Blockchain, also referred to as Decentralized Web or Web3, seems to be the driving technology behind the next generation of Internet. It is a novel solution to the age-old human problem of trust created in October 2008.
By allowing digital information to be distributed but not copied, blockchain technology created the backbone of a new type of internet. Originally devised for the digital currency, Bitcoin, the tech community is now finding other potential uses for the technology.
What Is Blockchain?
Blockchain is a shared, trusted, public ledger of transactions that everyone can inspect but no single user can control. It is a distributed database that maintains a continuously growing list of transaction data records, cryptographically secured from tampering and revision. The ledger is built using a linked list, or chain of blocks, where each block contains a certain number of transactions that were validated by the network in a given timespan.
How Does Blockchain Work?
Information held on a blockchain exists as a shared — and continually reconciled — database. This is a way of using the network that has obvious benefits. The blockchain database isn’t stored in any single location, meaning the records it keeps are truly public and easily verifiable. No centralized version of this information exists for a hacker to corrupt. Hosted by millions of computers simultaneously, its data is accessible to anyone on the internet.
To further simplify, picture a spreadsheet that is duplicated thousands of times across a network of computers, and then imagine that this network is designed to regularly update this spreadsheet.
Blockchain is composed of nodes which are computers connected to the blockchain network using a client that performs the task of validating and relaying transactions. Every node is an “administrator” of the blockchain, and joins voluntarily making the network a decentralized one. Any change made on the network is only accepted through the consensus mechanism, which means that all nodes must agree on the modification beforehand.
Why Is Blockchain Important?
Bringing trust to a decentralized network is groundbreaking. There is a constant flow of new technologies that are made possible by the invention of the blockchain. Like many other ideas that have revolutionized our world, the applications of blockchain stretch far beyond what we can imagine in our current day. Blockchain technology makes it possible for us to have a democratic, decentralized, and transparent store of data that requires no trusted third-parties. It completely removes the need to trust organizations, institutions, governments, and people.
Currently, finance offers the strongest use cases for the technology. By using blockchain technology, banks can change the current mechanism for international transactions, which are slow, antiquated, and expensive. Due to its open and decentralized nature, blockchain technology can serve as a solution bringing banking services to millions of people who are currently unbanked.
There are many additional uses that blockchain technology provides the financial sector in addition to its role in money transactions. As it can be used to record any type of information, blockchains can be used to store deeds, rental agreements, equities, bonds, contracts, and titles.