What Is Blockchain Technology and How Does It Work?

Blockchain is one of today’s buzz terms circulating in word-of-mouth and the news headlines because of reconfiguring the old financial technology called the ledger, i.e., distributed database. But a prominent question is likely to appear here! What is blockchain technology exactly and how does this revolutionary technology work? Discover the answers right in this blog!  

What Is Blockchain Technology? 

Blockchain technology is typically a shared digital ledger that enables tracking various tangible or intangible assets, like goods and services, smart contracts, etc. They are known for their active usage in cryptocurrency systems to secure and decentralize records of transactions. However, blockchain technology serves way beyond, or precisely, to make data in any industry sector fixed.  

While all business endeavors require accurate data faster, blockchain technology can deliver such data immediately and more transparently. The ledger is accessible to only those networked members who have permission, and each of them can have an end-to-end view of all transaction details. This ideal mix of security, speed, and transparency makes blockchain technology a leveraging boon for many companies. 

How Does Blockchain Technology Work? 

The primary feature distinguishing blockchain technology from other distributed databases is undoubtedly the distribution and recording of data on a peer-to-peer basis. So, when the process is completed, the dataset stands unchangeable and thus cannot get corrupted. Wondering how such an innovative process works? 

Well, blockchains comprise certain virtual programs called scripts. These are what perform the tasks of entering, saving, storing, and accessing data! As a blockchain is distributed, myriads of copies of the same dataset get generated on different machines, which the permissible members have to match to make it valid. 

Blockchain collects and stores digital information in the form of digital ‘blocks’, which is a sort of spreadsheet cell. This block then gets added to a prior ‘chain’ of blocks. Hence, the name, ‘blockchain’! Each of these blocks has its unique identification code called the ‘hash’ alongside a time stamp showcasing when the networked members validated or mined the block! Herein, the blocks shall encompass the previous block’s hash, again forming the chain. They stand encrypted like other information. 

Every time a block gets added to the blockchain, the participant computers have to update their blockchain copies, thereby establishing it as a secure system. In case of any necessary change in the former block, you have to record that in a new block so that none can ever rewrite a block’s history. It means whenever any hacker intends to disrupt an existing block, they have to rewrite all copies existing in the diverse machines, which is practically impossible!   

What Are The Merits of Blockchain Technology? 

Similar to any other smart technology of recent times, blockchain has some striking benefits, and they are as follows!

• Blockchain technology abolishes the need for centralized third-party systems because of its peer-to-peer transaction provisions. It further helps save much of the costs.
• Data recording is much more accurate in the case of blockchain technology due to the elimination of human intervention in the verification process.
• The decentralization aspect drastically reduces and almost topples the scope of data tampering in the blockchain. Therefore, transactions can now be made more safely, privately, and efficiently.
• Above all, blockchain technology is a great banking or financial alternative. It’s also a great mechanism to protect your financial information from the surveillance of underdeveloped or unstable governmental authorities.     

What Are The Demerits of Blockchain Technology? 

No doubt, with every boon comes a bane into the picture, and it’s no different in the case of blockchain technology. Here are some of the demerits of blockchain technology! 

• The initial technology cost and that associated with its setup is huge indeed!
• Blockchain technology isn’t as fast as a legacy system, such as a credit card or internet banking. Alas! The transactions per second tend to be low. 
• There are sustainability issues in blockchain technology. This is because such a technology requires a wide network of robust computers and vast amounts of energy.
• This technology holds a history of illicit uses, like on the dark web.
• Moreover, government authorities come with frequent updates and changes in their laws and policies regarding blockchain technology. There are no standard best practices to follow for blockchain and varies depending on the specific jurisdiction.     

Now, to wrap up, I must say that – there are public and private blockchains, and the number for both is increasing with time. As per last year's records, about 23,000+ active cryptocurrencies are working on blockchain technology. Whether you want to use it for intellectual property, patents, supply chain, insurance, or equity trading, it’s all possible with blockchain technology!