Blockchain Technology: What You need to Know
There’s no “right” answer to whether or not blockchain technology is the next big thing. Some say it’s a fad, while others believe it will reshape industries and civilization as we know it.
Blockchain certainly has its critics. Many believe that it is a highly volatile concept with no clear use cases. While this is true to an extent, there are many other uses of digital ledger technology that have yet to be explored.
In this article, I will take you through what blockchain is and its potential uses in the real world. We’ll explain what it is, its benefits, risks, and potential applications.
Check out my video below for the video version of this article.
What Is Blockchain?
Blockchain is a decentralized database system that was first introduced in 2008. It is commonly associated with Bitcoin, the first cryptocurrency. However, blockchain technology is much broader than just cryptocurrencies. It is a distributed database that stores data across a network of computers without any central authority. Because of this, blockchain is often referred to as the “world computer.”
Blockchain technology is a decentralized database system that uses cryptography to secure data transactions. It was invented by Satoshi Nakamoto in 2008.
How Does Blockchain Work?
The basic principle behind blockchain technology is simple: Each user has their own private copy of the database. When changes occur, they are automatically updated across each node. These nodes then verify that the change occurred before updating their own copies of the database. This prevents tampering and ensures that the information stored remains accurate.
Why Do People Use Blockchain Technology?
One of the biggest reasons people use blockchain technology is to create secure networks. By storing data across a network of users, blockchain makes it extremely difficult to hack. As long as the network is functioning properly, hackers would need to gain access to every single node in order to alter the data.
Another major benefit of blockchain is its transparency. Since everyone has access to the same information, there is no way to hide anything. If a company wants to keep something secret, it simply cannot do so using blockchain.
Potential Uses Of Blockchain Technology
While blockchain is primarily known for being used in cryptocurrencies, it has many other potential uses. One example is smart contracts. Smart contracts allow two parties to enter into a legally binding agreement without needing a third party to oversee the contract. Another example is identity verification. Imagine if you could prove who you were without having to provide any personal information. You could open a bank account, buy property, get a loan, or even vote in elections.
Other possible uses of blockchain include supply chain management, voting systems, online gaming, healthcare records, and crowdfunding.
Risks And Challenges To Using Blockchain
As mentioned earlier, blockchain is a powerful tool that has many potential uses. However, it does come with some risks and challenges. First, there is the issue of scalability. Currently, blockchain technology only works well with small amounts of data. As the amount of transactions increases, the time it takes to process them becomes longer. This slows down the entire network and creates bottlenecks.
Second, blockchain is still relatively new. There are many companies working on developing solutions to these problems. However, since blockchain is still in its infancy, it may take years before we see widespread adoption.
There are projects like Algorand, DeSo, Solana, Stellar, and Cardano that are working on fixing the issue of scalability. Right now Bitcoin can only process 7 TPS (Transactions Per Second) and Ethereum is capable of 20 TPS. Ethereum is working on this problem at the moment. After the Shanghai update and sharding, we should see a huge improvement in scalability.
The Bitcoin Lightning network can process 1,000,000 TPS which is amazing but the Bitcoin Lightning network comes with risks of its own. One of the main concerns with the Bitcoin Lightning network is that it needs to be online at all times which makes it susceptible. The lightning network does allow you to put your coins in cold storage which is considered the safest option for keeping your Crypto safe.
Conclusion
Blockchain technology is a revolutionary idea that has the power to transform our society. Whether you agree with this statement or not, it is undeniable that blockchain is here to stay.
I personally think Blockchain will fix a lot of the issues we have with fraud, manipulation of markets, identity theft, and so much more. Blockchain has a long way to go but it will be a part of our everyday lives in the not-so-distant future.
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