Two of the most used words over the past one year are cryptocurrency (well, it’s actually Bitcoin), and blockchain. The rise in the prices of cryptocurrencies last year has led to an increase in attention for the blockchain industry.
What then is the blockchain?
The blockchain is the underlying technology behind Bitcoin and most cryptocurrencies. The technology also called the distributed ledger technology (DLT) has started to gain wide recognition beyond just the cryptocurrency space due to some amazing properties it has.
In the current information age, storage and movement of data is a very important part of our daily lives. Virtually all activities we carry out now have to do with not just creating data but also moving and storing it safely.
This is where blockchain comes in. one of its properties (perhaps the most important one) is its decentralization. The movement and storage of information have normally being centralized, meaning that it is handled by one body and usually kept in one place. There is much trouble is the company handling data gets hacked or if the place where the data is being held gets destroyed.
If you are a big fan of the cyber-security world, you will have heard lots of hacking and Ransomware stories over the past two years. The trend of hacking companies just to steal customer data continues to be on the rise, with 2017 the biggest year so far for hackers.
Blockchain technology has now emerged to solve all that. Its decentralization feature means that instead of data being stored in one place or being moved and controlled by just one body, it is chopped into pieces and then controlled by thousands of nodes across a particular network. The blockchain technology is able to do this using cryptography which gives it a layer of security that is almost impossible to hack, unlike the centralized system of data storage.
The distribution of data across multiple systems in a network is where it gets the name distributed ledger. The security of user data and information on the blockchain network has seen the technology garner attention from virtually all sectors of the global economy. Several companies, government, and businesses have started using the technology for several things.
Transparent and self-care
When Satoshi Nakamoto, the founder of Bitcoin used the blockchain technology for the currency, decentralization, and transparency are two things that were highly valued. The blockchain technology is very transparent, unlike the centralized system of information movement or storage where the central body can change or manipulate the data in its possession. This transparency is the reason why some governments are already working on integrating the blockchain technology in their voting systems. Some companies have also started integrating into some of their programs like the reward programs so that the whole process can become more transparent.
Its self-care property implies that the blockchain has the ability to check the data available on the network and repair it should there be any damages. This is done with the help of the computers that are connected to the network. The computers help maintain the integrity of a network by checking and verifying every transaction (dubbed blocks) which then leads to the formation of a chain with the history of each piece of data encoded within the chain.
How does it do all that?
The most important question that people ask me right after admitting how awesome this technology is “is how does it do all that”?
It does that with the help of those computers connected to its network. While developing Bitcoin and working on its decentralization and self-reliance features, Satoshi decided that those controlling the network would be motivated to continue the work if they get a token for activities carried out within the network and helping to maintain the network’s integrity. These people are called the miners.
The cryptography used in the network has totally eliminated the need for a third party. As a particular blockchain network grows, so does its need to have more power to maintain itself. This is one of the reasons why cryptocurrency mining consumes a lot of electricity which has eclipsed the energy usage of some countries due to the increasing number of users and transactions.
Future of blockchain
Blockchain is one of the greatest innovations of our time. Even though banks and other financial institutions have been against cryptocurrencies for a while now, they have admitted time and again the brilliance and potential importance of blockchain to the financial sector. Asides the financial sector, other sectors of the global economy have started warming up to the technology and it is getting widespread adoption from both the private and public sectors.
The future looks bright for blockchain technology.