Bitcoin, cryptocurrency, NFT and more of the current buzzwords you see in tech circles have all one thing in common—blockchain.
Considered the backbone of the fintech industry, blockchain is a term as prevalent as it is hard to understand for newcomers. However, it is far from incomprehensible—with a proper explanation, it can be relatively easy to see what it is all about and join the hype of one of the most revolutionary concepts ever created.
But first things first—we have to understand what it is.
What is Blockchain?
Blockchain received that name because it is, at its core, exactly what you imagine—a chain made of blocks. Except these are not the blocks or chains you’re imagining.
At its core, blockchain is a database—a way of storing information. The blocks in question are a collection of cryptographic data connected in a precise sequence. Each block contains the transaction data corresponding to itself, a timestamp, and the cryptographic hash of the block that created immediately before it.
As such, this effectively creates a chain where the new blocks contain the information of the previous ones, ensuring they remain connected.
How Does Blockchain Work?
Let’s say you are using blockchain—maybe through cryptocurrency—for a purchase. Whenever you make this transaction, it creates a new block in the chain containing all the important information, including when it happened and, most importantly, the unique alphanumeric code of the transaction that occurred immediately before.
Once this happens, the block representing your transaction takes its position in the chain, connected to the previous block. The following transaction in the chain—happening immediately after yours—will contain your block’s alphanumeric number, linking right after it and continuing the chain.
The result is a stable blockchain that is perfectly secure—changing records or creating fake transactions is virtually impossible, as all blocks carry a register of the previous one. Likewise, all users have access to the database listing the blocks, making it a decentralised peer-to-peer network where everyone can verify transactions independently.
What Makes Blockchain Revolutionary?
Blockchain technology has changed the way we conceive information.
The “gold standard” for storing information nowadays is the cloud—a global network of services that keeps the data you upload remotely, making it easy to access anywhere.
However, the cloud relies on large storage centres, which makes them vulnerable to accidents or attacks. Conversely, blockchain keeps data remotely like a cloud does, but entirely encrypted and decentralised. As such, rather than being stored in one mega-location, it is safely tucked worldwide.
It is perfectly encrypted to keep it secured, yet backed up by the chain sustained by every user—blockchain changes how we store information.
Is Blockchain the Same as Cryptocurrency?
Despite being often spoken in the same breath, blockchain is not the same as cryptocurrency. Rather, blockchain is the technology that made the existence of blockchain possible.
As explained above, blockchain is perfect for transactions. Cryptocurrency is the natural conclusion of that logic.
Every form of cryptocurrency is exactly what its name indicates—a currency that uses cryptography to function and remain secure. Blockchain is the way to achieve this.
The appeal of cryptocurrency relies on the possibility of using blockchain to do direct transactions without resorting to third parties or central bank authorities, which renders traditional institutions a matter of the past.
However, blockchain is far more than just cryptocurrency.
What Uses Does Blockchain Have?
While blockchain is mostly used for cryptocurrency, it is far from its only use. Blockchain’s appeal is data storage and its end-to-end verification process, which makes it perfect for many everyday needs you may take for granted.
One such example? Healthcare.
If every procedure, medical visit, or diagnosis becomes a block in the chain, then each patient can have a reliable track of their health regardless of location or institution. Thanks to its encryption, the data would also be private and virtually impossible to lose.
Naturally, this type of usage is still developing, but it may change the game as soon as it is available.
Other uses, such as voting, real state, or record management, could be on the horizon for blockchain as the technology develops.
Blockchain is changing the present and shaping the future.
Despite the complex reputation of cryptocurrency or other blockchain-related businesses, blockchain is a step forward in a world that needs further complexity and accessibility for data. It’s evolution worth understanding and considering.
Blockchain is a tool rather than a blessing or a curse—and the key to using it properly lies in understanding how and when its benefits shine through!