Blockchain Technology : Everything You Need to Know

Blockchain technology and its most famous implementation, the cryptocurrency Bitcoin has taken the world by storm over the past few years, due to its disruptive and innovative nature. But not everyone understands what it actually is, what it’s used for, or why the controversy surrounds it. This guide will help you understand everything you need to know about blockchain technology and how it works, so you can make an informed decision as to whether it’s right for your business.

It was only in 2008 that Satoshi Nakamoto published his white paper, Bitcoin: A Peer-to-Peer Electronic Cash System, which outlined the technology behind blockchain and how it could be used to create Bitcoin, and thus potentially other applications as well. Since then, it has been picked up by many organizations and industries, including major financial institutions and even governments around the world.

What Is Blockchain Technology

At its simplest, a blockchain is a digital ledger of transactions. When someone makes a transaction, they hash the data associated with that transaction and add it to the most recent block in the chain. Every block in the chain contains a hash of the data from the previous block, so it's not possible to modify data in any given block without changing every subsequent block. This makes blockchain technology incredibly secure and tamper-proof.

How Does Blockchain Work

At its most basic level, a blockchain is a digital ledger of transactions. When someone makes a transaction, that transaction is verified by multiple computers on the network. Once it is verified, it is added to the blockchain as a block. Each block is then linked to the previous block, creating a chain of blocks (hence the name blockchain). This chain of blocks is stored on each computer on the network, and each computer constantly updates its blockchain to reflect any new transactions.

How Does Mining Work

The heart of the Bitcoin network is a distributed ledger called the blockchain. Mining is how new Bitcoin are created. Miners are rewarded with Bitcoin for verifying and committing transactions to the blockchain. Ethereum miners are rewarded based on their share of work done, rather than their share of the total number of blocks mined. By making it more difficult for miners to get rewards, Ethereum aims to be more resistant to ASICs. The process of mining is simple: miners group transactions into blocks, and each block is added to the blockchain in turn. If a majority of miners approve a change to the protocol, then it becomes part of the blockchain. The beauty of this system is that it is decentralized; no single person or group can control it.

Why Use Blockchain

• Because it's decentralized, blockchain provides a shared public ledger that everyone can inspect but no single person can control.

• The history of each and every transaction is recorded in a block, which is then added to the chain of all previous transactions (hence the name blockchain).

• This makes it incredibly difficult for anyone to tamper with the data retroactively, since they would need to change not just one block, but every block after it in the chain.

• Blockchain is also transparent - anyone can view the entire history of a particular blockchain at any time.

• Additionally, blockchain is secure by design since each block contains a cryptographic hash of the previous block, making it tamper-proof.

Governmental Applications

Most people think of blockchain technology in relation to cryptocurrencies like Bitcoin, but the applications of blockchain go far beyond that. In fact, governments are starting to explore ways to use blockchain technology to streamline various processes and create more secure systems. The Estonian government has been using a blockchain-based voting system since 2007 and one municipality in Sweden is using it for a registry for land and property transactions. Other potential uses include digital identity management, data security, voting verification and supply chain tracking. Governments can also use blockchain technology to simplify and streamline their public records. For example, Estonia is currently building a nationwide public notary service based on blockchain technology so that citizens can authenticate documents from anywhere in the world with an electronic signature or with biometrics through their mobile devices.