We always hear the word blockchain, we know that some companies and even industries are using the technology but do we really know what it is and how it works?
What is Blockchain?
By definition, a blockchain is a distributed database or ledger that is shared among the nodes of a computer network and stores information in digital format. Blockchains are mostly known for their crucial role in cryptocurrencies like Bitcoin—enabling a secure, decentralized record of transactions.
Differentiating blockchain from a typical database, blockchain’s data structure is quite different from the former.
A blockchain stores and collects data in groups, called blocks, and when filled, are closed and connected to another block. Whenever a block is filled, it is chained to a new block to store more information; hence, the name blockchain.
How does blockchain work?
The goal of blockchain is to have immutable, distributed records of digital information that cannot be altered, deleted or destroyed. With this in mind, we can also refer to blockchain technology as distributed ledger technology (DLT).
The concept of blockchain was first proposed in 1991, but the widespread use of the technology only ensued after the release of Bitcoin last 2009. Since then, new technologies came after blockchain, enabling the birth of cryptocurrencies, decentralized finance (DeFi) applications, non-fungible tokens (NFTs), and smart contracts.
Decentralization in Blockchain
What blockchain does is it allows data in the database to be spread among various network nodes, in different locations. With its immutable nature, it doesn’t allow the participants to alter or change information once it is recorded on the database.
Not to mention, if one tries to tamper with the record of transactions, all nodes will be notified and cross-reference each other to easily detect wrong information.
This type of systematic approach establishes a transparent and accurate order of records and transactions. Moreover, having no single node affects the entire network with wrongful or altered information.
Applications of Blockchain
The top applications of blockchain technology in the real-world are:
- Banking and Finance
- Real Estate
- Smart Contracts
- Supply Chains
As the world progresses, blockchain, among many other emerging technologies is shaping a bright, innovative future ahead of us.
Disclaimer: This article solely expresses the author’s thoughts, which may not reflect those of Enifex. Nothing in this article should be interpreted as investment guidance. Enifex encourages all clients to do their own research before investing in cryptocurrencies.