Blockchain Explained
By now, most people have heard the term Blockchain, but only a few know what Blockchain really is. Simply put, Blockchain is a database technology or ledger system. Blockchain technology is primarily used for cryptocurrencies and NFTs but has the potential to be used in an array of applications and industries.
What Is Blockchain?
Blockchain is, in essence, a distributed digital ledger that stores data on "Blocks." So, for example, a blockchain can store information about cryptocurrency transactions, NFT ownership, and DeFi smart contracts. What makes blockchain technology differ from other ledger systems is the fact that it is decentralized. Therefore it is not managed in a centralized location, but multiple identical copies of any given blockchain are held in various locations spread out across an extensive network or "nodes."
The digital ledger comprises individual blocks forming a chain (no need to explain where the name came from). Every transaction creates a new block attached to the chain and updates the block on every node. Before a new block is added to the ledger, most nodes must confirm and verify the latest data. The block is only added to the chain once there is consensus, and the transaction is then recorded on the distributed ledger. Finally, these blocks are linked together to form a highly secure digital chain that is practically impossible to overwrite. Transactions are secured through cryptography, meaning the nodes must solve complex equations to process transactions.
Blockchain in today's world
Blockchain technology is best known as the foundation of cryptocurrencies, two of the most popular currencies being Bitcoin & Ethereum. All crypto transactions are recorded on a blockchain, and every step is recorded, including buying, exchanging, and spending. Therefore, the more cryptocurrencies gain in popularity, the more widespread Blockchain becomes.
Blockchain in Banking
Not surprisingly, Blockchain is already being utilized in some banking systems for FIAT transactions. This is much faster than bank transfers as eliminating any human intervention allows quicker verification and can be processed anytime, not just during business hours.
Digital Assets and NFTs
Over the last couple of years, we have experienced a rise in the popularity of NFTs (Non-Fungible Tokens); transfer and ownership of digital assets and digital art are recorded on a blockchain. Blockchain could also be adapted to serve similarly for physical assets and property.
Smart Contracts
One of the most practical uses of Blockchain is known as smart contracts. Smart contracts are digital contracts that can be written and programmed to meet specific criteria; once these criteria are met, the smart contract automatically performs the desired function. For example, Affiliates for lunabets.io are paid through the implementation of smart contracts; once players, who have been referred through their links, have met specific criteria, affiliates are paid their agreed commission instantly and directly to their wallets.
Advantages of Blockchain
Accuracy
Since blockchain transactions are verified at multiple nodes, transactions are more accurate; if one node differs from the others, the error is easily caught.
No third-party intermediaries
Blockchain transactions are peer-to-peer between two parties, eliminating any third party, saving time, and lowering costs.
More Efficient Transfers
Blockchain systems operate 24 hours a day, unlike financial institutions, which improves efficiency, especially when making international transactions. In addition, the verification process is relatively fast and will generally take anywhere from seconds to a couple of hours.
Extra Security
In theory, the decentralized nature of Blockchain technology makes it virtually impossible to perform fraudulent transactions; to do this, a hacker would have to change every single block on every node and ledger. In addition, most blockchain use proof-of-work or proof-of-stake as a verification method, increasing the difficulty of creating fraudulent transactions.
The Future of Blockchain
Despite advances in blockchain technology and its multiple potential uses, Blockchain is still a niche technology. Still, it has the potential to significantly transform the way we interact and transact with others. Blockchain is still in its infancy as a technology, and we expect significant developments in this technology over the next decade. Nevertheless, like me, many see the potential of the technology and the value in investing in the future of Blockchain.