Even though the blockchain technology has been around for almost 10 years, its popularity spiked with the rise of cryptocurrencies. Many consider it the future of the world’s already established systems and methods. But what exactly is blockchain and why is it so special?
The ‘blocks’ represent all data and information – storing things such as a transaction’s date, time and value, transaction participants and their unique ID. The ‘chain’ is the segment that links all the data together and stores them in a digital, public database through cryptography principles.
After these logs are created, they go through a confirmation process in which the validity of a given transaction is checked by multiple computers around the world. Only after the accuracy is verified, block receives its unique ID code and gets added to the blockchain. Since every information is connected with a unique record that has its own history, it’s virtually impossible to falsify any single record.
Since the entire technology is dependent on a large network of computers, there’s no central authority – no one person controls the entire history of the blockchain. The blockchain is constantly updated on every computer in the network when a change is made, making it impossible to tamper within the hands of a hacker.
Blockchain is somewhat of a public ledger – information is transparent and open for everyone to see. It’s a completely decentralized system, which is where its main advantage comes from when compared to banks and other government-controlled businesses.
This was the main idea of Bitcoin – creating a payment system that completely removes the middle man, When sending or receiving cash, there’s no need for a third party. You are the sole owner of your money.
Transferring money through a centralized system takes days, The blockchain system works 24/7 with transactions taking minutes, even seconds in some cases. This is especially useful when money is sent/received internationally. Since the network automatically works on confirming the validity of the transactions, there’s almost no slowdown.
Even though the ‘ledger’ contains transaction information, everyone’s personal data is concealed. The identity of a person is hidden and presented via complex hashing algorithms. The address of a sender and the receiver is seemingly just a jumbled mess of letters and numbers – no compromising information.
What makes blockchain transactions difficult to manipulate? Each block is secured through hashing, a cryptographic function, with each block having a unique value. However, every new block contains hashing data of the previous one in the chain. Subsequent blocks in the chain would notice the unauthorized change in that one block, thus rejecting the modification.
Although there is no system that is completely tampered proof, blockchain is as close to it as it gets. Digital signatures make tampering close to impossible and anyone who would try to modify it to their own advantage would be easily identified.
The blockchain system is steadily improving and becoming more secure. Developers are constantly finding new implementations for it and building upon the existing ones. It’s only a question of when it will become a leading solution to many modern-day technology problems.