Blockchain technology is revolutionizing the world around us, gradually and silently. What is blockchain? How it differs from Cryptocurrency? What is the future
It was 1991 when Stuart Haber and W. Scott Stornetta described the first work on cryptographically protected block chains with a purpose to implement a system where it could not be possible to tamper or backdate documents’ timestamps. However, it was actually 2008 when blockchain technology gained true significance after Satoshi Nakamoto (a person or people) conceptualized the first blockchain by publishing the bitcoin whitepaper. That was a start of something new, something that changed the world of finance.
But what exactly is blockchain technology and why it is such a big deal? Let’s find that out.
What is Blockchain? How Does It Work?
It is a structure of data that is used to represent a record of the transaction or a financial ledger entry called as block. These blocks are in a chain. These blocks in a chain are sent Given that no one can temper with each digitally signed transaction, the ledger’s integrity is assumed to be really high. In simple words, blockchain technology is a digital ledger that not only keeps a record of financial transactions but almost everything that is of high value. It has a built-in robustness that ensures the digital ledger has no single point of failure and cannot be administered by any single entity. Ref
If you want to comprehend how exactly does a blockchain technology works, consider that it is a diary that just cannot be forged. Whenever a new transaction comes into a blockchain, there are nodes in the blockchain implementation that needs to start the process of executing algorithms to assess and authenticate the proposed blockchain block’s history. The new transaction gets accepted into the ledger once the nodes (the majority of them) come to an accord that everything about the blockchain block (e.g. signature, history) is valid. As a result of it, there is an addition of a new block in the chain of transactions. If the majority of nodes do not accord to the history and signature of a new transaction, the block is not added in the chain of transactions.
Hence, it can be said that blockchain doesn’t need some unifying authority to approve whether the transactions are valid or not and that’s why it works as a highly effective distributed ledger.
What is the Difference between Blockchain and Cryptocurrency?
Blockchain: There was a time when the only blockchain was Bitcoin. However, the technology matured and there are many blockchains that have blossomed over the past few years. It can be said that blockchain is used as a technology. It is a technology of distributed ledger that is responsible for forming a “chain of blocks.” There are information and data in each block that is verified and bundled together.
The blockchain is like a platform that is responsible for bringing a lot of cryptocurrencies into play. It is a technology that forms the network as a distributed ledger and generates means for transacting. All in all, blockchain technology permits the transferring of information and value.
Cryptocurrency: It is the native token (sub-token) of blockchain and can be seen as a resource or tool on a blockchain network, more like an asset class. The entire buying, selling, trading, investing etc. is done with cryptocurrency. So basically, cryptocurrencies are the digital currencies (tokens) that are used within blockchain networks for sending value and paying for transactions.
In a nutshell, it can be said that cryptocurrencies are parts of an ecosystem in which blockchains play the role of basis technology. Even though cryptocurrency is extremely important for a transaction, the blockchain is the main reason the transactions are recorded and transferred without any interference. Needless to say, both of them are different in functionality but they go hand in hand.
Other than Cryptocurrency What Can Blockchain Be Used For?
Although blockchain is widely known as the technology behind various cryptocurrencies, not many people know that it is way more than just an instrument of finance. Here are some of the other applications of blockchain:
- Supply Chain Management: It can be used for recording transparent transactions and making them visible for all. This way a lot of human mistakes, time delay, and cost can be reduced. Blockchain can be used to track the origin of products and verify their authenticity. There are some startups that have already started using blockchain technology for this purpose.
- Transport: This use of blockchain can pose a serious challenge to some of the renowned ride-sharing companies in the world. It is because peer to peer ride sharing apps can be created by using blockchain technology. This way the car owner and rider can easily set their own terms without the interference of any third party.
- Refugee Aid: Due to the turmoil in Syria, Ethereum blockchain was successfully used for a charitable cause. The United Nation’s World Food Programme (WFP) ran a project of cryptocurrency-based vouchers to Syrian refugees that could be used to purchase food in participating markets.
- Elections: To avoid the rigging during elections, blockchain technology can be used for some major roleplaying areas such as voter registration and counting of votes. This means that there will be no fake voters. It can be a great application of blockchain to eliminate rigging during elections.
- Music: Blockchain technology is being used to give singers a chance to earn more without paying the contract companies. This way a singer can no longer feel dependent on contract companies and can get directly paid from the listeners.
Video on Understanding Block Chain
A 6 minute video on What is Block Chain explained simply.
Is Blockchain The Future? Or Is It Just A Fad?
The answer to this question is quite simple: Blockchain is the future!
The reason why it is the future is that it has so many other applications than just cryptocurrencies. There is a wide misconception about blockchain technology that it only revolves around cryptocurrencies and if there is no crypto, there is no future of blockchain. However, it is entirely wrong because crypto is just one of the applications of blockchain technology. Given that there are numerous other applications of the blockchain, it is too harsh to predict that it is just a fad.
The blockchain is the future because it is advanced technology that can benefit businesses of all shapes and sizes. Today, small and large businesses are embracing blockchain technology because they’ve realized its true potential. It is only moving in the forward direction and there is no chance of it fading anytime soon.