What is Blockchain and why should you care?
If you have been following fintech and the ongoing crypto craze, it is highly likely that you have heard about blockchain technology.
This is the technology behind cryptocurrencies among other disruptive innovations in the market today. Tech enthusiasts believe that this is the next hottest thing after artificial intelligence.
But what is it? Simply put, a blockchain is a distributed ledger where data can be recorded and stored. The ledger is immutable meaning that no one can alter a transaction after it has been recorded. Consequently, if an error occurs on a blockchain, a new transaction must be used to reverse the mistake.
While blockchain has many use cases, it is mostly synonymous with the crypto industry. A digital currency based on the blockchain can be traced from source to the end without revealing the real identity of the holder. This means that a single coin cannot be duplicated or spent twice.
Blockchain has four distinct characteristics which make it suitable as a trustworthy record of value. These include consensus, provenance, immutability, and finality.
For a transaction to be validated, all parties within the network must follow some rules and come into a consensus. If a consensus is not achieved, then the transaction cannot be validated. The consensus mechanism for bitcoin blockchain is known as proof of work while that of Ethereum is known as proof of concept.
Provenance is all about traceability. Any record documented on the public ledger must be traceable from the beginning to the end. This includes the various coins issued through a given ledger.
Once a record is entered on the blockchain, it cannot be edited. As mentioned earlier, if an error occurs during documenting, a new transaction must be registered to explain it.
In a blockchain network, there is only one ledger. This means that everyone in the system can see everything that happens.
Outside cryptocurrencies, blockchain has a lot of use cases. For instance, companies like IBM are using the technology to track products through their entire supply chains. Others tech firms are exploring its potential in securing the Internet of Things.
While the future of cryptocurrencies remains hazy, blockchain is undoubtedly going to disrupt industries. The mainstream industry is already adopting it en masse which means that there is no looking back.