What is Blockchain Technology?
Sounds familiar, right? The big buzzword that seems to be flying around. It’s on the blockchain, invest in the blockchain, blockchain is the future. So, what exactly is the blockchain? Today we are going to explore the technology behind Bitcoin and debunk the myths regarding blockchain technology.
Bitcoin’s presence in the media has been an epic journey of ups and downs, there has been huge growth in the price of Bitcoin and as it becomes more and more recognized, the question which is on all of our minds, what is the technology behind it that makes it work?
The answer to this is something called blockchain technology. Originally created for the sole purpose of Bitcoin, but now being used for many other purposes, blockchain is effectively an electronic ledger which keeps an unforgeable record of transactions – a block, with each one being linked to the previous one, as well as time stamped. How does blockchain work with Bitcoin then?
As previously mentioned, the main appeal of Bitcoin is the ability to make ﬁnancial transactions without the need for a third party intermediary such as a bank or credit card company.
Blockchain is a distributed ledger with a network of replicated databases which are synchronized and also visible to anyone on the network. When a transaction is made it is sent to a block along with other transactions made at a similar time where it is then sent out to the entire network.
The transaction is then only validated once a miner, who is in competition with other miners, completes a complex maths problem in return for a reward. In the case of this example they would of course be rewarded with some Bitcoin.
So that’s the block part, the chain part then comes from the fact that once all the transactions in a particular block are validated, they are then timestamped and linked to other blocks which in turn creates a chain.
Newer blocks are then added to a chain meaning that every transaction made in that chain is visible. It is the chain element that helps to make this virtually impossible to hack, because this means that the data is decentralized as it is stored across the network, meaning there is no central point of vulnerability that can be exploited.
So, in its simplest form, the blockchain is a distributed ledger or list stored on a network of computers, each computer on the network has the current list or ledger stored on it. The list is then checked and verified against other lists on the network, if there is a mismatch in the data then the unvalidated list on the computer is thrown out of the system. This is how the system of trust works by removing the bad actors from the chain.
So as well as being used for cryptocurrencies, the use of blockchain technology is now becoming more widespread as people discover more uses for it.
So what can the blockchain be used for?
- Blockchain technology was designed for bitcoin to be used as a medium of exchange as a tradable asset.
- It is the technology behind many digital cryptocurrencies.
- It is a secure way to verify and confirm transactions.
- Blockchain technology is a database of transactions which once verified conclude the transaction.
- The blockchain can measure anything that can be connected digitally, so can be used to track and monitor products, data or even services.
- Blockchain technology can be used to exchange data, therefore can be used in creating software applications or cloud storage.
So hopefully now you understand a bit more about blockchain technology and its real world uses. please download the eBook guide on “How to invest in cryptocurrencies by MyOS” for more information.