Blockchain is a revolutionary technology that is the underlying framework for cryptocurrencies like Bitcoin ($BTC) and Ethereum ($ETH).
At its core, it’s a digital ledger, a decentralised database that records transactions across a network of computers.
Imagine it as a chain of blocks, where each block contains a list of transactions. These blocks are linked in a chronological and immutable chain, hence the name "blockchain".
How do blockchains work?
When a transaction occurs, it is grouped with other transactions in a block. This block is then added to the existing blockchain after undergoing a process called "validation" or "consensus", where network participants verify the transactions' validity.
Once validated, the block is added to the chain, becoming a permanent part of the ledger. This decentralised nature ensures transparency and security, as every participant in the network has a copy of the entire blockchain.
Are blockchains secure?
Blockchain's security stems from its decentralised nature and cryptographic techniques. Each block contains a unique cryptographic hash, a digital fingerprint that ensures its integrity.
Additionally, altering any block in the chain would require changing every subsequent block, a task virtually impossible due to the computing power needed. This means once your transaction is confirmed, it can't be changed. This helps secure your transactions and funds, as ownership is easy to prove and can't be altered.
You can also view any transaction on a blockchain through a blockchain explorer like Etherscan or BscScan. This means that you can record and track any transaction, allowing for a transparent crypto environment.
How are blockchains decentralised?
Traditional databases are centralised, meaning they are stored in a single location or controlled by a single entity. This means they are prone to mismanagement and liable to hacks and compromised data.
In contrast, blockchain operates on a decentralised network, with no single point of control. Many individual computers across the globe validate and process transactions in a blockchain, meaning data is never stored or processed in a single location.
This decentralisation eliminates the need for intermediaries, reducing the risk of manipulation or censorship. It also means that there are no single points of failure, making it very difficult for hackers.
Advantages of blockchains
Global, borderless transactions: You can send your cryptocurrencies across the planet quickly and cheaply, with no intermediary or third party.
Privacy: Using Best Wallet and owning/sending cryptocurrencies does not require any of your personal information. This means you can transact your crypto with the utmost privacy.
Publicly recorded: Every transaction on a cryptocurrency network is publicly recorded on the blockchain, meaning anyone can scrutinise them. This leaves no room for transaction fraud, changing the money supply, or hiding transactions.
The utility of blockchains
Blockchains' applications extend far beyond cryptocurrencies. It can be used for various purposes, including:
Supply Chain Management: Tracking the origin and movement of goods to ensure authenticity and transparency.
Smart Contracts: Self-executing contracts with the terms of the agreement directly written into code, automating processes, and eliminating the need for intermediaries.
Identity Verification: Providing secure and tamper-proof digital identities, enhancing security and privacy in online transactions.
Decentralised Finance (DeFi): Transforming traditional financial services like lending, borrowing, and trading through decentralised platforms.
The future of blockchain technology
Blockchain is a transformative technology that can revolutionise numerous industries. Its decentralised, secure, and transparent nature makes it an ideal solution for various applications beyond cryptocurrencies.
As blockchain continues to evolve and gain traction, its impact on society is expected to be profound, shaping the future of finance, governance, and technology.