What is blockchain?
Cryptocurrencies throughout the world have been booming during the last year. Bitcoin’s price has skyrocketed, causing confusion and admiration at the same time. Bitcoin is currently using a special technology called blockchain. Yet, those two are not the same or similar in any way. Blockchain was first introduced in 2009 and its main objective is to track large volumes of transactions and keep them secure. Blockchain allows digital information to be distributed but not copied, blockchain technology created the backbone of a new type of internet. Even though it was originally designed specifically for cryptocurrencies, the tech community is now finding other potential uses for this technology in area as diverse as manufacturing, food production and many more.
How does blockchain work?
Blockchain consists of blocks, which are linked and secured using cryptography. Each block contains unique information about transactions, thus forming a chain, a “block chain”. By design, a blockchain is resistant to modification of the data and is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. This method means that blocks don’t need to have serial numbers, as the hash allows them to be uniquely identified as well as verifying their integrity. Blocks in that chain confirm the validity of the previous block. Therefore, blockchain works as a decentralized system, as there is no need for confirmation/configuration from a third party server holding the transactions, since each and every individual computer has a copy of the blockchain which is constantly updated with new blocks. This all renders the presence of a bank useless, as algorithms automatically confirm transactions.
What are some of the biggest blockchain databases?
Apart from the obvious popularity gain of bitcoin, blockchain has also gained quite many supporters, including some multinational companies in the technology and financial sector. Hence, this has led to the launch of numerous alternative blockchains recently. The first one is R3, which utilizes similar technology to that of blockchain, and it is mainly used by companies like HSBC, Intel and Back of America. Another one is Hyperledger, an open-source cross-industry collaboration created by the Linux Foundation in order to popularise blockchain-based ledgers, with the first generation of its technology released in July 2017. Apart from those, there are particular firms, such as IBM, that aim at developing their own “blockchain” to let customers build their own secure blockchains. It is worth mentioning that LSE (London Stock Exchange) has set as a goal the use of blockchain for future transactions to improve transparency of information between customers.
How secure is blockchain?
As it was mentioned earlier, blockchain technology is decentralised as there is no need for a central server or agency (such as banks) and therefore people can complete transactions without the configuration of a third party. Thus, the privacy of the user is preserved making it a far more secure technology than traditional banking. This can be seen from the fact that transactions made do not require the identity of the person making or receiving payments. Nevertheless, this can pose a threat as cyber criminals might use this technology to exchange money.