Blockchain Technology: Guide for Beginners

Introduction

There is no doubt that blockchain technology has created the backbone of a new type of internet. It is definitely a great invention but many are still asking questions such as ‘what is blockchain?’ and ‘how does it work?’. Fret not as this guide will break down blockchain technology for beginners and dummies.

What exactly is blockchain?

To put it in simple terms, blockchain is a way of passing information from A to B in an automated and safe manner. Records of data are managed by a group of computers not owned by a single party. This means that information in blockchain is open for all and its transparent nature makes everyone responsible for their actions.

Process

One party initiates the process of a transaction by creating a block. This block will then be verified by millions of computers around the internet. The verified block will be added to a chain which is stored across the net. A unique record with a unique history is then created. Not only can the blockchain  transfer and store money, but also replace all models that rely on charging small transaction fees. 

How does a blockchain work? 

Information on a blockchain is present as a shared and continuously updated database. Since the blockchain database is not stored in a single place, records are fully public and there is no centralized information for hackers to corrupt.

Why is Blockchain so popular?

There are 4 main reasons which make it highly attractive for internet users around the world. Firstly, it is decentralized since there is no single entity ownership. Secondly, data is stored inside cryptographically. Thirdly, no one can tamper or change the data inside as blockchain is immutable. Lastly, blockchains’ transparency allows one to track data if they wish to do so.

Pillars of Blockchain Technology

i) Decentralization 

An example of a centralized system is banks. They store all your money and you can pay someone by going through the bank. Solely interacting with entities that store all the data is required to get information. However, this system has made it an easy target for hackers and upon corruption, all data inside will be compromised. Thanks to the decentralized system of blockchains, interaction can be done directly without going through a third party. You are in charge of your money.

ii) Transparency

One’s identity is hidden via complex cryptography and represented by their public address in blockchain. This way, real identity is secure while all transactions are still visible. Level of accountability is then added. In the cryptocurrency world, big companies are forced to be honest as all their transactions can be viewed by the general public.

iii) Immutability  

Once information is entered into the blockchain, it cannot be tampered with. This allows embezzlement cases to be caught easily. Hash functions in blockchain have proven to be wondrous. Hashing refers to an input string of any length giving out an output of fixed length. Any changes made in the block will change the hash stored in the previous block. This in turn will change the data and hash of the previous block, so on and so forth, creating a chain. Since changing the chain is impossible, blockchains attain immutability.

What is Blockchain Good for?

 With the blockchain network, internet users are given the ability to create valuable and authentic digital information. Initially, blockchain was used for bitcoin and other cryptocurrencies. Now, it can be seen in almost every industry but especially benefitting the finance sector. From data management and file storage to governance and crowdfunding, blockchain has made a breakthrough on the internet by providing safe and secure services. 

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Disclaimer: The blog content above does not constitute financial advice in any way whatsoever. Nothing published by LinqCash constitutes an investment recommendation, nor should any data or Content published by LinqCash be relied upon for any investment activities.

LinqCash strongly recommends that you perform your own independent research and/or speak with a qualified investment professional before making any financial decisions.