What is Blockchain?
So before you can understand how Bitcoin or other coins and tokens within the Crypto world work, we need to understand Blockchains. A blockchain is a type of database. This database is a collection of information that is stored electronically on a computer system. Information, or data, in this database is typically structured in table format to allow for easier searching and filtering for specific information.
A blockchain is essentially a digital ledger/wallet of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain. Each block in the chain contains a number of transactions, and every time a new transaction occurs on the blockchain, a record of that transaction is added to every participant’s ledger. The decentralized database managed by multiple participants is known as Distributed Ledger Technology (DLT).
This means if one block in one chain was changed, it would be immediately apparent it had been tampered with. If hackers wanted to corrupt a blockchain system, they would have to change every block in the chain, across all of the distributed versions of the chain.
Blockchains such as Bitcoin and Ethereum are constantly and continually growing as blocks are being added to the chain, which significantly adds to the security of the ledger.
Bitcoin (Crypto) vs. Blockchain
When it comes to understanding how Bitcoin or other coins/tokens work the main point to take away from it all is that Bitcoin uses the blockchain as described above. Bitcoin merely uses blockchain as a means to transparently record a ledger of payments, but blockchain can, in theory, be used to immutably record any number of data points such as votes in an election, product inventories, state identifications, deeds to homes, and much more.
So what do I mean by “record ledger of payment?” Well, every time a buy or sell order happens on the Bitcoin network it is recorded to the network where multiple users on the network will sync up and approve the transaction which once approved by multiple users it will be then stored as a block on the network in the chain, From there everyone else will receive an updated copy and then the cycle continues.
Blockchain vs. Banks
When it comes to cryptocurrency vs banks, it has yet to be seen where and when Crypto will become a mainstream form of payment. But Blockchain technology definitely has a place in the near future with the way we transact in our daily lives.
Below is a list of differences:
Advantages and Disadvantages of Blockchain
For all of its complexity, blockchain’s potential as a decentralized form of record-keeping is almost without limit. From greater user privacy and heightened security to lower processing fees and fewer errors, blockchain technology may very well see applications beyond those outlined above. But there are also some disadvantages.
- Improved accuracy by removing human involvement in verification
- Cost reductions by eliminating third-party verification
- Decentralization makes it harder to tamper with
- Transactions are secure, private, and efficient
- Transparent technology
- Provides a banking alternative and way to secure personal information for citizens of countries with unstable or underdeveloped governments
- Significant technology cost associated with mining bitcoin
- Low transactions per second
- History of use in illicit activities
Bitcoin and other mainstream cryptocurrencies are the way of the future for making payments, how long that takes or if they stick with blockchains is another question but I can say that Blockchains are the way of the future for data in your day to day lives, it just all about how it is widely adopted. Only time will confirm that.