While blockchain isn’t a brand new concept, it’s become a bit of a buzzword lately. From its relationship with Bitcoin to how it’s disrupting the financial industry, it’s constantly in the news. However, hearing blockchain technology explained usually just makes it seem more complicated. It’s actually much simpler when you eliminate all the jargon.
Blockchain By Definition
Blockchain is a decentralized public ledger of transactions. It was first developed along with Bitcoin by Satoshi Nakamoto. However, no one is still 100% certain of Nakamoto’s identity or whether it’s a single person or a group.
A blockchain is exactly as it sounds. It’s a digital chain built up of blocks (transactions). The main difference between this type of record keeping and a traditional ledger is everyone shares it. Every node computer involved in the transactions maintain an updated copy, which is updated and sent with every transaction or new block.
All transactions are in chronological order, making it simple to reference data by a set date. It was developed to ensure no single person had full control over the accounting side of Bitcoin, which is why the cryptocurrency and all variants self-regulate and stay anonymous.
In the most simple terms, the best example of blockchain technology explained is to think of it as P2P record keeping.
Evolution of Blockchain Technology
Blockchain’s humble beginnings started back in the early 90s by Dave Bayer, W. Scott Stornetta, and Stuart Haber. They started by trying to uncover the best way to time-stamp digital documents securely. This then led to the concept of collecting documents into blocks for more efficient time-stamping.
It wasn’t until 2008 that Satoshi Nakamoto took their initial concept and turned it into what we all know as today’s blockchain technology. By creating a public ledger, the potential for double spending of digital currency is eliminated without having a set third party involved.
With the creation of Bitcoin, Nakamoto needed a way to ensure the integrity of the currency and each transaction. A P2P ledger system became the ideal solution.
Blockchain then evolved to be even more effective with the creation of a second generation system called ethereum. This allows for transactions beyond cryptocurrencies, such as bonds or loans. These smart contracts have paved the way for the introduction of blockchain into other industries.
One of the latest developments is called proof of stake. The current system uses proof of work, which works like data centers for storing transactions. Data centers are created by miners, which applies to users with the most computer processing power. Proof of stake introduces more complex financial systems that are more secure and does away with mining.
Blockchain scaling is still in the works, but it’s designed to be a faster way of processing transactions. Since everyone owns the ledger, each transaction is processed by each computer on the network. The tricky part is reducing how many computers must process each transaction without compromising security.
Related Read: Cryptocurrencies: The Basics
Blockchain Technology Explained in Video
Does this all still sound complicated? Sometimes, the best way to understand blockchain is to see blockchain technology explained in videos. This helps condense the concept while giving you a visual way to understand a complex digital concept.
A great place to start is with Institute for the Future’s quick video. In under three minutes, they help explain all the basics so you’ll know exactly what blockchain is the next time you see an article about it.
IBM Think Academy takes a slightly different approach by applying blockchain technology to the diamond industry. By seeing how this technology helps eliminate the theft and fraud that occurs in the diamond industry, you get a clearer image of why a decentralized ledger is so effective.
Blockchain Beyond Bitcoin
Despite blockchain being tied forever to Bitcoin, it’s not limited to just cryptocurrencies anymore. Many industries are taking advantage of a decentralized public ledger to maintain more secure transactions and updated records while eliminating the any middleman. It’s more efficient and cost effective when implemented correctly.
According to Fortune, some of the industries currently using blockchain include:
• Banking – Barclays is one popular example
• Shipping – Maersk started testing blockchain in early 2017
• Diamonds – Everledger registers more than 40 traits of a diamond to a block in a blockchain
• Livestock – Walmart uses blockchain for tracking pigs in the supply chain from China to America
• Law – Law firms are beginning to use smart contracts as legally binding agreements
Forbes has a list of 35 companies currently working to implement blockchain in a variety industries, including healthcare, cybersecurity, and retail. This list alone shows that blockchain is evolving far beyond where it began. This technology is changing major industries for the better and the popularity is only growing.
The Future of Blockchain Technology
It’s impossible to hear blockchain technology explained without thinking about the future of this innovative concept. As you may have noticed, blockchain is starting to become a part of nearly every industry.
However, it’s important to remember that blockchain may not be suitable for everything. Blockchain does have noticeable disadvantages, such as requiring users to store large ledgers on their computers. For instance, Bitcoin ledgers are now over 100 GB.
There’s also the illusion that it’s completely decentralized. However, miners typically work together in groups for higher profits. Currently, three pools of miners control over 50% of the computing power required to process blockchain transactions.
Of course, the future of blockchain is still bright. With proof of stake and blockchain scaling, some of the biggest problems are being solved.
Blockgeeks lists 17 mind-blowing ways blockchain is helping change industries for the better. Even your car key could become part of blockchain. Internet of Things (IoT) is even being affected.
For any industry where better security and few to no intermediaries are necessary, blockchain could the answer. For instance, the advertising industry could help eliminate fraud and reduce overall spending. The gaming industry is even getting on board with the startup Gameflip that uses blockchain to help gamers trade and sell digital goods safely and securely.
The future is bright for blockchain. As long as it keeps evolving for the better, you might just find yourself using the technology yourself.
Related Read: The Dangers of Cryptocurrency Mining Malware
Contribution by Crystal Crowder
About the Author
Crystal lives and breathes tech. She’s spent over a decade writing tutorials, reviews, and more on tech, business, and lifestyle sites. Her idea of fun is settling down with the latest tech and gadget news.