Blockchain Technology Explained
The term ‘blockchain’ has become a buzzword in almost every industry. It is often associated with Bitcoin and cryptocurrencies, but blockchain technology has the potential to disrupt markets as wide-ranging as healthcare, finance, real estate, governance, and more. With the growing adoption of distributed ledger technologies (DLT), the scope of blockchain is expanding rapidly in various industries such as supply chain management, gaming, media, and so on. So what exactly is blockchain? Let’s dive into this article to learn everything you need to know about it!
What is the Blockchain?
Blockchain is a ledger of transactions stored on a digital network where data can be transparently viewed by all parties, without the need for a trusted third-party intermediary. People often confuse blockchain with Bitcoin but they are not the same. Blockchain is the technology, whereas Bitcoin is a type of digital currency. Most blockchain networks are open-source and distributed, meaning data is not stored in one location but is instead shared across a network of computers. The term ‘blockchain’ is used to describe the mechanism behind digital currencies. It’s a decentralized ledger that records digital transactions.
How Does Blockchain Work?
Now that we know what blockchain is, let’s find out how it works. As mentioned above, a blockchain is a decentralized network of computers that host a copy of the ledger of transactions. Every computer on the network is known as a ‘node’. Nodes communicate with each other through a ‘consensus algorithm’, which is a consensus mechanism that determines how nodes agree. The consensus mechanism ensures that all nodes have an identical copy of the ledger. There are two types of blockchain networks – public and permissioned. Public blockchain networks operate with complete openness, which means that anyone can view and participate in the network.
Limitations of Blockchain Technology
Blockchain technology has been a buzzword for quite some time now, but not everyone has heard about it and its advantages. This article will help you understand what it is and why it is important to you. The blockchain is a distributed ledger technology that helps in the creation of digital currencies like Bitcoin. The advantage of blockchain is that it helps in eliminating the need for a third party while making transactions. The blockchain network is created with the help of nodes that authenticate the transactions. The nodes are present in large numbers on a peer-to-peer network. Thus, it becomes difficult for hackers to disrupt a single node and make a change to the network. The blockchain network works on a consensus. Thus, when a transaction is made, it is verified by all the nodes in the network and only when it is verified it is written to the ledger. Thus, it becomes extremely difficult for anyone to hack the network.
Key Takeaway
Blockchain technology is a decentralized ledger system used to record transactions and manage data. It’s a digital process that uses cryptography to create an ongoing chain of transaction data that can be monitored and verified by anyone. Blockchain technology allows data to be stored across a network of computers. This network is decentralized, which means no single person or company owns the system.