What is Blockchain?
The UN says the fast-rising popularity of cryptocurrencies like Bitcoin and Ethereum is a reminder of how important the internet has been to our economy, but it also highlights how much we have yet to learn about blockchain technology. What exactly is blockchain?
We’ll start with what blockchain is not. It’s not Bitcoin or Ethereum or other cryptocurrencies. The blockchain serves a completely different purpose than those currencies, even though cryptocurrency value is derived from it, and cryptocurrency markets swell and ebb by its hand.
Blockchain is essentially a decentralized ledger that records transactions across an almost unlimited number of computers simultaneously—a system naturally suited for storing data securely, without any single point of failure or loss of access. This technology can be used for any type of information, for example, medical records, intellectual property rights, or even financial transactions.
In case you’re wondering if there’s such a thing as a cryptocurrency without blockchain at its core: your answer probably depends on whether you’re talking about Bitcoin or Ethereum. The former was designed on top of blockchain as part of its protocol meaning it uses blockchain under the hood, while the latter was built from scratch by its developers and doesn’t utilize the underlying technology so much though, more are bound to appear in the future.
Just keep in mind, though: they both use blockchains under different circumstances—not entirely dissimilarly, but distinctively enough to warrant their separate existences and no copyright disputes between them.
Blockchain, History, and a New Path Forward
First, let’s review the basics of blockchain technology:
An essential part of the digital currency known as Bitcoin, a blockchain is a decentralized storage and transmission device that keeps records of any transaction involving Bitcoin. The whitepaper for its existence was published by the mysterious Satoshi Nakomoto in 2008, and the first Bitcoin was mined in 2009 by Nakamoto himself. And the rest, as they say, is history.
Now, it’s important to note that “decentralized” in this sense doesn’t mean “distributed”: although many computers hold copies of the blockchain, it’s still a single entity, not an infinite number of scattered ones.
What’s more: as a result of its distributed nature, no one has control over it. It can’t be controlled by any single person or group; instead, it is open-sourced and maintained by everyone who participates in the process. This is what comprises the cryptocurrency market.
In order to change something in the existing chain or create something new, all users must participate to reach a consensus on the new data—and only then will they act on it. The blockchain has proven to be remarkably effective at this task: according to BlockchainHub Inc., an independent research firm focused on cryptocurrencies and distributed ledgers, more than 90 percent of all transactions are validated within ten minutes from initiation.
The True Potential of Blockchain Lies in its Ability to Disrupt the Status Quo.
One of the most exciting emerging technologies is blockchain, a digital ledger that recorded transactions for the purpose of eliminating fraud. Its lower transaction cost and faster processing power have made it ideal for use in the Internet of Things (IoT) and other applications where security, speed, and efficiency are critical.
On Thursday, May 23, 2016, IBM announced its first implementation of private blockchain technology with the Hyperledger Project. Like Bitcoin’s public blockchain, Hyperledger allows different organizations to collaborate on a common system while maintaining data privacy controls. In this case, IBM has partnered with financial institutions and others to explore ways to more securely share data on conditions such as trade finance or supply chain management between them.
When the futuristic technology of blockchain was first introduced, it was in the form of a digital currency—but now it’s coming to be used for a wide variety of other applications. Blockchain was initially designed to promote transparency in an industry that previously operated largely outside the regulatory purview.
The decentralized nature of blockchain has made it perfect for use as an alternative payment channel, and its properties of security, reliability, and immutability have fueled its widespread adoption by large corporations and governments alike. Even though we’re still in the early days of blockchain’s evolution, you can bet that these innovations will continue until the technology becomes ubiquitous.
One thing is certain: if you want to get involved with blockchain right now, you shouldn’t wait too long, although you should do your research! As prices continue to rise rapidly and new investors pour in, you’ll find plenty of opportunities to invest in Bitcoin or Ethereum at low-risk levels before jumping into high-risk investments later on.
It’s important to remember that investing isn’t rocket science —it’s just putting some money into stuff you believe will go up in value over time. If you don’t know where to start, your best bet is this simple guide on how to buy Bitcoin, the original cryptocurrency, or Ethereum the second-largest cryptocurrency.