One of the most talked about technologies of last year was blockchain. The tech grabbed headlines when cryptocurrencies jumped massive percentage points over the course of a few days, with Bitcoin leading the charge from $900 to $20,000 a coin. It’s no secret that blockchain will play a vital role in society’s future, which is why you should learn how the technology works.
Blockchain technology can come off as excruciatingly complex for the average Joe or Jane. However, it’s also easy to grasp if you look at it this way – a business wants to store data securely. This stored data can range anywhere from real estate to user information. The transaction or record is checked by the network to validate it. Once the blockchain network has established validation, the data is stored together with other records in that network to generate data blocks. Each block is given a unique code, known as a hash, and the hash of the block that comes before it.
Another way of understanding blockchain is thinking of it as a neutral third party. Imagine making a bet with your friend about tomorrow’s weather. You bet that it will be sunny while your friend bets it will be rainy. Trusting them to honor the bet might suffice, but then what happens when you make bets with people you don’t really know and trust? A contract might sound like another solution, but then enforcing it requires time and money. With blockchain, both you and your friend can send $50 into the network, and the program automatically sends the $100 to the winner, depending on the outcome.
Going In Depth
Under the hood, blockchain is a program, consisting of thousands of lines of code. It allows groups of computers to maintain one centralized, up-to-date, and secure ledger. To be able to make any transactions on the blockchain network, participants need a wallet, which is another type of program that allows you to store and trade assets, which in this case is Bitcoins. Because only you can be able to spend your bitcoins, every wallet is encrypted by a unique cryptographic technique that utilizes a unique pair of distinct yet connected keys – a public and private key.
Question of Safety
Amid the cryptographic methods and tools that are involved in blockchain transactions, can you be 100 percent sure that your funds are safe? Since anyone can access the Bitcoin ledger via anonymous networks, such as TOR and VPN, a question of safety cannot be avoided. Yet as mentioned earlier, a user with a matching private key has the only access to a wallet and its contents. And since the bitcoin network imposes no limit as to how many wallets one user can own, you can generate multiple wallets to accept or receive payments thereby reducing the risk of anyone tracing transactions back to you.
It’s no secret that blockchain is still a relatively nascent technology that has several risks and vulnerabilities. Nonetheless, the benefits that blockchain offers both to customers and companies dwarf any of these current issues.
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