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What Is Blockchain Technology, How Does It Work? Pros & Cons of Blockchain

Suppose you have to send money to someone immediately while sitting on a couch in your home, what will you do? You will go for the easy way instead of visiting a bank. Right! The money you have stored in an online wallet does not need permission or change any exorbitant fee, you just have to enter the key and send money within a few seconds. Doesn’t it make you curious about how this whole procedure is maintained? Your transactions have been sustained by Blockchain technology. Let’s explore this modern technology more.

What Is Blockchain Technology?

Blockchain technology is a network of decentralized distributed digital ledgers which store data related to digital assets transactions without including the intermediates. It is a highly advanced technology that is gaining people’s attention as it reduces the risks of scams and fraud.

What Is the Historical Background of Blockchain?

Blockchain technology was first invented by David Chaum in 1982. Afterward, W. Scott Stornetta and Stuart Haber wrote about consortiums blockchain in 1991. But the technology was implemented in a real sense by Satoshi Nakamoto, after organizing digital currency for the first time.

How Does Blockchain Technology Work?

The working of blockchain technology is based on the following steps:

  • Firstly, the authorized customer makes a digital transaction which is stored on a blockchain database.
  • This action creates a block that represents all the data related to the transactions.
  • The block then sends the information to all the linked computer nodes on a network.
  • The official nodes then verify the transaction and add the block to the entire blockchain network.
  • Finally, the transactional data is approved by the network, allowing the customers further proceedings.

What Are the Types of Blockchain?

The following are the major types of blockchain:

  • Public Blockchains: Anyone who wants to verify a transaction has full access to it.
  • Private Blockchains: These implement certain restrictions, as one has to request and grant permission from the administration.
  • Hybrid Blockchains: This type has also been named a consortium blockchain which includes centralized as well as decentralized transaction features.
  • Sidechains: These allow the customers to make assets within two different blockchains, to enhance the efficiency or scalability of the network.

What Is the Potential Significance of Blockchain?

The significance of blockchain is compiled below:

  • Automotive – It allows the user to manage fractional ownership.
  • Financial Services – A user can make cheaper and faster settlements by improving transparency.
  • Voting – This technology even allows customers to cast their votes online.
  • Healthcare – The health information of the patients could be shared with the providers without privacy breaches.

What Are the Advantages and Risks of Blockchain Technology?

Blockchain has several advantages along with some risks as well:

Pros

  • It keeps the high accuracy of digital transactions.
  • It doesn’t require intermediates.
  • As the data on a network is unchangeable, the transaction would be easily traceable.
  • It provides a highly secure network, reducing the risk of fraud or scams.
  • It provides efficient transfer of financial assets all over the globe.

Cons

  • There is a limitation on the transactions made per second.
  • Blockchain transactions are a bit expensive but it requires high energy to work efficiently.
  • It creates a carbon load on the environment.
  • Loss of private key causes the assets to be lost permanently.
  • Sometimes, it is hard to track illicit transactions, which may correspond to illegal activity.

Future of Blockchain

In the upcoming years, blockchain technology is indulged in several fields such as supply chain management, digital identity verification, video games, and health records management. The significant success behind this technology is its ability to run and store computer codes.

Conclusion

Blockchain is a modern technology that allows users to make digital transactions without involving third parties. The customers simply have to verify themselves on a network and make a digital wallet to store their assets and make transactions whenever they need. Hurdles always exist but technology is gaining attention in a digital world because of its efficiency and accuracy.

About the author

Talha