No matter where you turn, all of a sudden, blockchain is everywhere. Blockchain technology (which we will explain) was invented in 2008 to power Bitcoin when it launched a year later.
With Bitcoin and other cryptocurrencies playing a major role in the financial news cycle, more and more people are trying to figure out what the hell blockchain actually is. The good news is that it’s actually a pretty simple concept if explained correctly.
How Does Blockchain Work?
Without confusing you with metaphors or hyperbole, in the language of cryptocurrency, a block is a record of new transactions. This “block” could be the location of cryptocurrency, voting records, medical data, tax returns, or any other piece of information. Once each block is completed it’s added to the chain. This chain of blocks gives you a blockchain.
Do we lose you yet?
Blockchain Is a Public Ledger
On top of Bitcoin and Blockchain
If you transfer Bitcoin (or some other cryptocurrency) to a friend, a business, or sell it on an exchange, that information becomes public record on the blockchain. There will be no record of your name attached to this entry on the public ledger, but everyone will know exactly how much value has been transferred.
Because of its many advantages (which are listed below) many people see blockchain as an alternative to traditional banking.
Advantages of Blockchain
1.Transparency: The technology is open source. Meaning, other users or developers have access to modify it if necessary. Most importantly, open source technology makes altering logged data within the chain very difficult.
2.Faster Transaction Settlements: Traditional banks take days to completely process transactions (due to protocols and business hours). Blockchain is up and running 24 hours a day, seven days a week.
3.Reduced Transaction Costs: With peer-to-peer and business-to-business transactions, there’s no need for a third party, which is often a bank. Since there’s no middleman involvement in blockchain transactions, this can reduce costs to the user or businesses over time.
4.Decentralization: Instead of needing a bank or some other financial institution to verify and store the transaction data, all transactions are stored on the ledger. With information on a particular blockchain piecemealed globally on individual servers, it ensures that if this information fell into unwanted hands, only a small amount of data (not the entire network) would be vulnerable.
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