Confused About Blockchain Technology? We’ve Got Your Back
If you’re like I was about a year ago, you’re rather confused about Blockchain, mining, and just what’s so special about it all. I’ve compiled this guide to give you a better understanding of this breakthrough technology, and what makes it so beneficial.
What is Blockchain?
Originally created to ensure the legitimacy of every Bitcoin transaction, Blockchain is a public, decentralized, and immutable ledger. It allows users to share, view and store digital information in a worldwide, security-rich environment.
Public and Decentralized. All of the data stored on the Blockchain is shared among a network consisting of millions of computers, continually reconciling the information added and stored to the Blockchain; making it a public, distributed ledger. Because the data is shared among millions of users, no single person/entity controls it, making it decentralized.
Immutable. The data on the Blockchain cannot be deleted or changed. Because it is shared among a network of millions of users, it is extremely difficult to alter or delete anything stored on it. Anyone attempting to hack the Blockchain database would need to control over 51% of the network, and complete their hack before the next update of the system. An extremely difficult task to manage considering the database is continually reconciled and added to.
Because it is public, decentralized, and immutable, Blockchain Technology helps to foster trust, transparency, and accountability in all business transactions.
But where do the block and chain come from?
Once verified, a transaction is combined with other transactions to create a new block of data that goes into the ledger. Each block is connected to the previous block with a complicated cryptographic hash, thus creating the chain that joins the blocks. By connecting the blocks in such a way, it becomes almost impossible to delete or alter any records. Even the most minuscule change would result in a completely different hash value being computed, one which doesn’t connect to the blocks surrounding it.
How does mining come into it?
Mining is the process in which nodes verify all the information about a transaction and get rewarded for their work.
A node is a device (usually a computer) that is connected to a Blockchain network using a program that performs the tasks of relaying instructions and validating transactions. Nodes use a consensus protocol to agree on ledger content, cryptographic hashes, and digital signatures to ensure the integrity of transactions.
Due to the complicated cryptographic nature of transactions on the Blockchain, a great deal of computer power is required. People who mine professionally invest in extremely powerful CPUs (Central Processing Units) and GPUs (Graphics Processing Units) to handle this demand. Due to this and the amount of electricity used to run these devices, nodes are rewarded with a specific cryptocurrency for their efforts.
What makes Blockchain so beneficial?
Blockchain Technology offers a wide variety of benefits that are increasingly attracting more and more businesses each day.
- Decentralized —This is one of the most important advantages of Blockchain. By not being contained in a centralized location, all of the data stored on the immutable Blockchain — protected using cryptography — is almost impossible to hack or alter. With a decentralized option being available, it would be irresponsible to store your data in a centralized location, and potentially lose it all when you are compromised.
- Transparent and Private — Although every transaction is open for all to see on public Blockchains, privacy is still retained as the identity of each actor on the Blockchain is anonymized behind a complex hash of encrypted code. The level of transparency in the Blockchain can lead to lower audit and regulatory compliance costs.
- Reduces fraud — Blockchain Technology is resistant to hacking, DDOS attacks, and other forms of fraud. With less fraud, the cost of doing business decreases and these savings will presumably be passed on. IBM was able to free up $100 million that had been used for settling disputes after they housed the essential assets for their financing process on a shared Blockchain.
- Automation /Cost Reduction — Blockchain cuts out the middleman. By executing Smart Contracts — basically a simple “if this/then that” command — many processes that currently require human interaction can be automated by a program. This leads to a reduction in costs, transaction times, and the risk inherent in all tasks that involve a human element. Multi-step processes, especially those involving people, are prime targets for fraudsters; with all the steps being automated, the possibility of fraud is all but gone.
- Simplifies Business — The Blockchain is constantly updated and reconciled, and all information is up-to-date. By conducting all of your business on the Blockchain, you no longer have to worry about incompatible programs, out-of-date data, or entries being tampered with.
- Verification of Authenticity and Source — Blockchain can be used to prove the authenticity of goods and trace them from the source all the way up to the Sales point. This can be useful for tracing a food source, especially in cases of food contamination. Australia’s recent strawberry contamination in which sewing needles were found inside several strawberries, could have been quickly resolved if every step of the food chain had been tracked using Blockchain Technology. Walmart in America has reduced the time taken to trace their food from approximately 7 days, down to just 2.2 seconds by moving the process to the Blockchain.
- Enables Trust — Trust is an extremely hard thing to come by these days. By running all verification processes through an incorruptible Blockchain, parties are able to trust each other when they normally would not have.
- Removes Possibility for Double Spending — This is often a huge problem for standard banks and payment systems. Fraudsters rely on these outdated payment methods to steal your money and/or goods.
Stay tuned to our Medium for more upcoming guides. Don’t forget to check out our in-depth series concerning Online Fraud and Scams.
Natmin Pure Escrow is a revolutionary decentralized application that provides Escrow Services. Utilizing Blockchain Technology and Smart Contracts, Natmin is able to offer Escrow transactions quicker, cheaper, and safer than conventional Escrow companies by eliminating the need for a middleman. Natmin is currently in the Public Sale phase of its’ ICO, to find out more about Natmin or investing in the project, head to the website, check out the pitch deck, and give the whitepaper a read through.
