Bitcoin, Ethereum, and all other cryptocurrencies have one thing in common — Blockchain. Blockchain is the underlying technology that most cryptocurrencies are built from. Every crypto asset you can see in the “crypto” industry is made using this transformative technology.
Blockchain technology initially started being used to develop a decentralized medium of currency exchange which later became the “cryptocurrencies,” where the word “crypto’ meant the use of cryptographic encryption that ensured the security and anonymity of the “currency.”
Since the launch of the now hugely popular “Bitcoin” in 2009, cryptocurrencies have become one of the most widely used and hyped currencies in the world, and with the rise of altcoins and stablecoins, the realm of crypto has reached a new high and is continuing to rise further.
However, the real gem behind all of crypto is, of course — Blockchain, and many believe that blockchain is likely to have more influence and implementations than the famous cryptocurrencies and has the potential to change nearly every aspect of our lives.
But what does this mean exactly? Here’s what you need to know about the amazing nature of blockchain and how what it holds for us in the near future.
What is Blockchain and How does it work?
Blockchain may sound foreign and complicated to you, and it can be, but the base concept is really simple. A blockchain is a specific type of database that stores information in the form of “blockchains” that are then chained together.
Many types of information can be stored on a blockchain, but the most common use of them so far has been as a decentralized ledger for transactions, as seen in cryptocurrencies.
For instance, in Bitcoin’s case, blockchain is used in a decentralized manner so that no single group or person gets to control the network completely; instead, everyone collectively retains control.
Blockchains are fundamentally immutable for which any data entered is permanent and irreversible to change. Take Bitcoin, for example, where every transaction is permanently recorded and can be viewed by anyone.
This unique way of securely recording and transferring data has a much broader application than just cryptocurrencies. A blockchain is essentially a form of distributed ledger which allows record-keeping across multiple computers that are called “nodes”.
Any user on the blockchain network can be a node, although it does take a lot of processing power to operate. Nodes basically approve, verify, and store information within the ledger, which is different from the traditional record-keeping methods where data is stored in a centralized manner.
Every blockchain has its own unique identifier called a “hash.” This hash not only protects the information within the blockchain from anyone without the required code but also maintains the block’s place in the chain by identifying the block that comes before it.
Use of Blockchains in Cryptocurrencies
As mentioned before, Blockchain is the underlying technology that underpins cryptocurrencies like Bitcoin and Ethereum.
Cryptocurrencies are basically digital stores of value that are mainly used for buying and selling goods, services, and properties. Cryptocurrencies may be referred to as coins or tokens and are secured through the use of cryptographic encryptions.
Blockchains enable decentralized platforms that require cryptocurrencies and serve as the distributed ledger where transactions can be made. It allows a network to maintain consensus for tracking transactions and enables the transfer of data and value.
Cryptocurrencies act as tokens within such networks for sending value and paying for these transactions and also to provide network incentives. Additionally, you can see them being used as a tool for digitizing ownership within an asset.
The Bigger Picture
Blockchain provides us the technology to move information securely and offer near-complete certainty of knowing the authenticity of any type of information that you want to protect.
Since the underlying blockchain is immutable, NFTs allow sellers to verify the authenticity of the digital assets. This demonstrates that you can have a digital economy with digital property rights, which gives you the ability to own and control a particular piece of the digital economy.
For some of us, one of the most useful and impactful cases of blockchain implementation would be the protection and securement of personal data transfer. Imagine yourself using blockchain to store your banking information.
When you transfer information between institutions, open and check your bank account, a blockchain ledger could easily and quickly help secure the transfer or show if the information in the account is accurate.
This reduces a lot of costs and unnecessary need for intermediaries and also becomes a good way to reduce fraud.
Blockchain can fundamentally impact and change almost every industry since every kind of industry has some type of information that they’re trying to exchange in a secure way.
And such possible implementations just come to show that the use of blockchain technology is much more far-reaching than just cryptocurrencies and is probably going to shape the future of our world through its innovative applications.