Not knowing these three unique features about Blockchain makes you a rookie!
In 2008, Satoshi Nakamoto created the first cryptocurrency, Bitcoin, by introducing what is currently known as Blockchain. For the readers who are new to this concept, aim of this piece is to explain the basics of blockchain in a very easy way.
Blockchain is basically a public digital ledger in which transactions made in cryptocurrencies are recorded chronologically. In simpler words, blockchain is an open decentralized database of any transaction involving value, for example, money, votes, property etc. When the record is created, its authenticity can be verified by the entire community and this eliminates the need for a third-party trust organization.
There are three unique features that make blockchain revolutionary:
1. The way it tracks and stores data
2. The way it creates trust in the data
3. The way it eliminates the need for intermediaries
1. The way it tracks and stores data
Blockchain stores data in batches, called blocks that are linked together in a timely fashion to form a continuous line of blocks. If anyone makes a change to one of the blocks, they don’t rewrite the block, instead that change is stored in a new block showing that A changed to B at a particular date and time. This follows the basic ledger system but blockchain is:
- Decentralized and distributed across a large network of computers
- A non-destructive way to track data changes as once the record is made, it cannot be tampered with.
2. The way it creates trust in the data
Before a block can be added to the chain, a few things need to happen. First, a cryptographic puzzle must be solved thus creating the block. The computer that solves the puzzle in the network then shares the solution with all the other computers in the network which is known as the proof of work. The network then verifies the proof of work and if correct, the block is added to the chain. These steps ensure that we can trust each and every block on the chain as the entire network does the trust building for us.
3. The way it eliminates the need for intermediaries
Currently, when doing business with one another, we don’t show the other person our financial and business records. Instead, we rely on a third-party trust organization like a bank to keep our information confidential and share only when there is a formal agreement. These intermediaries are no longer needed to build the trust between the parties or verify as data verification can be easily done from anyone on the network. As we know, all blocks added to the chain have been verified to be true and cannot be tampered with, this type of peer-to-peer (P2P) interaction with our data can revolutionize the way we access, verify and transact with one another.
Although, this all looks very promising, Blockchain has a lot of limitations in terms of scalability, flexibility and speed.
Give it a clap and tweet if you knew this already! Even if you didn't know before, its great that you do now so give it a clap and tweet this achievement as well.
Now, do you think you know what the solution to the scalability, flexibility and speed issue is?
Click here to find out whether you're familiar with this next concept!
