Blockchain Technology – How Does It Work?
Blockchain technology is currently a hot topic in the media. This is most commonly associated with Bitcoin and other cryptocurrencies, but this is a technology with many other applications as well. As more types of blockchain software are developed, we can expect to see some revolutionary transformations across many industries.
What is Blockchain Technology?
A Blockchain is an open, distributed ledger of continuously growing transactions, called blocks. Once complete, a block is added to the blockchain using cryptography so each block becomes permanent and verifiable. There is a countless number of such blocks in the blockchain, connected to each other in chronological order. Every block contains a hash of the previous block making blockchains incredibly reliable and secure.
Benefits and Unique Characteristics of Blockchain
Bitcoin and Cryptocurrency
- Built-in Robustness. It cannot be controlled by any single individual. Because identical blocks of information are stored throughout the network, it has no single point of failure. This makes it extremely secure and robust.
- Transparent and Incorruptible. Unlike typical centralized systems, the blockchain exists by consensus. It automatically checks in with itself every few minutes, making it a kind of self-auditing ecosystem. Each transaction is reconciled in ten-minute intervals. Groups of transactions are known as "blocks."
- Not Traditional. Transparent data is embedded within the entire network, making it public by definition. Unlike traditional systems of data storage and encryption, it can't be corrupted by altering a single unit of information. For doing this would mean overriding the entire network, which would require an immense amount of computing power.
Bitcoin has gotten lots of press recently due to its spike in value. While it's interesting to discuss Bitcoin and other cryptocurrencies as an investment, they are much more than this. Bitcoin has many advantages over other payment systems. As a peer-to-peer currency, transactions can't be intercepted or manipulated by third-parties such as hackers. Paying by Bitcoin doesn't require divulging any personal information as you would with a credit card. Bitcoins also have extremely low transaction fees as there's no centralized institution such as a bank to go through. Bitcoins and other cryptocurrencies are extremely secure and convenient for making mobile payments, another advantage in an age when people are traveling more and making purchases from smartphones.
We've only begun to scratch the surface when it comes to cryptocurrencies and other applications of this exciting new technology. Some possibilities include:
- A greater diversity of cryptocurrencies and other financial solutions. Banks and investment companies can create transactions for customers.
- Blockchain software. Software applications can become more robust and less susceptible to viruses and tampering.
- Cloud storage. More secure ways to store data in the cloud.
- Contracts. More trustworthy contracts that can be used digitally.
- Digital identity. As a solution to problems such as identity theft, blockchain technology might be used for documents such as birth certificates, passports, driver licenses and more.
Blockchain software developers will become more sought after as this technology increases in popularity. Find a partner to help you fill your gaps with the right people. For more information about how Cohesion can help you with your IT staffing needs, contact us.