LONDON (Bywire News) - According to many analysts, the blockchain represents the future. However, many people are left asking what the blockchain is. How does it work, and what services can the blockchain provide? We have the answers.
How does the blockchain work?
The blockchain is like a record of transactions which is impossible to forge. It works by recording and duplicating transactions on a chain of blocks (like a record or file) which are distributed across a network of computers. It is designed to provide complete transparency and to be difficult to hack, change blocks or cheat the system.
It is trustless (as in, it eliminates the need to trust a third party), transparent system operated by a network of computers which verify each transaction. Each block contains information about a transaction. Every time a new transaction occurs, a record appears on each computer in the network. It therefore creates a decentralised database with information spread across multiple participants. We call this distributed ledger technology (DLT).
The system is very difficult to hack. If cyber criminals compromise one of the computers, it will become immediately apparent that someone has tampered with it. If they wanted to really compromise the system, they would have to hack every block in the chain and every computer in the network.
This means the network is extremely difficult to hack, if not completely impossible. The more blocks are added to the chain, the more difficult it becomes to hack the system.
What is the blockchain used for?
The most famous example of blockchain use involves Bitcoin and other cryptocurrencies. In fact, the blockchain was the technology which made digital currencies possible. The distributed and decentralised system removes a key component of traditional (also called fiat) currencies in which everything is centralised through one authority which makes the transaction.
This overcame one of the big problems of trust - if one centralised authority is in charge, how can you trust it not to simply award itself vast amounts of its currency? Bitcoin got around this by using the blockchain which is controlled and run by the people who use it. Control becomes decentralised which ensures no single person can rig the system.
Other cryptocurrencies have since followed in Bitcoin’s footsteps. These include Ethereum, Ripple and many others. Most of these run on their own public blockchains which work in much the same way - they require complete consensus from all computers in the network before a transaction can be completed.
As blockchain technology develops and becomes more mainstream, they are evolving and being used in a number of different ways. EOSIO is an example of one of the latest blockchains which seek to address the weaknesses in other technologies. This contains its own digital token, EOS, and aims to be more scalable than other blockchains, aiming to process millions of transactions per second without transaction fees.
Today, the blockchain is moving into the mainstream. It is being used for a host of different solutions such as managing financial transactions, data storage and independent media sites - such as us at Bywire News.
What was once created as an alternative to the mainstream is now attracting interest from established providers themselves. Major corporations are developing their own blockchains and governments are seeking ways to regulate the blockchain.
It is also developing its own following with a host of sites offering blockchain news and coverage of all related issues. They show that the blockchain is becoming the foundation on which our digital future may depend.