Blockchain technology is one of the most transformative technological innovations that would propel the new age of the Internet. It has given rise to one of the best-performing assets in history — Cryptocurrencies. The impact has been such that crypto news has become a part of the daily news cycle.
But blockchain technology can be used for a lot more than just creating cryptocurrencies. The true potential of blockchains is yet to be unraveled and utilized. With blockchains, the world could become more democratized and decentralized. In this article, we will cover the most important features of blockchains.
What Is Blockchain Technology?
Blockchain is a shared, decentralized, distributed ledger or a database that stores data and information over a network or nodes of computers. The information stored on blockchains is encrypted using cryptographic techniques. Whenever new information is added to the ledger, it is in the form of blocks and is linked with the previous blocks, thereby forming a chain of blocks.
Blockchains are generally decentralized, meaning no single person or entity controls them, and everyone can view and verify the information stored on them. One of the most common use cases for blockchains is for cryptocurrencies and making transactions.C
How Does Blockchain Technology Work?
Blockchains work in a peer-to-peer network where the nodes or computers are connected through the Internet globally. Each party carrying out any transaction has two cryptographic keys — private and public. The keys give the users a secure digital identity and are required for performing activities on the blockchain.
The third thing required for performing actions on the blockchains is a computer or device with an internet connection. Users can perform digital activities on chains, such as financial transactions, using their keys. These transactions are verified by other users on the network, and once verified, they are added to the blockchain.
Top Features of Blockchain Technology
Blockchains are not merely a database to store information or carry out transactions. They have certain features that make them, unlike any other technologies. These features are inherent to them and make them completely secure, immutable and transparent. Some of these features are as follows.
Public Distributed Ledger or Decentralization
The information is stored and controlled by a single entity or organization in the traditional ledger or database. This creates a centralization of control over the data.
However, blockchains are ledgers that are not controlled by a single entity, and the information is stored all over the nodes in the network. This makes them transparent, as anyone can join the network and view, verify or add new data to the blockchains. Hence, these networks are decentralized and have no single point of failure.
Hash Encryption
In the day and age that we live in, data protection is of paramount importance, and blockchain technology does that through Hash Encryption. Hash is a mathematical function that converts data into a unique string of characters for each piece of information. The hash function cannot be reverse-engineered to reveal the information it contains.
Proof of Work or Transparency
When blockchains first came into existence, they deployed the Proof-of-Work (PoW) consensus mechanism for verification of data stored on them. In this mechanism, the data to be stored in blocks is verified by nodes on the network through a process called mining. In mining, the nodes solve complex mathematical problems and are rewarded with new tokens on that blockchain.
Another consensus mechanism gaining popularity is Proof-of-Stake (PoS). In this, the data is verified using cryptocurrency tokens of that network. These consensus mechanisms allow anyone to view and verify the information stored in the blocks, thereby making them completely transparent.
Conclusion
Going by the latest blockchain news, it is clear that almost all the major corporations worldwide and even some governments are working on incorporating blockchain technology. In a world that requires more decentralization and transparency, they are the solution that can go beyond cryptocurrencies and form the backbone of how our digital lives function.
