When talking about cryptocurrencies or new technologies like Ethereum, we often hear the word “blockchain.” It has become one of those cool, new words that pops up when discussing all this new tech. So what is a blockchain? In short, simple terms it is a public ledger that hold records of transactions. It really is that simple. But there is a lot more to it when discussing cryptocurrencies, digital assets, money and even real property.
The concept of a blockchain began in 1991. But it wasn’t utilized until the creation of the first cryptocurrency in 2009 – Bitcoin. A blockchain is a series of informational records called blocks. It can be thought of like an accounting ledger that lists assets paid in and assets paid out. But instead of one accountant having access to the ledger in a central location, blockchains are kept on an open network. Transactions can be viewed by anyone on the network. And instead of one person keeping the books, copies of the ledger are kept on tens of thousands of computers called nodes all across the world. Those are the two main things that set blockchains apart from traditional centralized banking and record-keeping.
Whenever someone wants to add a block of new transactions to the blockchain, it gets distributed to all the nodes to check for validity. If the data in the block checks out, a new block is added. That makes the process accountable to the large number of server nodes, which in turn provides more transparent and honest transactions.
Once you understand how the process works, you can begin to see how blockchains might improve things in many areas other than banking. It’s ability to track money (whatever form that might be) is easy to grasp. Transferring funds reliably via a self-validating system of nodes makes sense. But an open and accountable public ledger could be used to track and process things other than money.
Blockchain technology can be used to track supply chains to make sure products are authentic and safe. That could be very useful for tracking medications for patients or food to make sure it’s safe to eat. It could be used to validate and secure elections in democracies where governments corruption is a problem. It is being considered for use with digital identities so people can access services with a secure ID. It could protect intellectual property rights for musicians and artists who might be subject to unlawful use of their copyrighted material. The list of potential uses for blockchain keeps expanding.
Blockchains are evolving. There are different types of blockchains created for different purposes. The Ethereum platform uses blockchains that utilizes ‘smart contracts’ – programs that can process transactions on their own. They can be set up to function with parameters. That can be helpful for complicated processes like real estate transactions or tracking products ordered online. With computerized systems checking the processes and parameters, there would be less errors and faster transactions.
The evolution of blockchains continues. But one thing is sure: Blockchains are here to stay. They are already being adopted by many large companies in many different industries. And programmers are constantly updating existing ones and creating new versions as the technology continues to blossom. The future of blockchains is wide open. So as we always say: if you’re looking to invest, early is best.
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