The aim of blockchains is to enable the recording and distributing of digital information without any edit to them. But grasping the answer to the question “does blockchain work” will help you understand why it’s a reliable and secure way to store monetary data.
Yes, blockchain does work. It works because it’s a distributed ledger system that records digital information with clarity around each transaction, so it’s impossible to edit or hack. The transparency in this system minimizes the chance of human error or fraud. It’s a chain that links a block to others, where each one makes a record of the transaction that occurs, and it’s added to the ledger of every participant.
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The main difference between an average digital database and a blockchain is the structure of the data. Blockchains gather information and group them into a block, where each block holds a set of data. Once it’s filled, it closes and links to another block, forming a chain.
But, Does Blockchain Work?
This type of network can find its usage for all kinds of information, but its most common use is as a digital financial ledger of transactions. When it comes to Bitcoin, blockchains are a decentralized mechanism in which no groups or individuals have control over the transactions, but the control is retained by all users collectively. The data entered into each block is immutable, which means the entered information is irreversible but also leaves a permanent record that is visible to anyone.
The Main Usage of Blockchains Is for Transactions in Crypto Networks Such as Bitcoin
Bitcoin is the primary reason why the technology of blockchains was developed, and it remains its major application. So this cryptocurrency is used within these networks and can’t be bought on the stock market. But besides Bitcoin, there are hundreds upon hundreds of cryptocurrencies using this emerging technology, while it remains to be seen whether it will supersede other methods of payment. Many experts believe that the fact that the application of blockchains is growing fast is going to lead to extraordinary changes across industries.
The Technology Behind the Cryptocurrency Has Many Pros
When applied to cryptocurrency, there are many advantages to using blockchains. Here’s an overview of some of them:
- Decentralization is often referred to as the biggest pro of cryptocurrencies. A government agency can not issue bitcoin and has no ability to determine the fate of a public network dealing with them. The lack of institutions acting as the middle-man reduces costs, while such networks also have high time efficiency because they work 24/7, 365 days a year.
- Its transparency is unparalleled, while owners enjoy anonymity. Each transaction is transparent because the history and the address of the bitcoin wallets are publicly viewable. On the other hand, owners of those wallets are completely anonymous, and they are not recorded.
- They offer opportunities for people that live in poorly developed and corrupt surroundings. Cryptocurrencies based on blockchains allow owning funds and bypassing third parties at the same time.
The Disadvantages of Blockchain
Perhaps the most known con of the technology of blockchains is scams, as criminals tend to target cryptocurrency holders. The other disadvantage is risk, as bitcoin is highly fluctuating and volatile, while the transaction process is inherently slower than, for example, that of a credit card company. Also, its usage is still niche as purchases with bitcoin remain an exception, and many consider it an energy-inefficient process, which will probably be overcome in the future.
The Participants in these Networks and Their Roles
Each of these networks has many participants who have different roles. They are separated into four following groups:
|Users||Business users in the network are the participants with permission to join and conduct a transaction within the network with other users.|
|Regulators||Specially-permitted users whose role is to oversee all the transactions conducted within the network between users.|
|Network operators||Particular individuals with authority are specially permitted to create, define and manage the network. They also monitor everything within it.|
|Certificate authorities||Individuals that manage and issue all the required certificates of different kinds. These certificates are needed for blockchains to run with permission.|
If a blockchain is public, anyone can join and participate within the network activities, while private blockchains allow a selected entry. Certain entries can be overridden, edited, or deleted by operators.
A Business Can Greatly Benefit From Such Networks
There are many industries that can benefit from the new technology behind blockchains. By skipping the intermediary institutions and individuals, a business can not only cut down on costs but also escape corruption and overcome situations where there are scarce resources. This is especially important for an international business.
A business app like Uber or Airbnb is enabled to use peer-to-peer networks, where it allows its users to pay for fees or parking. But any two private parties who wish to conduct a private transaction can benefit from it.
Above all, blockchains can be used as a secure platform for providers of healthcare services, where they can safely store sensitive information from their patients. This data can then only be shared with authorized people.
The following video talks about the applications of blockchains.
Future Applications of Blockchains Will Revolutionize the World
The possibilities of implementing blockchain technology in the world around us are truly endless. The way it is developing in recent years is making a trustless and decentralized internet as a marketplace possible, where we’ll be able to have transparent transactions. Besides ruling the world of cryptocurrency, it has more new and exciting things to come, and it’s in the form of non-fungible tokens (NFTs). Blockchain’s potential is constantly expanding, its future is bright, and it’s showing promise in many industries.