block can be added to a chain a computer (known as a ‘Miner’) must solve a cryptographic puzzle to ensure the data is accurate. The solution is then shared with the other computers in the network (this step is referred to as ‘proof of work’).
At this point the network must verify the ‘proof of work’ to ensure its legitimacy. In total, this process usually takes up to about 10 minutes to complete.
Blockchain works hard to build user trust and ensure the security of the data it stores.
What are the different ways Blockchain can be used?
One of the most common applications of Blockchain technology is to record, track and validate financial transactions via cryptocurrencies like Bitcoin. However, the versatility of Blockchain technology is being increasingly recognised as an effective way to solve real business problems.
As one example, Blockchain is being tailored by retailers (such as Walmart) to protect the quality standard of their goods and to track the condition of products through their supply chains.
According to Deloitte’s 2019 Global Blockchain Survey, Fintech still remains the leading user of Blockchain technology. However, the survey also found that more and more governments and organisations in sectors like technology, media, telecommunications, life sciences, and health care are continually pushing towards Blockchain initiatives.
The future for Blockchain looks bright indeed!