The technological world has glimpsed a rapid advancement in recent years. It takes just a few seconds to conclude processes & programs with the help of modern technology. One can now send and receive money globally without burning a hole in your pocket due to significant transaction charges, all thanks to the introduction of a milestone technology called the blockchain.
If you are involved in trading, investing, or cryptocurrency trading, then you indeed would have heard the term Blockchain Technology.
You might want to know what the buzz is all about. You’ve come to the right spot since this article will help you as a complete guide to blockchain technology & various blockchain properties. Let’s get started with the fundamentals.
What Is Blockchain Technology?
Blockchain might seem complicated, but it is pretty simple to comprehend. It is a type of database. A blockchain is a time-stamped chain of unchangeable records of data that is managed by a set of computers owned by multiple entities. All these blocks of data are secured & bound to each other with the help of cryptography (i.e., chain).
Why is Blockchain So Popular?
Blockchain has become a trendy concept in recent years due to its easy functionality and translucency. The best part is that the blockchain concept has no central command. It is a shared and immutable ledger due to which the data is accessible for the public.
However, every technology has its benefits & disadvantages, and it is the same as the blockchain concept. Let us look at the advantages & disadvantages of this path-breaking technology.
Advantages of Blockchain Technology
least prone to technical failures: Blockchain data is kept in a dispersed network of nodes, making the system and data resistant to hostile attacks and technical failures. Every node duplicates and stores a copy of the database, so there isn’t a single point of failure.
Holding financial records: Once data is stored in a blockchain, it is practically irreversible. Thus, blockchain is ideal for storing financial data as every change is tracked and documented on a public ledger(register).
Reduces cost: Transactions do not have an intermediary partaker in blockchain technology as the transactions are verified through a method known as mining. It reduces the overall costs and transaction fees.
Disadvantages of Blockchain Technology
Possibility of 51% attacks: Although the blockchain algorithm is secure and foolproof, some probable attacks can occur against this network. One of the most talked-about probabilities of incursion is the 51% attack, which could occur if one entity control more than 50% of the network power. While such an attack has never happened till date, its probability cannot be negated.
Difficult to modify data: Changing any data after entering a blockchain is challenging.
Public keys: Another disadvantage of blockchain is that it uses public keys that grant users ownership over their crypto units. The blockchain address has a private key; if the user loses their private key, they will lose their wallet.
Storage: Blockchain ledgers can become massive overtime. A bitcoin chain takes 200 GB of storage. It could lead to a loss of nodes if the roster becomes too large.
How Does Blockchain Work?
Information on the blockchain is held in a shared and harmonized database format. The database is stored in multiple spots, making the records public and easily checkable. A hacking incident is rare as there is no centralized version of this data. The data is also accessible to the public on the internet as millions of computers host it simultaneously.
Transaction Process
The process of transaction is quick and permanent. The data is copied and stored on each node across the system. All the essential details of a transaction, such as a price, ownership, asset, etc., are documented in a blockchain, and all this occurs within seconds. Any changes in one ledger automatically get replicated in all the other ledger copies. The process is so easy that it removes the involvement of any third-party verification as every transaction is recorded transparently.
Types of Blockchain
There are four types of blockchain:
Public Blockchain
It is a non-restrictive dispersed ledger system. Anyone can sign into the blockchain network and become an approved node. A public blockchain is mainly meant for mining & trading cryptocurrencies. Bitcoin, Ethereum, and Litecoin, Cardano are the most common examples of a public blockchain. If you utilize this type of blockchain, it is essential to obey the security protocols.
Private Blockchain
It is a restrictive ledger system that is operative in a secured network. A private blockchain is typically used in organizations with restricted access. In most cases, only authorized members are part of the blockchain, and the organization has total control over the security, permissions, and accessibility. Private blockchains are used for voting, digital equivalence, asset ownership, etc.
Consortium Blockchain
It is a semi-decentralized network that can be managed by more than one community. Multiple organizations access the network or exchange information in this type of blockchain. Banks, Countries, states prefer consortium blockchain.
Hybrid Blockchain
It is a fusion of a private and a public blockchain. A hybrid blockchain utilizes elements of both the private & public blockchain. It is a flexible node wherein data can be kept open or discreet as per the individual’s choice.
Take away
In the financial services industry blockchain technology means dispersed ledger technology. And some notice blockchain as a more trustworthy database. As digital money becomes increasingly popular and more than 50% of the world’s population owns a smartphone, some predict that blockchain technology will replace conventional technology in the trading industry. This new financial technology reformation could be the pathway to widely available digital assets.
Nations are also starting to pay attention to cryptocurrencies. In 2015, the U.S. Commodity Futures Trading Commission declared that Bitcoin, and other virtual currencies, should be adequately defined as commodities.
