What Exactly is Blockchain Technology?
Theorised in a 1991 paper, How to time-stamp a digital document, by Stuart Haber and W. Scott Stornetta, advanced upon by Nick Szabo and Stefan Konst in 1998 and 2000, respectively, and implemented in 2009 by the pseudonymous Satoshi Nakamoto, ‘blockchain’ has been at the forefront of technological development for almost a decade and a half.
So, ultimately, blockchain technology has been around for a while. It certainly isn’t the ‘new kid on the block’. But still, at this point in time, the greater majority of the population isn’t entirely sure what it is or what it does; primarily, people just know about cryptocurrencies and non-fungible tokens (NFTs) — the digital tokens and assets — that are enabled by the underlying technology.
Here’s a simple breakdown!
What is Blockchain Technology?
A blockchain is a database or a ledger of digital transactions that is distributed across a network of computers or nodes. It is a decentralised system, which means that there is no single entity that controls the entire network. Instead, every node in the network holds a copy of the blockchain, which is updated continuously to reflect the latest transactions.
The word “blockchain” comes from how the data is stored in blocks that are linked together in a chain-like structure. Each block contains a set of transactions, and once a block is added to the chain, it cannot be modified or deleted. This feature makes the blockchain immutable, meaning that the data stored on it is permanent and cannot be tampered with.
How does Blockchain Technology Work?
To understand how blockchain technology works, let’s take the example of Bitcoin, which is the most well-known application of blockchain technology—and the brainchild of Satoshi Nakamoto. When someone sends a Bitcoin transaction, it is broadcast to the entire network of nodes. Each node verifies the transaction using a consensus mechanism, such as proof of work or proof of stake, before adding it to the blockchain.
Once a transaction is verified and added to the blockchain, it becomes a part of the permanent record. This record can be accessed by anyone on the network, making it transparent. However, the identity of the person behind the transaction is not revealed, as Bitcoin transactions are anonymous.
To prevent malicious actors from tampering with the blockchain, it is protected by cryptography. Each block in the chain is encrypted with a unique digital signature, which can only be unlocked using a private key. This private key is known only to the person who initiated the transaction, ensuring that the data on the blockchain remains secure.
Applications of Blockchain Technology
The applications of blockchain are vast and varied, beyond just cryptocurrencies. Here are some examples of how different industries are using or could use the innovative technology:
Supply Chain Management: Blockchain technology is being used to track the movement of goods in a supply chain, ensuring transparency and accountability.
Healthcare: The technology is being used to store patient data securely and make it accessible to authorised parties, ensuring privacy and accuracy.
Voting: Blockchain technology can be used to create a transparent and tamper-proof voting system.
Real Estate: The technology can be used to store property records, making verifying and transferring ownership easier.
Blockchain technology is a revolutionary concept that has the potential to transform the way we conduct transactions and store data. It is a decentralised, immutable, and transparent system that various industries can use to increase efficiency, security, and transparency. While its applications are still in their infancy, it is clear that blockchain technology is here to stay and will continue to impact various aspects of our lives.
