Why Is Blockchain Important?
5 min read
Over the past few years, you have heard of the word ‘Blockchain,’ and you’ve always thought it was synonymous with Bitcoin. This is not exactly true. As the world tends towards decentralization, Blockchain is the power house of this technology. If you are trying to learn what blockchain is, why it works, and what it powers, you have to stick to this article until the end.
According to Simplilearn, Blockchain technology is a structure that stores transactional records — the block — of the public in several databases — the chain — in a network that is connected through peer-to-peer nodes. This type of storage is commonly referred to as a ‘digital ledger.’
In the technology by which the blockchain works, every transaction in this ledger is authorized by the owner’s digital signature. This type of signature authenticates the transaction, safeguards it from manipulation, and ensures its accuracy. Hence, the information the digital ledger contains is very, very secure.
In layman’s terms, the digital ledger is like a spreadsheet on Microsoft Excel that is shared among numerous computers in a network. That means the transactional records are stored based on actual purchases. The mind-blowing phenomenon of blockchain technology is that anybody can see the data, but they can’t corrupt it.
This technology is the concept behind the world of cryptocurrency. Blockchain technology makes cryptocurrencies like Bitcoin, Ethereum, Tether, and more work, just like the internet makes Facebook, Instagram, Twitter, and more possible. According to Oxford Languages, cryptocurrency is a digital currency in which transactions are verified and records maintained by a decentralized system using cryptography rather than by a centralized authority.
The blockchain is an immutable distributed digital ledger with many use cases beyond cryptocurrencies. It is immutable because every transaction on the blockchain cannot be changed. It is a digital ledger because all the transactions made are digitally stored in multiple places across various computer networks.
Who Invented the Blockchain?
The term blockchain is still a myth to many. In 1982, the first blockchain-like protocol was proposed by cryptographer David Chaum. After nine years, in 1991, Stuart Haber and W. Scott Stornetta wrote about their work on Consortiums.
Although these people were not the originators of blockchain, Satoshi Nakamoto invented and implemented the first blockchain network after deploying the world’s first digital currency, Bitcoin. Many people presume that Satoshi Nakamoto was the pseudonym of these multinationals, namely Samsung, Toshiba, Nakamichi, and Motorola. Although these are mere speculations, there is no substantial evidence to validate these truths.
Basic Features of Blockchain Technology.
According to Euromoney Learning 2020, there is more than one feature of this technology called the blockchain. The basic features of blockchain technology include: it is programmable, it is immutable, it is secure, it is unanimous, it is time-stamped, and it is on a distributed ledger.
It is programmable because anyone can see the results of any computation. Ethereum is one of the cryptocurrencies that powers programmable blockchains, and these blockchains can be used to create smart contracts which enable peer-to-peer transactions. Programmability is one of the most important aspects of a blockchain. Blockchain technology is immutable because all the validated records are irreversible and cannot be changed.
Blockchain technology is secure because all the individual records are individually encrypted, and the identities of the Blockchain members can be anonymous or pseudonymous. Blockchain is unanimous because all the individual members have to agree on a transaction before it is authenticated. It is time-stamped as all transaction records have a timestamp that is recorded on the block. It is on a distributed ledger as all individual members have a copy of the ledger for complete transparency.
Remember that the goal of blockchain is to allow digital information to be recorded and individually distributed but not edited. This shows that a blockchain is a foundation for immutable ledgers or records of transactions that cannot be altered, deleted, or destroyed. That is why blockchains are also called Distributed Ledger Technology (DLT).
Blockchain & Bitcoin.
According to Investopedia, Blockchain forms the bedrock for all cryptocurrencies, most especially Bitcoin. The Central Bank of Nigeria controls the Nigerian Naira. This principle of a central authority makes a user’s data and currency technically at the whim of their government. If the bank is hacked, the classified information of the client is at risk. If the client’s government collapses, the value of their currency may be at risk. This was the fallout of the financial crisis of 2008. Due to predatory lending and excessive risk-taking, financial institutions all over the world suffered a massive crisis. These were the issues that brightened the emergence of Bitcoin.
Because of its distributed ledger technology that spreads its operations across multiple networks, blockchain allows Bitcoin and other cryptocurrencies to operate without the need for a central authority. This reduces the risk of theft and eliminates huge transaction fees. It can also give countries with unstable currencies or financial infrastructures a currency with a wide range of applications. This makes it easier for individuals and institutions to do business domestically and internationally.
Merit and Demerits of Blockchain.
The major advantage of blockchains is their security level because blockchains can protect and secure sensitive data online. The speed and convenience of transactions on the blockchain are seamless. It only takes a few minutes to send money via crypto, whereas other conventional methods can take several days to complete. Due to the technology’s decentralized nature, many users look at it as an advantage.
The method of safety in a Blockchain is the use of public and private keys, which poses an issue. If a user loses their private key, they may not be able to access the network. The scalability restrictions are a hassle due to the limited number of transactions per node. This means that multiple transactions can take several hours to complete. It is also difficult to change or add information after it is recorded, another disadvantage of blockchain.
As we conclude, a blockchain is a database that stores encrypted data as blocks and chains them together to form a chronological single-source of truth for the data. The inherent security of Blockchain makes it a prime technology for almost every single sector. While I am fascinated with this technology, I found it necessary to share my thoughts.
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