Two words; blockchain and cryptocurrency. They are suddenly everywhere. While some have a vague idea of what cryptocurrency is, others mistake blockchain for being one of its forms. They couldn’t be more wrong.
The blockchain is a technology that is now a decade old. It was invented to power one of the first cryptocurrencies, which you perhaps know, Bitcoin. It has gained popularity and has been adopted for many uses including copyright protection and others.
The world of cryptocurrency is skyrocketing, Bitcoin for instance. Wherever there is the mention of one of the cryptos, the technology blockchain is somewhere in between. This, maybe, have you wondering what it actually is.
That said, let’s look at how blockchain works to make it clearer for you. As you will tell, the concept is somewhat simple, and complicated in scrutiny.
How Does Blockchain Work?
To begin, let’s define a block, in the language of cryptocurrency. A block is a record of new transactions, and by this, it means but not limited to the location of cryptocurrency. Whenever each block is completed or is processed, it is added to the chain. This creates a chain of blocks, hence blockchain.
Now, the beauty of cryptocurrencies is that they are always heavily encrypted. If you lose them, you might never reclaim them ever again. The encryption makes the processing of transactions difficult. It involves solving a series of tough math problems, which incidentally becomes difficult as the blockchain grows. Individuals solving these problems get rewarded with cryptocurrency in what is referred to as mining.
Any individual owning a cryptocurrency typically owns a very long password, a private key to its address on the blockchain. The key allows you to make transactions, you can withdraw cash to spend but once your key is lost, you will never get your money back. The money remains lost in the cloud. Each account also has a public key, which lets other people send cryptocurrency to your account.
The information on the blockchain is also available for anyone to see. It is dispersed, which means it is independent of a single computer or server to function. This makes any transactions instantly visible to everyone, and that introduces us to another term, public ledger.
The blockchain is like a public ledger. Whenever you send cryptocurrency to someone else, the information is available to the public. Although others may not know who you are, they know how much value you have transferred to a friend.
Blockchain can be considered a traditional bank. As opposed to seeking the consent of a bank, or any other institution to approve the transfer of money, one can easily use blockchain to eliminate the middleman.
The same way that the internet made the transfer of information free is the same way blockchain does so for money. Blockchain allows you to transfer money across the globe by bypassing all the intermediaries including government regulations or banks and their policies.
Take for example Finterra Blockchain. The technology is transforming the way people use time, money and resources. Finterra’s blockchain platform provides users with financial freedom and independence. Empowering individuals to take control of their financial destiny.
William Mougayar, the author of The Business Blockchain summarized and said that blockchain is like Google Docs. Before Google Docs, if you wanted to collaborate on a piece of writing with someone online you had to create a Microsoft Word document, send it to them, and then ask them to edit it. Then you had to wait until they made those changes, saved the document, and sent it back to you.