What Makes Blockchain So Cool?
What do you see when you hear the word ‘blockchain’? Is it a bunch of blocks linked together in a chain? If you do, that’s great, because that’s exactly what a blockchain is! A blockchain consists of blocks of data connected together into a chain using cryptography. To simplify, a blockchain is a series of time-stamped data that is managed by millions of computers instead of a single entity such as a bank.
A blockchain is an online, public ledger – or a record of transactions – that allows you to make financial transactions and transfer cryptocurrency such as Bitcoin. A blockchain is a distributed ledger so anyone can access it and add to it. Although blockchain technology was initially made for Bitcoin, its potential to allow free, secure transactions makes it possibly revolutionary.
Here is why blockchain is so cool:
- The data stored on a blockchain is virtually immutable, making it very secure
A blockchain is made up of blocks linked into a chain. Each block consists of data, the hash of the block, and the hash of the previous block. A block’s hash is its reference number, a unique number that is assigned to a block. If a user makes a change in a single block’s data, the hash of that block will change, making all the subsequent blocks invalid as they no longer store the hash of the previous blocks. Changing all the subsequent blocks requires massive computational power, and so the data stored in the blockchain is virtually immutable. In addition, the ‘proof-of-work’ security mechanism slows down the creation of blocks. It takes approximately 10 minutes to calculate the proof-of-work, which is a piece of data that is costly and time-consuming to produce. If a hacker attempts to change one block, she will have to compute the proof-of-work of every block that comes after. Therefore, the data stored in a blockchain is almost impossible to change.
- Blockchain is transparent, allowing multiple users to edit it
A blockchain is transparent, meaning that the transactions and holdings of each public address can be viewed by anyone. Users can add blocks to it as they see fit. Because a blockchain is open source and transparent, it is incredibly challenging to manipulate data logged in it, hence securing it against cyber-attacks.
- Blockchain is decentralized and distributed, adding to its securit
There is no central hub in a blockchain; it uses a peer-to-peer network that anyone can join. Each user or peer in a blockchain is known as a ‘node.’ Instead of verifying transactions through a central entity such as a bank, individual transactions through blockchain have their own proof of validity. Because a blockchain is decentralized, the information on a blockchain is distributed on individual servers throughout the world. Thus, if the information on a blockchain were to be intercepted by a cybercriminal, only a small amount of data, and not the entire chain, would be impacted.
- Blockchain has no transaction costs
Although blockchain does have an infrastructure cost, it carries no transaction costs. There are no processing fees or transaction fees. This means that with blockchain, you no longer need a ‘middle man’ or an intermediary such as a bank to process your transaction, and can send and receive currency for free!
- Transactions through blockchain are faster
Unlike banks and financial institutions which are closed in the evening and on weekends, blockchain technology is working every second of every day, all year. Thus, any transactions made through blockchain are processed more quickly.
Blockchain has the potential to revolutionize the way financial transactions are made today. It is not only more secure than traditional methods of sending and receiving money, but is also faster and cheaper. Supporters of blockchain hope and expect that it will soon make banks obsolete and create a storm in dozens of industries.