What Is Blockchain And How Does It Work?
Blockchain, sometimes referred to as Distributed Ledger Technology (DLT), makes the history of any digital asset unchangeable and clear through the use of decentralization and cryptographic hashing.
A Google Doc is a good comparison for understanding blockchain technology. When we produce a document and share it with a group of individuals, instead of being duplicated or transferred, the document is disseminated. This provides a decentralized distribution network in which everyone has simultaneous access to the document. No one is locked out while waiting for another party to make changes, and all changes to the document are logged in real-time, making them entirely transparent.
Of course, blockchain is more involved than a Google Doc, but the comparison is useful because it highlights three key concepts:
Why blockchain is significant?
Blockchain technology helps in the verification and traceability of multistep transactions that require such verification and traceability. It has the ability to deliver secure transactions, lower compliance costs, and accelerate data transfer processes. Contract administration and auditing the provenance of a product can both be helped by blockchain technology. It may also be used to manage titles and deeds, as well as voting platforms.
Blockchain is important because it is a transparent technology`. There are different types of blockchain networks and protocols. Public blockchain provides transparency due to its nature. This type of blockchain is very useful for improving many aspects of our current society, including, conducting electronic elections.
Blockchain technology is not just limited to the finance sector. This makes technology excellent for the future of our society. Blockchain can be used in almost every sector and market, including commercial finance, banking, government, healthcare, education, and so on. These sectors are what make our society function.
Blockchain technology is much cheaper when compared to other technologies and systems. Being a decentralized technology, there is no need to pay for intermediaries, which improves operational cost-efficiency.
How does blockchain work?
- Each transaction is logged as a "block" of data as it occurs.
These transactions depict the movement of a tangible (a product) or intangible asset (intellectual). The data block can store any information you want, including who, what, when, where, how much, and even the state of a shipment, such as a temperature.
- Each block is linked to the ones that came before it and those that came after it.
As asset transfers from one location to another or ownership changes hands, these blocks form a data chain. The blocks validate the exact timing and sequence of transactions, and they are securely linked together to prevent any block from being changed or inserted between two other blocks.
- In a blockchain, transactions are linked in an irreversible chain.
Each successive block reinforces the prior block's verification, and hence the entire blockchain. The blockchain becomes tamper-evident as a result, giving the key strength of immutability. This eliminates the risk of tampering by a hostile actor and creates a trusted record of transactions for you and other network users.
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