Blockchain technology is a shared, immutable ledger or database used to record transactions, track assets, and build trust. It stores blockchain information electronically in a digital form, serving as a database. Blockchains do not require a third party to establish trust and provide data security guarantees on their own. Due to their secure and decentralized nature when recording transactions, they play a significant role in the cryptocurrency system.
While a typical database structures data in tables, a blockchain keeps data in sequentially linked blocks. This data structure, when used in a decentralized manner, allows you to obtain irreversible data. Its irreversible nature ensures that a piece of data in the environment is not lost or overwritten. Its ability to serve as a database used in banking, buying and selling transactions gives it versatility.
How does Blockchain Technology Work?
Think of a blockchain as a historical record of transactions. Each block is chained to the preceding block and is immutably recorded in a network. Encryption technology applies a unique hash code to each chain.
It progresses as a decentralized database, but each piece of information is added to each other in a node-like fashion. This represents a chain. Each node is held uniquely and immutably. This distributed nature of retaining every transaction ensures secrecy and security.
Where is Blockchain Used?
Blockchain technology can be used in many areas such as cryptocurrencies, banking services, asset transfers, and more.
Cryptocurrency Sector
When blockchain is mentioned today, the first use that comes to mind is cryptocurrencies. It forms the backbone of cryptocurrencies like Bitcoin and Ethereum. When people buy or sell these cryptocurrencies, their transactions are recorded on a blockchain chain. This ensures that transaction records are kept, and transactions are executed.
Banking Sector
Unlike cryptocurrency, blockchain is also used to process transactions in national currencies such as dollars, euros, etc. It may be preferred by banks because transactions can be verified more quickly and recorded without requiring security from a third party.
Voting
Additionally, Blockchain can be used to facilitate and ensure the integrity of a modern voting system. Using blockchain in this way allows for transparent elections without the risk of theft or doubt in the minds of voters.
Asset Transfers
Blockchain allows for faster asset trading and ensures that records are kept securely. Additionally, digital art and the recent popularity of NFT trading have become quite popular.
Advantages of Blockchain Decentralization
Due to its distributed nature, blockchain data is stored across thousands of devices, making it highly resistant to technical failures and database attacks. The failure of one node does not affect the security or operation of the network.
Lower Costs
Using a blockchain network eliminates third-party verification, leading to lower costs.
Secure Transactions
After a transaction is made in blockchain, it must be verified by the blockchain network. Once verified, the transaction is added to the block node chain. When a change is made to a block, the hash code of that block changes, but the hash code of the subsequent block remains unchanged. This inconsistency makes it difficult to alter information in the blockchain.
Disadvantages of Blockchain Technological Cost
Verifying transactions consumes more electricity than a typical database. This not only makes block chain transactions expensive but also has a negative impact on the environment.
Illegal Activities
The distributed nature of blockchain provides a high level of privacy, making it conducive to criminal activities. It makes tracking illegal activities more difficult. Bitcoin (BTC) was initially used in the dark web for illegal trades such as drugs, illicit arms, adult content sales, etc. However, with community adoption, its popularity increased, and with new updates, it was released to the public for legal use. Governments are taking necessary measures in this regard, and control will be fully established shortly.
Data Alteration
One of the strongest advantages of blockchain is the inability to alter data. However, when there is a need to alter data, it is very difficult to do so.
Usually, a hard fork is required, where the chain is removed and a new one is initiated.