Put simply, a blockchain is a list of every cryptocurrency transaction with details of the sender and receiver’s cryptocurrency wallet ID (cryptocurrencies are stored in digital wallets), along with the amount of the currency sent. This blockchain is public, and everyone can access it, but knowing someone’s wallet ID does not mean we know their identity – users have anonymity.
This network has two features, which differentiate blockchain technology. Firstly, the blockchain is decentralised, the information is not stored on a single server or on a series of servers owned by a single company, but is instead stored locally on numerous computers (of the owners of the cryptocurrency). Thus, there is no single point of attack for hackers. Secondly, the blockchain is distributed, anyone can help operate the blockchain (via mining/processing transactions). Rather than a single person or company manage all this information, blockchains rely on miners who verify each transaction and make sure no false transactions are processed. Cryptography is used to secure the blockchain, preventing any false transactions from being listed.
Implications of Blockchain Technology
The main implication of blockchain technology is that it is able to track ownership of a cryptocurrency (this is not published) and ensure the cryptocurrency is not exchanged more than once. Counterfeit cryptocurrency cannot exist, the blockchain would pick up on, making the blockchain both secure and transparent.
These features have the potential to help us store, manage and update large data records. Commentators have suggested the technology could be used in fields such as resource traceability, identity and medical record management.
Bitcoin was the first technology to make use of a blockchain. The blockchain enabled bitcoins to be exchanged securely, for negligible amounts (though scaling has made this tougher recently). But blockchains are likely to be incorporated in areas other than finance, the best is yet to come.
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