July 24, 2024

Business Bib

Business & Finance Blog

Cryptocurrencies 101: Blockchain Explained, Simplified

3 min read

Cryptocurrencies are the new hottest things now in the world of finance.  Even more so, the technology that underpins it sports higher potential than those that came before.  This technology is called blockchain, which is something you should definitely learn about.The blockchain industry has been growing because of its convenience and efficiency.

We will answer all the important questions regarding the blockchain technology.  And we will start by defining what this technology exactly is.

What is the blockchain technology?

At present, you see that most people use reputable middlemen to make transactions.  These middlemen are usually banks that people trust, letting them handle their money and investments.  Now, you can think of blockchain as a technology that removes the need for middlemen.  This means that consumers and suppliers can interact and connect directly with each other.

Blockchain gives us access to a decentralized database (also known as “digital ledger”) and it uses the science of cryptography that makes the exchanges super secure.  Basically, the network that underlies blockchain is a chain of computers.  This chain then must approve a transaction before it is verified and recorded.

How does it exactly work?

Let’s use Bitcoin as an example.  In the case of Bitcoin, the blockchain technology stores the details of each and every transaction made with the digital currency.  This technology prevents Bitcoin from being used or spent more than once.

The impressive thing about this digital ledger is that it can work for nearly every type of transaction that involves some sort of value.  That includes money, goods, and property.  And coming from a financial geek’s perspective, its potential uses and innovation are almost infinite.  You can use it to collect payments and taxes, and you can use it to send money somewhere far, like in places where banking is difficult.

Perhaps one of the best selling point of the blockchain technology is its ability to prevent fraud from happening.  It keeps fraudulent activities at bay because every transaction is recorded and distributed on the blockchain technology, and everybody is free to view it if they want to.

The year 2008 saw the launch of the blockchain technology, though it only garnered much attention when Bitcoin Price entered the game.

Why do we call it ‘blockchain’?

Here’s how it goes.  A block is a record of a new transaction.  And when a block is completed, that block is added to the chain.  For Bitcoin owners, there’s a private password, which is a complex key that they can use to an address on a chain.  That chain has the record of their ownership.

Now here’s what we’ve said above: a cryptocurrency owner doesn’t need a bank or any kind of middleman.  You wouldn’t need a bank to verify the transfer of funds, or even take a commission from the transaction.

It is not easy to foresee the future of this revolutionary technology, give the endless possibilities it offers.  But it’s not impossible.

At present, the blockchain technology hasn’t gone full-blown mainstream yet.  But if it does, anyone who can access the internet can use it to make transactions with cryptocurrencies and blockchain.  According to recent surveys on the use of cryptocurrencies, more and more banks, insurers, and tech firms are eyeing blockchain to speed up their operations, settlements, and cost-cutting.

In addition, Silicon Valley has a bunch of venture capitalists tinkering with the possible benefits of using blockchain.