What are some problems blockchain technology solves?
It should be no surprise to an individual who is experienced in the field of cryptocurrency that blockchain technology has had a substantial impact on how the trading system works. With it, we have made fantastic strides concerning bitcoin and the development of innovations such as smart contracts and decentralized applications.
However, if you are someone who is unfamiliar with the concept or are only aware of the basics, you might be wondering, “What is so special about blockchain? What exactly can it do for me?” Neither question is easy to answer with just a basic definition; there are layers to this concept that are what make blockchain the revolutionary digital apparatus it is.
What is blockchain?
Before we get into clarifying blockchain’s benefits, it is only fitting – and appropriate – that we first explain what blockchain technology is. At its core, blockchain is a system of cryptocurrency transactions. Its maintenance is in the hands of a series of computers that connect through a peer network. Getting down to the quintessence, it is a list of records (the titular “blocks”) that link with cryptography. A whole community of users can control the distribution of the information, as well as its updates and adjustments.
As this is a decentralized system, there is no need to involve a third party or middlemen with the transaction processes. While on the surface this may appear to be a risky structure, it actually provides the users with a sense of reliability and authenticity.
One of the technologies responsible for creating blockchain back in 2008 is ‘Private Key Cryptography.’ In blockchain, there are two types of keys: a public key and a private key. The public key is how others identify you and also represents your wallet address, and the private key is what allows you to digitally authorize various actions (transfers, withdrawals, etc.) based on your public key. Both of these components combined to give you a digital signature.
How blockchain works
The details that reside within the definition of blockchain technology may come across as excessive, but in reality, using this system is quite simple. In a rudimentary form of illustration, it is a string of blocks strung together. To be technical, it works as follows:
- A transaction occurs.
- The transaction must then be verified.
- The transaction will go into storage inside a block. The dollar amount, your digital signature, and the site’s digital signature (let’s say for example your transaction was made on Amazon) are all stored in this block.
- The block is given a hash (a code whose function is to map data of various sizes), at which time the block is then added to the blockchain.
The benefits of blockchain technology
Overall, blockchain provides a sense of trust among all participating parties. Moreover, it comes with a strong feeling of ownership due largely in part to the keys. By being granted possession of these digital tools, the user is able to fulfill requirements surrounding authenticity; an element that is not provided at the best of times when a third party or a middleman is involved.
Undoubtedly, there is much more to be given and implemented through blockchain. Authenticity is arguably nothing without authorization, and authorization is a pivotal factor in assuring that a system such as this is indeed a reliable one. Due to blockchain operating on a peer-to-peer network, it greatly reduces failure that would be brought upon by that of a centralized system.
Potential uses for blockchain technology
The potential uses for blockchain go beyond the prominent usage for monetary transactions. Some locations use this technology as a means to run a system of records.
- Government use – There is the obvious overseeing of ownership rights pertaining to the cryptographic key, but there is also the authorization of transactions.
- Digital identification – Cryptographic keys create the foundation to build digital relationships, thus allowing a new way to manage one’s digital identity and personal information.
- Medical records – A medical record can be implemented into the blockchain after it is verified, making it difficult to be altered and ensuring the integrity of the record.
- Agriculture – In regards to food safety, blockchain will provide the tools needed to track down sources and establish ideal conditions in farms and markets so that an outbreak can be prevented.
All in all, blockchain technology is a system that is constantly being developed in new and innovative ways and produces by-products that are equally as beneficial in design and function. What remains the same throughout these recurring progressions is its dependability. Its mere existence is the solution to those who would prefer not to deal with any hassles, ranging from middlemen to inefficient distributions of information. It functions autonomously and relies on a community rather than a third party or a singular entity. It gives countless issues pertaining to storage, voting, governance, and transactions a digital solution.