What is Blockchain and how does it work?

In this new world, cryptocurrency and blockchain technology have become a popular trend. In this article, I will tell you about What Blockchain is and how it works. 

Blockchain is the base of Bitcoin, Ethereum and all Cryptocurrencies functioning in the world. Many experts believe blockchain to be a very influential and powerful technology that could transform our world. 

The Blockchain technology and Cryptocurrency has a very huge potential to change the finance and technology fields. Read about btc click ads to get free bitcoins.

What is Blockchain?

In rough words, Blockchain is a type of technology in which the information or data is stored in the form of blocks which we call as Digital Ledger. 

This concept of Blockchain technology and cryptocurrency was first introduced by Satoshi Nakamoto, an anonymous person (nobody knows who he was!) from Japan in 2008. 

He gave a white paper document in which he talked about Blockchain, Bitcoin, how they would be used and how they would transform the technology.

Blockchain is a chain of blocks which contains certain information or data such as transactions of money. 

A single block contains a piece of information. A number of blocks combine and form a chain. This chain keeps continuously growing as people do more and more transactions. 

This chain is known as Blockchain. Thus blockchain acts as a digital ledger whic records all the information about the transactions being done. 

Each transaction is verified by a network of computers called masternodes, and then added as a block in the digital ledger. 

Once the information is saved in the Digital ledger, it can’t be altered. It becomes immutable or unchangeable. 

How does Blockchain work?

A blockchain runs on many computers and systems that are specifically built to host the processes and transactions of cryptocurrency. These computers are sometimes called Masternodes. 

Blockchain works through a series of steps. Below I have taken an example of Bitcoin as how blockchain works in it.

• A bitcoin is bought and sold. The transaction is then entered into the blockchain in a separate block. 

• This block’s information will be sent to a network of computers known as nodes. Now this network of computers will have to confirm the transaction. 

• The confirmation of a transaction is done through certain computer programs and algorithms. This process is also known as crypto mining. 

• The miner who first mines this transaction, confirms it and then adds it to the blockchain, gets some bitcoins in rewards. 

• Thus the transaction is now added to the blockchain ledger. This information then becomes immutable and hence can’t be changed now.

Blockchain has many features other than storing data in a ledger. It can be used for programming and coding several apps and programs. 

Many Developers and Coders have started to use blockchain for developing and building apps based on blockchain technology.

What are the benefits and disadvantages of Blockchain technology?

Blockchain technology has many benefits. But along with it’s advantages, it has many disadvantages as well. Here I would cover some pros and cons of using this technology.

Benefits of Blockchain Technology

Decentralization

The first and biggest advantage of using blockchain technology is Decentralization. Decentralization is a process wherein a particular power or information is held by everybody and there is no single regulating authority. 

As we know the reserve bank of a country is the most powerful authority and it regulates the country’s paper currency. It can print as much money as possible. It can demonetize them at any moment and introduce a new currency as well. 

This is not good because if the power falls into corrupt hands, then the whole economy will be destroyed and the people will become poor. 

One single decision of the reserve banks or the government can destroy many people in one minute. 

What Blockchain does is that it provides the facility of decentralization. The meaning is that the cryptocurrencies which work on blockchain don't depend on any authority or bank. 

It remains independent and it doesn’t matter whether the others are in loss or profit. The cryptocurrency will move at it’s own pace. 

Transparency

Transparency is yet another big advantage of Blockchain. As all the information is transparent and are added to the blockchains publicly, anyone can view them to know what transactions are going on in cryptocurrency. 

Instant transaction without any interference of third party

Suppose if you are living in the USA and want to send $10 to your family member who is living in India. 

When you do so, there will be certain charges and costs applied. In between many intermediaries such as Banks, Forex departments, Agents will come. 

It may happen that the $10 you had sent to your family member becomes only $6 or $7 after applying charges and fees.

Cryptocurrency solves this problem by removing all the charges and third parties. If you want to send $10 then you can directly send it to your family memer without any banks or agents coming in between. 

Disadvantages of Blockchain

Blockchain is not secure

Because blockchain is a digital technology and works on the internet, there are many chances of threats from hackers, scammers and fraudsters. 

This is a reason many people lose their money and become a victim of cyber threats. It is a major drawback of blockchain.

Blockchain is dear to criminals

As I told you blockchain is decentralized and it is not maintained by a single authority, it is a big disadvantage.

As there are no regulating authorities, criminals easily use bitcoin or ethereum to send and receive funds for illegal purposes.