Most people think of the technology behind Bitcoin when they hear the word blockchain. Even though this was actually the original purpose of it, there is much more potential in the blockchain.
Blockchain is an acronym for a whole range of Distributed Ledger (DLT) technologies that can be programmed to capture and track everything of value. This ranges from financial transactions to medical records and land register entries.
Now you may think: There are already processes for tracking data – why do I need blockchain? We show you why blockchain technology is revolutionizing our world.
1) Data is tracked and stored decentrally
In the blockchain, information is stored in stacks (called blocks) that are connected chronologically to form a continuous line. For a better understanding you can imagine a chain of blocks.
If information recorded in a particular block is changed, you do not rewrite it. Instead, the change is saved in a new block indicating that x was changed to y on a specific date and time. If you are familiar with this procedure, it is because the blockchain is based on the general financial book method. This made it possible to track data changes over the course of time hundreds of years ago.
So what’s new about blockchain? Whereas the ledger method stores data on a single system, the blockchain is decentralized. This means that the data is distributed over an entire network of computers. Decentralization drastically reduces the possibility of data manipulation.
2) Data becomes more trustworthy
The data entry into the blockchain can be compared to the attempt to get into a hip club: some criteria must be fulfilled that one is allowed to enter. Before a block is actually added to the chain, there are some obstacles that have to be overcome. The first step is to solve a cryptographic puzzle to create the block. The computer that solves the puzzle shares the solution with all other computers on the network. This is called proof-of-work.
Only when the network verifies this proof-of-work, the block is added to the chain. This complex and multi-level approach ensures that we can trust every block in the chain.
3) We no longer need mediators
When we do business, we do not disclose our finances to our counterparts, but rely on intermediaries such as banks or lawyers. They check the relevant documents and treat the information confidentially. Although these intermediaries create mutual trust, their commitment also costs money accordingly.
If you use the blockchain instead, you can do without such intermediaries, because a block is only added to the blockchain, if it is verified by the network. As a result, the peer-to-peer network is revolutionizing the way we handle our data.
And because blockchain is a technology and not a single network, it can be implemented in many different ways. Blockchains can be completely public and therefore visible and accessible to everyone. Others can only be made accessible to a selected group of authorized users (private blockchains) – for example, within a company, a group of banks or government authorities. In addition, there are hybrid public-private blockchains in which, for example, not everyone can see all data or can add data.
Blockchain – Technology with great potential
The combination of decentralized data, a new confidence in the accuracy of this data and direct handling without intermediaries makes the blockchain an interesting technology with the potential to change the way we interact. How and for what we use the blockchain will show with time.