Guestpost by Sophia Young
Remember the early days of the internet when everyone was excited about how it would change the world? We were thrilled about the possibilities of a global network where we could share information instantaneously with anyone worldwide. And now, a new technology is taking the same trajectory- it’s called the blockchain.
Blockchain technology is often referred to as the “Internet of Value.” Just like the internet created a new way to share information, it also invented a revolutionary way of transferring value, such as money, contracts, assets, and even votes.
Blockchain beyond Bitcoin
You’ve undoubtedly heard of Bitcoin, the first and most well-known cryptocurrency. Blockchain is usually associated with Bitcoin, but they are not the same thing. While Bitcoin is a digital asset and payment system, blockchain is the underlying technology that enables Bitcoin and other cryptocurrencies to exist.
When an anonymous person or group under Satoshi Nakamoto’s pseudonym launched Bitcoin in 2009, they also created the blockchain. The original purpose of blockchain was to create a digital cash system that didn’t require a central authority like a bank or government to issue new money or keep track of transactions. And serve as the public ledger for all Bitcoin transactions that is decentralized, distributed database, secure and tamper-proof.
These are the Blockchain characteristics that attracted various industries and organizations to explore its possibilities, resulting in the creation of new blockchain applications beyond cryptocurrency.
Blockchain Technology Application
The most popular use of blockchain is cryptocurrency. In fact, it’s one of the primary drivers of the Bitcoin price today. But blockchain technology has other potential applications beyond that. Here are some:
-Supply Chain Management: Blockchain can help track the movement of goods and materials throughout the supply chain from production to delivery to increase transparency and accountability, as well as help to reduce waste.
-Voting: Blockchain can create a more secure and transparent voting system. By using blockchain, organizations can store votes in a public ledger that is tamper-proof and immutable to increase confidence in the voting process and reduce voter fraud.
-Real Estate: Blockchain can streamline buying and selling of property process. When all the relevant information is stored on a blockchain, buyers and sellers can transact without needing a third party, such as a real estate agent, with reduced costs and speed up the process.
-Wills and Estate Planning: Blockchain can be used to store wills and other estate planning documents to ensure they will not be tampered with and are accessible when needed.
-Cross-Border Payments: Traditional methods of sending money internationally can be slow, expensive, and opaque. Blockchain offers a more efficient way to send money globally transparently and securely.
Blockchain Technology: A Simple Analogy
To easily understand how blockchain works, let’s start with a simple analogy.
Imagine a Google doc with a list of transactions shared with everyone in your company. When someone makes a change, everyone can see it in real-time. We call that a centralized database because it’s centrally located in Google’s servers and managed by one company (Google).
Now, imagine the same Google Doc, but instead of being stored on Google’s servers, it’s stored on every single computer in your company. And whenever someone wants to add information or a transaction, everyone in the network must agree that the changes are valid or correct before adding to the updated doc version. Once this change is approved, it becomes permanent and unalterable.
Lastly, an updated version of the doc is then shared and stored on every computer in the network. We call this a decentralized database or distributed ledger because documents are stored on multiple computers spread across the company.
Blockchain essentially works like this. It’s a decentralized, distributed database that allows everyone in the network to see and verify the changes or transactions before it’s added to the chain.
Blockchain: How it Actually Works
We’ve just scratched the surface of how blockchain works with a simple analogy. Now, let’s look at how blockchain technology actually works in more detail.
1. A transaction is initiated.
For a transaction to be added to the blockchain, it first needs to be initiated by one party, typically known as the sender. Then, once the transaction is created, it is broadcasted to the network of “nodes.”
2. Each node in the network validate the transaction.
Node, in this context, refers to computers connected to the network. Once a node receives the transaction, it will then validate the transaction.
There are three main things that a node will check:
- Does the sender have enough digital currency to complete the transaction?
- Has the sender already used the digital currency in another transaction?
- Is the transaction format valid?
If all these checks pass, the transaction is valid and will continue to the next step. On the other hand, invalid transactions will be rejected by the network and will not be added to the blockchain.
It’s important to note that all nodes in the network validate all transactions, even if they are not a party to the transaction. This process is called “consensus.” The consensus process ensures that all transactions in the network are valid and prevents anyone from tampering with the blockchain.
Once a transaction has been validated, it is added to the blockchain as a new block.
3. Valid transaction is added as a new block to the blockchain.
The process of adding transactions to a block and chaining the blocks together is called “mining.” For a block to be added to the blockchain, miners must solve a complex mathematical problem with powerful computers.
The first miner to add a block of transactions to the blockchain is typically rewarded with more digital currency than the other miners. This incentive system ensures that there is always someone mining and verifying transactions.
The new block contains three pieces of information:
- The transaction itself – This includes data about the sender, receiver, cryptocurrency use, and the amount
- A timestamp – The timestamp ensures that each block is added in
- The hash of the previous block – The hash is a unique code generated
for each block that serves as a fingerprint for the block to identify it.
Remember, once a block is added to the blockchain, it cannot be altered or tampered with. Because doing so would require changing the blocks that come after it in the chain, which would require an incredible amount of computing power.
4. Broadcast the block of transactions to the network.
The newly minted block is then broadcasted to the network of nodes. Each node will then check to see if the block is valid and add it to their copy of the blockchain. This process ensures that everyone in the network has an up-to-date copy of the blockchain.
5. The transaction is considered complete and irreversible.
Once a block is added to the blockchain, it cannot be altered or tampered with. At this point, the transaction is complete and permanent.
If someone tries to tamper with a transaction that has already been added to the blockchain, it would require an incredible amount of computing power and need to change the transaction in every single node in the network. That is practically impossible, which is why blockchain is considered so secure.
The Future of Blockchain
The key features of blockchain – decentralization, transparency, and immutability – make this technology so powerful and valuable. Just like the internet, people will need time to figure out all the different ways to use blockchain. While it is still in its early stages, there’s no doubt that this technology will revolutionize how we live and work in this digital era.
About the Author
Sophia Young recently quit a non-writing job to finally be able to tell stories and paint the world through her words. She loves talking about fashion and weddings and travel, but she can also easily kick ass with a thousand-word article about the latest marketing and business trends, blockchain, cryptocurrency, finance-related topics, and can probably even whip up a nice heart-warming article about family life. She can totally go from fashion guru to your friendly neighborhood cat lady with mean budgeting skills and home tips real quick.
I would like to thank Sophia once again for this mini-course in Blockchain Technology! And the Google Docs example was spot on! For those who want to learn more about blockchain Technology I highly recommend you listen to my interview with Ivan On Tech of the Moralis Academy!
If like Sophia you wish to collaborate for guest posting or sponsored posts please do not hesitate to reach out by e-mail at email@example.com and of course, for everyone, do follow us on social media as well for more great content, check our Facebook, Instagram, Twitter, and join our e-mail list. I would love to connect with you!