What is Blockchain?
Blockchain is a relatively new technology that has seen a rise in popularity, since the introduction of cryptocurrencies, such as Bitcoin. The purpose of it is as a system of recording and storing information, in such a way that it cannot be changed, reversed, hacked or cheated.
How does Blockchain work?
Blockchain maintains a decentralized record of transactions. This means that when a transaction is performed, a record is made of it, duplicated and distributed across the entire network of computers on the blockchain. This decentralised database, which is managed by many users is also known as Distributed Ledger Technology (DLT) – below is an image showing the properties of a DLT, from Euromoney Learning.
The way that Blockchain collects and stores information, is different from standard databases. It collects the information together in groups, known as “blocks”, which have limited capacity. Once a block reaches its capacity, it is closed and linked to the previous block – hence the “chain”. Blockchain is secured through the use of cryptographic digital signatures and secure timestamps, for each transaction and every block.
Pros and cons of Blockchain
lockchain technology has its pros and cons, just like any other technology. Providing a secure and immutable ledger of transactions and a decentralized database of information and the biggest perks. But, with that security and power come some cost implications, as well as a means to do the “not so legal”. Below is a good comparison of some of the pros and cons of blockchain, done by Investopedia.
|Improved accuracy by removing human involvement in verification
|Significant technology cost associated with mining bitcoin
|Cost reductions by eliminating third-party verification
|Low transactions per second
|Decentralization makes it harder to tamper with
|History of use in illicit activities such as on the Dark Web
|Transactions are secure, private, and efficient
|Regulation varies by jurisdiction and remains uncertain
|Data storage limitations
|Provides a banking alternative and way to secure personal information for citizens of countries with unstable or underdeveloped governments