Most people know about blockchain technology because crypto has become a trendy topic in the last few years. However, blockchain has many more applications than cryptocurrency alone. While blockchain allows you to send money directly to someone without a bank in just a few seconds, it can also help you store money that’s not tied to a bank, offering you complete control over your own money.
Blockchain applications continue to evolve, and they can get confusing. Blockchain can seem like a complex topic for many people, especially those who don’t know anything about cryptocurrency. This article will discuss everything you need to know about blockchain, including applications in everyday life.
What is Blockchain?
Blockchain technology is responsible for ensuring the transparent and secure trading of Bitcoin and other cryptocurrencies. The blockchain cannot be changed once a transaction is recorded. As a digital ledger, the blockchain serves as the record of transactions, but it has many applications beyond crypto. Two of the two most significant features of blockchain are being unchangeable and distributed. Because the ledger can’t be changed, it’s always accurate. Additionally, being distributed protects it from cyberattacks, although cyber attacks can still happen.
Ultimately, each transaction is stored as a block in a chain. The information within the block depends on the information in another block to form a chain of different transactions.
How Does Blockchain Technology Work?
Ledgers are used throughout all industries to store information and records. However, records stored the traditional way can be tampered with or edited, and records can be removed. Public blockchains are more trustworthy because they provide a tamper-proof record of transactions within the blocks of the chain. To help you better understand, let’s discuss how public blockchain technology works regarding cryptocurrency.
When someone sends Bitcoin, they pay a small fee for a network of computers to confirm the transaction and combine it with other transactions to be added to a new block within the chain. The computers validate the list of transactions via complex mathematical problems and add the block to the network. Your fee and the transaction fee then go to the miner as a reward for verifying and adding transactions to the blockchain.
New blocks added to the chain are assigned a unique key, and new blocks are continuously added through ongoing mining to make them more secure.
Core Properties of Blockchain
There are three main core properties of blockchain that are often referred to as its benefits. These core properties include:
Decentralization
Decentralization of the blockchain means there’s no entity in control of it. Instead, the distributed network of computers is responsible for decision-making. Sending transactions can take time, though, because it requires multiple confirmations from computers across the network.
Scalability
Blockchain is scalable as it’s able to handle numerous transactions, which is essential for the adoption of the technology. Ultimately, the more people who use it, the more scalability will become important for blockchain technology. For example, while many Bitcoin and cryptocurrency transactions happen every day, more credit card transactions are happening simultaneously.
Security
Blockchain must remain protected from cyberattacks. Unfortunately, the blockchain has been hacked numerous times. While it is considered secure, hackers are getting smarter, but they can only hack into someone’s private crypto wallet if they have access to their private key, which most people keep hidden away somewhere in their homes.
Pros and Cons of Blockchain
Blockchain has many benefits over traditional finance, but there are also some drawbacks.
Pros of Blockchain
- Immutable: Records within the blockchain cannot be changed. New blocks make the ability for the blockchain to be hacked more difficult.
- Decentralized: There is no entity in control of the network, and nobody else but you is in charge of your assets.
- Peer-to-Peer: Cryptocurrencies allow you to send money to anyone in the world without having a bank in charge of the transfer.
- Transparency: Public blockchains are open-source, which means transactions are transparent.
Cons of Blockchain
- Not Sustainable: Blockchain requires a network of computers that are on 24/7, using up loads of electricity and putting pressure on the electrical grid.
- Responsibility: As the holder of crypto assets, only you are responsible for your own money. If you lose your money or your key, your assets are gone for good, and there’s no way to get them back.
Applications for Blockchain Technology
While most people talk about blockchain in relation to cryptocurrency, there are many other applications, including:
Smart Contracts: Smart contracts are automatically executed without intermediaries.
Decentralized Banking: As we’ve mentioned, one of the main benefits of blockchain is decentralization, which can help make transactions more efficient.
Supply Chain and Logistics: Blockchain can be used to track the supply chain to trace food and precious metals, along with other products, making quality control easier.
Healthcare: Blockchain can reduce the time it takes to pay patients and doctors and store medical data and records securely.
Real Estate: Property records can be stored and verified using blockchain technology, making them more accurate and trustworthy.
NFTs: Non Fungible tokens allow you to tokenize anything from art to music.
Investing in Blockchain Technology
Blockchain has promising applications and uses cases to help companies become more efficient. With more big companies becoming interested in blockchain technology, it’s easy to understand why more investors are wondering if it’s worth the risk. If you want exposure to blockchain technology, you can start by investing in crypto. Investing in crypto is simple; all you have to do is choose the right trading platform and do your research to understand how much risk you’re willing to take on.
Additionally, you can invest in blockchain technology by buying shares in companies using the technology, such as Walmart.
The Future of Blockchain
Blockchain technology is not a passing tech trend; it is continuing to expand in scope and usability in many industries beyond finance. Blockchain technology can help people and businesses save time and money while solving other complex issues. Some finance schools are even covering the importance of cryptocurrency, blockchains, and more. Many experts believe blockchain will be a driving force behind major changes in business while creating new opportunities for every industry.
Ashley Nielsen
Ashley Nielsen earned a B.S. degree in Business Administration Marketing at Point Loma Nazarene University. She is a contributing writer at 365businesstips.com where she shares knowledge about general business, marketing, lifestyle, or financial tips. During her free time she enjoys being outside, staying active, reading a book, or diving deep into her favorite music.