In the most basic terms, blockchain is a type of digitized and public ledger. It’s distributed. It’s open source, so anyone can modify the underlying code. It’s peer to peer; it doesn’t require intermediaries such as banks to authenticate or settle transactions. The value of any crypto is ultimately determined by its underlying technology, known as the Blockchain. As crypto investors, it is super important that we understand this technology, how it is being used today and how it can grow in the future. Many (including myself) believe Blockchain has the potential to revolutionize the financial industry at large. In particular, the way organizations execute business transactions may change for good.

What does a Blockchain Do?

Blockchain Technology is trying to improve the efficiency of financial transactions by removing the need for a third-party intermediary. In doing so it leads to faster, cheaper, transparent transactions between members of a network.

When members of a business or financial network (known as nodes) agree on a transaction, all relevant details are stored in a digital ledger. All nodes involved receive a separate copy of the ledger using a consensus protocol. This protocol ensures that all copies distributed across the network are exact copies. For contract tampering to occur, all copies of digital ledgers must be changed simultaneously – which significantly reduces the risks of its occurrence.

After distribution, the integrity of all ledgers is verified using cryptographic hashes and digital signatures. If any of you have studied computer science (fun fact: I dropped out of CS to pursue finance), you will probably already be familiar with hash encryption. In essence, cryptographic hashes look at the content of a digital ledger and employ unique algorithms to produce a final output ID. If the ledger undergoes even the slightest modification, the output value will not match. Digital signatures (carried out using digital keys) ensure the contracts are signed by the true account members and not identity thefts or hackers.

Once all nodes agree on the transaction, the ledger becomes a permanently stored, unique, identifiable and auditable record within the network. This is referred to as a block.

Within a network all blocks (containing the details of all approved transactions) are stored in a chain of chronological order, known as Blockchain. This now represents a single and unchangeable collection of all agreed upon transactions between all nodes in the network.

The benefits of Blockchain

The removal of an intermediary brings a great deal of benefits to the execution of business transactions. In fact, decentralizing this process prevents any single entity (the intermediary) to have absolute control over the content and execution of the transaction. Within a Blockchain, all node members operate with equal powers and under the same protocols! So, this is an extraordinary thing. An immutable, unhackable distributed database of digital assets. In short, Blockchain leads to more secure and efficient business transactions with fewer risks. Highlights include:

• Reduced costs
• Enhanced security
• Greater transparency
• No need for intermediaries
• Near immediate processing times
• No single entity has control over the transaction leading to increased trust and integrity
• All members receive are exact copies: minimizing the risk of tampering or disputes

 

To be updated..