what is blockchain technology

What is Blockchain Technology?

What Is a Blockchain?

The development of blockchain technology stands out as one of the most important moments in computing history. The blockchain was developed by Satoshi Nakamoto as part of his work on the cryptocurrency, Bitcoin. Blockchain and Bitcoin are tied to one another, but the truth is that they don’t have to be. While blockchain applications are routinely tied to cryptocurrency, blockchains themselves can be used in many different fields and sectors including banking, healthcare, and fraud prevention. Blockchain technology is going to play a large role in the future of our world, so we need to make sure that we understand the concept completely.

Blockchains: A Simple Concept

In order to fully understand what a blockchain is, let’s use Bitcoin as a key example. Bitcoin is a digital currency that is dependent on a ledger system in order to function. This digital ledger system is comprised of countless ‘nodes’ that operate independently from individual computers all around the globe. We call this ledger a ‘blockchain’.

Bitcoin’s digital ledger system is constantly auditing the information being recorded into it. The reason for this self-auditing system is simple: it makes Bitcoin almost impossible to hack or alter for nefarious purposes. Similar to the website Wikipedia, blockchains are crowd-sourced forms of data verification. The pure volume of individual audits makes it almost impossible for the data to be compromised.

Building A Blockchain

Groups of data compiled together are known as ‘blocks’ and the interconnecting nodes that work together for accuracy can be considered the ‘chain’. Pretty simple, right? Let’s look at the construction of a blockchain from beginning to end in order to make this concept even simpler.

1) The Miners/Nodes – The chain starts with your miners. Individual users work from their own computers or a private data farm in order to record transactions into a digital ledger.

2) The Block – When the miners compile information into a group, it is known as a block. This block is useful, but it hasn’t given up anything to the miner yet.

4) The Hash – Once the data is compiled into a block, miners work to calculate something known as a ‘Hash’. A hash is a string of unique characters that unlocks a piece of cryptocurrency (BTC, Ether, etc). Once the hash is solved, the winning miner gets the currency and their block is added to the chain. As blocks of data are added to the chain in cryptographical order, the data itself becomes more and more secure.

5) The Incentive – With currency as a reward for lending computing power, the blockchain can grow and thrive on a volunteer network.

6) The Redundancy – Being as the data stored in the blockchain is backed up by thousands of self-auditing computers, it becomes impossible to alter the data due to the redundant security. Redundancy in this instance is a positive trait.

Blockchains In The Future

The special blockchain network that helps to keep cryptocurrency growing is what has technological investors around the globe so excited. A self-auditing ledger system that keeps information accurate and protected is truly something to behold.

While this genius system is gaining ground in sectors outside of the crypto world, there are a few downsides. The biggest reason for skepticism regarding blockchain technology is simple: it requires a dedicated network of computers, donating their computing power, in order to stay backed up and secured.

Right now, blockchain technology has the chance to change the way that the world around us works. From cryptocurrency, which has been called ‘digital gold’, to the healthcare system, the role of the blockchain is only going to grow as we push forward into the future.