What Is Blockchain?
Blockchain is a database that records transactions made on it. It’s like a spreadsheet, except the information can’t be edited once it’s entered into the spreadsheet. Now, this may sound like a regular database you’re used to using, but there are several reasons why blockchain is different from traditional databases. First of all, blockchain is decentralized. This means that no one person or group has control over the database (like Google does with Gmail). Secondly, every transaction that occurs on blockchain gets recorded in an immutable way. The future of finance will be decentralized and transparent. Blockchain can help us achieve this goal.
What Is The Problem With Traditional Databases?
The problem with traditional databases is that they’re not very secure or transparent. Banks and other financial institutions operate on them, but the information contained in the databases is susceptible to hacking or corruption by malicious actors for their own personal gain. This was demonstrated in 2013, when a hacker stole $5 million worth of Bitcoin from the Sheep Marketplace, an online platform for buying and selling illegal drugs (yes, they exist). Because blockchain is immutable, it’s more secure than traditional databases. It can’t be hacked into because it uses advanced cryptography techniques to protect its data instead of using passwords or digital signatures (which are vulnerable to attack). The result of blockchain technology will be a more secure financial system that gives users control over their money without third-party intervention.
How Does Blockchain Work?
There are several different ways to implement blockchain. Bitcoin’s implementation of blockchain is the most popular, and it uses a “proof-of-work” algorithm to secure its network. Each transaction that occurs on the blockchain is verified by miners (people who run special software). Miners must solve complex cryptographic puzzles to verify transactions. The first miner who solves a puzzle gets rewarded with newly minted Bitcoins (or sometimes other tokens). This creates an incentive for people to make sure the network stays secure even if they aren’t paid for it directly. In addition, Bitcoin uses a “proof-of-stake” algorithm instead of proof-of-work in which nodes (entities that submit new transactions) can earn money based on their reputation within the system. Proof of stake algorithms have been shown as 2x more energy efficient than proof of work algorithms because they don’t require mining via ASICs or GPUs which consume lots of energy while mining them (a lot more info here). This also means that mining decentralizes over time because there will be less reward for investing in ASICs/GPUs since one doesn’t need them anymore after some time has passed.
What Are The Benefits Of Blockchain?
There are several benefits of blockchain technology, including:
Decentralization – As I mentioned earlier, no single entity has control over the blockchain. This helps prevent attacks because if someone hacks into a node or network, only that one node or network gets hacked instead of the entire system. It’s also harder to tamper with information on a blockchain since every block is linked to previous blocks and it becomes more difficult to hack as you move up the chain. This makes it easier for people to protect their money without having to use third-party services like banks. Transparency – Another benefit of blockchain technology is transparency. Because transactions on a blockchain are recorded in an immutable way, everyone can see how much money people have in their accounts and where they spend it (if they choose). While this may be seen as an invasion of privacy by some users who value their anonymity (the identity behind your account), others will welcome this feature because they can better track where all their money goes during each transaction without having to ask anyone else for help.
Blockchain is an amazing technology that will change the way we do business in the future. It’s my opinion that it will advance society in a positive and meaningful way. Will blockchain be flawless? Of course not, but it’s important to note that no technology is (except maybe the Internet). Blockchain is still very young, and there are still many places where it can improve, however I think its potential far outweighs any of its failings.
Thanks for reading! I hope you enjoyed this piece on why blockchain has become so controversial. The next time you hear something negative about blockchain, just remember what I wrote here and reach out to me if you need help understanding more about blockchain!
