Blockchain is a ledger that stores the data of any type. In other words, it is a creative database technology which is the base of almost all cryptocurrencies. Since it’s a system of recording information, it is difficult or even impossible to change, hack or cheat the system. A blockchain is a digital ledger of transactions that is duplicated and distributed throughout the entire network blockchain. Each block in the chain includes a number of transactions, and every time a new transaction takes place on the blockchain, a record of that transaction is added to every participant’s ledger. The decentralized database managed by multiple participants is known as Distributed Ledger Technology (DLT). While cryptocurrency is the most popular application for blockchain currently, the technology proposes the potential to offer a very wide range of applications. A blockchain can record information about cryptocurrency transactions, NFT ownership or DeFi smart contracts.
How Does Blockchain Work?
A majority of nodes must verify and approve the legitimacy of the new data before a new block can be added to the ledger. For a cryptocurrency, they might include ensuring that new transactions in a block were not fraudulent, or that coins had not been spent more than once. This is different from a standalone database or spreadsheet, where one person can make changes without oversight. Transactions are typically secured using cryptography, meaning the nodes need to solve complex mathematical equations to process a transaction. A blockchain network can track orders, payments, accounts, production and much more. Also, as users share a unique view of the truth, all details of a transaction can be seen end to end, which gives you greater confidence, as well as new efficiencies and opportunities.
Blockchain Applications
- Cryptocurrency
- Banking
- Asset Transfers
- Smart Contracts
- Supply Chain Monitoring
- Voting
Blockchains, despite all benefits such as accuracy of transactions, no intermediaries, security, and efficient transfers, have disadvantages such as limitation of transactions and higher energy costs.