Beginners Guide to Blockchain
With the ballooning in the crypto space in recent times, blockchain technology has become the next big thing in the business world. Cryptocurrency enthusiasts have led humankind into the revelation of this concept that has changed payments and transactions across the globe. But what exactly is the blockchain?
It is likely to find yourself raveled in the talk about the blockchain technology, which is why this piece is for you. This guide is going to become your ultimate guide to not only understanding the concept but also how you can reap from the technology.
What is Blockchain?
Everything you know is composed of smaller pieces that make up the complete piece. Similarly, the blockchain technology contains blocks that the system edits and shares to the chain for use in transactions. The blockchain technology is a system that not only supports cryptocurrencies such as Bitcoin and Ethereum. It also supports the management and sharing of data.
The blockchain technology is a way in which one can save and move data across the internet. Take it. For instance, in a hospital, the management will need to save their clients’ details, bills, medical history, and prescriptions in their system. However, if a patient is unable to visit the hospital for any reason whatsoever, he may resolve to visit another hospital within or without the country’s border. Nevertheless, his or her details cannot be accessed as the new facility as it can only be retrieved in the hospital the patient recently visited.
With blockchain technology, it runs similarly as the hospital’s centralized system only that after the data is recorded, it is transferred to the chain and thus accessible to other network users across the globe. For anyone to access any information in the blocks, one must have an encrypted password. Additionally, the system records the data on a digital ledger, where it would be hard to manipulate or duplicate this information.
Roles Played by Blockchain
There are several roles played by the blockchain in collaboration with cryptography.
- No Middle-men
First, it can eliminate the middle-man in money transactions that previously had to go through the bank. Formerly, when transferring money from one account to another, even using online payment methods such as PayPal, one had to go through a bank. With blockchain systems, there is no need to visit a bank as the technology plays banking roles. It records the transactions and establishes the identity of the receiver and sender, which makes transfers not only seamless but also efficient.
- Securing your Wealth
Blockchain systems come in handy as it gives you the protection you need. Imagine having your money stored in one house. With this money all in one place, if one breaks into the house, they are going to find your hard-earned money all in one place, and you might lose all of it.
However, with blockchain systems, it distributes your information into encrypted blocks that are hard to break into. Also, the information stored is protected from manipulation as it leaves a digital footprint of anyone that attempted to make any changes. The system would heal itself; thus, if any unauthorized changes were made, the system auto checks and resolve the issue.
- Smart Contracts
Third, on the list, there is the possibility of automated contracts, also called smart contracts. Your entire household electronics could send the watts usage to the electric smart grid. When it reaches a set cap, another blockchain transfers a value of money to the supplier, which in the long run, automates the meter reading and billing process.
Differences in How we Do Things Now Compared with the Blockchain way
The blockchain way supports continuity of business, unlike how processes are done in the traditional style. For instance, when you send someone a word document for them to make changes, you have to wait until they are done then resubmit the document again to you. Well, all this time you have to find something else to do. However, with blockchain, both parties can work together and make the changes each was supposed to make simultaneously.
Today, for data to be processed for any purpose, it has to be transferred from one party and back to the other for processing. Again, this data is recorded on hardcopy documents in the library and bookshelves or in softcopies in the cloud where hackers can easily access this information and manipulate it for their gain. Well, with blockchain, you do not have to send such information back and forth. After the information is complete, it is not stored on a centralized system like a cloud but on a network where it is safe.
Drawbacks of Blockchain
Blockchain has several advantages that make processes seamless. However, does it have a downside? Well, the following are some of the shortcomings of the blockchain network.
- High Energy Consumption
Blockchain does have some of its flaws, such as energy consumption. It is expensive to mine some of the coins that operate on the blockchain. For instance, mining of bitcoin consumes as much power as Switzerland uses in a year.
- Long Procedures
Secondly, blockchain has detrop performance in that any change that is made on a ledger has to update on all nodes in the system. Therefore, even the slightest change on the digital ledger will have the system going back and forth, updating a simple process that would have taken shorter on a centralized system.
- Hacking Risks
Blockchain operates on a system that gives a user a private key and password that they use to access the crypto wallets. However, a user is at risk if they lose the password or their key falls into the wrong hands, as they cannot recover the password.
- No Regulations
Most blockchain systems are still operating in a land of no rules. Everyone is the boss, and everyone can do anything. With no authority to man the encrypted transactions, there are high risks of scams. Most of these scams have led thousands into losses.
Final Word
There are many reasons why blockchain has gained much allure from crypto enthusiasts across the planet, security, efficiency, and the digital footprint system. For this reason, you should keep your eyes open for opportunities, as cryptocurrency is the business of the future.