What is Blockchain?
Simply put, a blockchain is a type of database. Databases are typically structured as a table that is searchable. With the advent of blockchain, data began being stored in blocks. This means that instead of data being stored in a table, it is stored in blocks that are chained to one another. Hence, the name blockchain. As the data changes in the database, the new data that is generated is chained on the previous record (or block of information), providing a history or ledger of the data that can not be altered.
Bitcoin – How Blockchain Emerged as Technology
The most common application of a blockchain database is its use as an unalterable transaction ledger. The first application of blockchain technology was Bitcoin, a digital currency (or cryptocurrency). Bitcoin was originally intended to support the anonymous online transfer of funds between peers. The block structure of the database allowed for transaction transparency because each exchange is recorded in the blockchain (or digital ledger). However, with the growing popularity of Bitcoin, it has shifted from a peer-to-peer currency to the most popular cryptocurrency that is now being used in the transaction of commerce globally.
Why is Blockchain Important?
- It’s decentralized. An important feature of blockchain is that the digital ledger lives physically on a network of peer-to-peer computers across the globe, not a centralized server like Amazon Web Services. Given the rise in cybersecurity threats, for instance, ransomware attacks and server hacks, data stored within a blockchain database are more secure. Some would hazard to say that data stored in a blockchain database is hard to hack. For instance, if a computer on the blockchain network is compromised, the other computers within the network can not be impacted by the breach. Data is only updated by nodes within the network known as miners. No one miner controls the whole network.
- It holds real promise as a component of online commerce and global banking and investment. Like any new or emerging technology, blockchain has a lot of unexplored frontiers. Investors, nonetheless, like Elon Musk, and large digital payment processors like Paypal, Square, and even Visa are making investments in the space by giving cryptocurrency real estate on their platforms. Payments processors such as PayPal and Square have helped mainstream digital currencies by facilitating ways for their users to purchase cryptocurrency through their platforms. Additionally, many cryptocurrencies are now publicly traded on the stock exchange, giving it legitimacy as stock exchanges are places where goods and services are able to obtain large influxes of cash. These cash influxes enable capital to be invested into the cryptocurrency space, which helps finance the research and development of blockchain technology as a whole.
- It provides anonymity online in an era of surveillance. Privacy concerns are a real problem. It is common knowledge that users are tracked online so that their activities, preferences, and buying habits can be monetized for marketing purposes. The introduction of blockchain into the financial technology space (or fintech), helps problematize this phenomenon that continues to incite public outrage. As the use cases (and application) of blockchain technology grows, the potential the help combat this growing problem increases.
Blockchain is still an emerging technology. However, as laid out in this post, its future looks bright given the current political and social landscape. As the Internet of Things (IoT), expands and technological adaption grows globally, we will continue to witness the need for solutions that prioritize privacy and security online. Mobile phone use, internet-enabled devices (or IoT), and online buying continue to rise in our post-COVID world. Innovative ways to securely transact online are essential. Blockchain offers a technological solution whose use cases are limitless.