Blockchain enables digital information to be recorded and distributed, but not edited.
The blockchain concept was first proposed as a research project in 1991, and it predated its first widespread application in use: Bitcoin, in 2009. Since then, the use of blockchains has grown exponentially, thanks to the development of various cryptocurrencies, decentralized finance (DeFi) applications, non-fungible tokens (NFTs), and smart contracts.
Blockchain Advantages
- The Chain’s Accuracy
A network of thousands of computers approves transactions on the blockchain network. This eliminates almost all human involvement in the verification process, resulting in less human error and a more accurate data record. Even if a computer on the network made a computational error, it would only affect one copy of the blockchain.
- Cost Cuts
Customers typically pay a bank to verify a transaction, a notary to sign a document, or a minister to perform a marriage ceremony. Blockchain eliminates the need for third-party verification and the costs associated with it.
- Decentralization
Blockchain does not keep any of its data in a centralized location. Instead, the blockchain is replicated and distributed across a network of computers. Every computer on the network updates its blockchain whenever a new block is added to the blockchain.
- Efficient Transactions
Unlike financial institutions, which operate during business hours, typically five days a week, blockchain works 24 hours a day, seven days a week, and 365 days a year. Transactions processed by a central authority can take several days to settle. If you try to deposit a check on Friday evening, the funds may not appear in your account until Monday morning.
- Private Transactions
It is a common misconception that blockchain networks, such as bitcoin, are anonymous when they are only confidential. Many blockchain networks function as public databases, meaning anyone with an Internet connection can view the network’s transaction history. Although users can view transaction details, they cannot view identifying information about the users who made those transactions.
- Secure Transactions
Once a transaction is recorded, the blockchain network must validate its authenticity. The transaction is added to the blockchain block after a computer has validated it. Thousands of computers on the blockchain race to confirm that the purchase details are correct.
- Transparency
The majority of blockchains are entirely open-source software. This means that anyone with access to the code can view it. Also, it enables auditors to examine the security of cryptocurrencies such as Bitcoin. This also implies that there is no absolute authority in charge of who controls Bitcoin’s code or how it is edited.
- Banking the Unbanked
Perhaps the most significant aspect of blockchain and Bitcoin is the ability for anyone to use it, regardless of ethnicity, gender, or cultural background. According to the World Bank, an estimated 1.7 billion adults lack bank accounts or any other means of storing their money or wealth.
Almost all of these people live in developing countries, where the economy is still in its infancy and is entirely based on cash.
Blockchains of the future are also searching for ways to store medical information, property rights, and a range of other legal contracts in addition to serving as a unit of account for wealth storage.