Most of us have heard about cryptocurrency by now. Although currencies like BitCoin and others have been around for some time, they only gained mainstream appeal once the value of BitCoin skyrocketed.
Today, legitimate big-name investors like Elon Musk express a great deal of interest in cryptocurrency, which may well have the potential to become the currency of the future. This has prompted average Americans to invest in GPU systems and a high speed internet package, check Spectrum internet prices to start mining their own cryptocurrency and reap the benefits.
However, this may not be a very successful approach without first understanding blockchain, the technology that governs cryptocurrency. This blog explores blockchain as an introduction for newbies. Read on to find out more.
What is Blockchain Anyway?
Blockchain has often been called “Internet 2.0”. It is also the technology known to make the cryptocurrency ecosystem possible. But what exactly is it?
In very basic terms, blockchain is a technology structure designed to store encrypted transactional records. The storage is what is known as the “block”. However, this isn’t centralized storage.
In fact, the encrypted transactional data resides in several peer-to-peer networked databases known as the “chain”. Hence, encrypted data recorded on networked databases is essentially what is known as the blockchain.
The digital encrypted storage forms a ledger that records all digital transactions. However, no ledger authorizes a transaction without the owner’s digital signature.
This digital signature is heavily encrypted, making it virtually impossible for anyone other than the owner to authenticate and authorize transactions. This also means it is impossible for anyone without the digital signature to steal, monitor, or alter the information stored in the ledger.
Why is Blockchain Such a Big Deal?
To non-techies, all of this seems like a rather complicated way to make transactions more secure. But the reasons for blockchain’s popularity are far beyond that. Let’s take a simple example for easier understanding.
Let’s say you want to transfer money to a person from your bank account. Most people would log onto their banking app and transfer the amount to the relevant beneficiary account. This has been an easy and simple process for quite some time. But there are some inherent flaws to the current online transaction model.
For one thing, these transactions aren’t always secure, and there have been instances of tampering, theft, and fraud in the past. This is a big reason why third-party authentication and payment applications entered the process. But even they are not foolproof. Blockchain addresses this specific vulnerability, which is a big reason for its popularity in digital finance.
Digital Signatures Are Extremely Secure
A digital signature is far more secure than a password or an authentical code. You can lose both if someone has access to your device and passwords.
However, digital signatures are virtually-fraud free, since it is almost impossible to fraudulently duplicate. This implies that the ledger is far more secure than a conventional banking model, preventing anyone from making unauthorized transactions, tampering with data, or even erasing it.
Therefore, blockchain secures both account access as well as transactional records.
Decentralized Storage Means Faster Transactions
Conventional banking protocols can often be a pain for businesses that conduct international transactions. Payments have to pass through banking processes, regulatory authorities, and government bodies before finally arriving in the beneficiary’s account.
This can often slow down business processes, and lead to costly delays until the payment finally comes through. Blockchain removes this significant bottleneck with its decentralized storage.
With both the sender and beneficiary conducting a consensual transaction, the funds can pass through their bitcoin ledgers much faster, and in a much more secure way than conventional banking can offer.
Automation Capability Offers Greater Convenience
Automation is a buzzword that is quite important in business circles. Automation reduces costs, increases efficiency, improves accuracy, and reduces errors or delays.
Blockchain holds the capacity to automate many financial actions such as payments when specific and defined triggers are activated. This adds a whole other layer of streamlined and efficient digital banking.
One that can boost financial transaction volume considerably, and inject more funds into the economy. With the ability to automate key systems, events, and transactions, you can safely run a business without the risk of fraud or theft as far as blockchain transactions are concerned.