Blockchain Technology and the Tech World
Imagine a world where you store money online and are not tied to a bank, In other words, you are your bank and have complete control over your money. You don’t need a bank’s permission to access or move and never have to worry about a third party taking it away, or a government’s economic policy manipulating it.
This is just one of the important blockchain technology use cases that are transforming the way we trust. Blockchain technology is still a mysterious or even intimidating topic. Some even remain skeptical that we’ll use this technology in the future.
Five key elements of blockchain
Let's explore the key elements of blockchain that makes it so unique and valuable. These are the five critical components that have made its rise and its continuity.
Blockchain uses technologies such as public and private keys to record data securely and semi-anonymously. During the process of creating a Bitcoin wallet, for example, the blockchain generates an address for the participant that is visible to all network participants but provides pseudonymity.
Value is exchanged in the form of tokens, which can represent a wide variety of asset types, including monetary assets, units of data, or user identities. Token use can be programmed via smart contracts. Tokenization, or the creation of tokens, is the way a blockchain represents and enables trade via digital business assets.
It is a process by which centralized networks reduce trust and deter an individual’s ability to exert authority over others. Decentralization is one of the most critical components of Blockchain Technology which is the cause of all their benefits like trustlessness, censorship resistance, and immutability. Due to the decentralized nature of blockchains, no central database can be taken down by a government or terrorist outfit for personal gain.
Blockchain immutability is a concept that explains the stability and unchangeability of the blockchain. One of the central tenets of a cryptocurrency is to prevent double-spending. This requires that none of the previous entries in the ledger could be modified in any way.
Blockchains are especially useful in a scenario such as this because changing previous ledger entries requires an attacker to have more computing power than the entire network of miners protecting the network, which is referred to as a 51% attack.
The addition of encryption adds an extra layer of protection to the system and it becomes impossible for anyone to tamper with any characteristics of the network for their gain because it doesn’t operate using a central authority.
The blockchain uses cryptographic hashing to encrypt data. Essentially, the network hides the nature of the data. A mathematical method is used to transform input data into a different form of value, but the length remains the same.
How does it work?
When you do a transaction with your bank, the record of the transaction is kept with two parties- yourself, and your bank. This sometimes leads to errors knowingly or unknowingly which indeed leads to shady transactions.
With the blockchain, the record of any transaction is sent to every party on the network. Any attempt to change a part of the transaction by one party will be seen by every other person in the system. This way, records can be trusted even after an infinite number of years.
There is indeed a lot of work going on in the blockchain and crypto space. Blockchain is being used as the foundation of many new applications, and it continues to grow in terms of development and application.