When you hear the word “blockchain,” you may think of cryptocurrency like Bitcoin. But while blockchain technology does tie into cryptocurrency, that’s just one of its many uses. Here’s everything you need to know about this emerging, wildly popular technology.
What is blockchain?
In simple words, a blockchain is an electronic database that can be accessed across a network of devices. The term for this is “decentralized,” which means the records aren’t stored in one central operating system. All the data is stored electronically, so whenever a record is added, the network automatically updates on every system.
How does it work?
The name says it all: “blockchain,” or a chain of connected blocks. Whereas most databases are structured by table, a blockchain database is structured by group (“block”), with each group holding a set of information. When a group reaches its storage limit, it closes and links on to the previous group. New information goes into a new group, which gets linked to the previous group when it fills up, and so on.
When a block fills up, it becomes irreversible—in other words, tamper-proof. While the recorded information can be distributed to any connected device, it can’t be edited, altered, or deleted. When the group fills up, it also gets a time stamp, so the chain acts as a set-in-stone timeline of records and transactions.
What is it used for?
Blockchain technology is used in just about every industry these days. Here are a few examples:
- Banks use blockchain to help consumers quickly process transactions
- Stock traders use it to transfer funds between institutions with no delays
- Cryptocurrency owners use it to store, exchange, and process funds without fees
- Healthcare providers use it to store encoded patient records
- Suppliers, especially in the food industry, use it to verify the origins and authenticity of purchased materials
- Property owners use it to establish and verify ownership
- Landlords and business professionals use it to create smart contracts
- Companies and consumers use it for cross-border payments
There’s also talk that blockchain could make voting more secure by preventing fraud and tampering. It could even boost voter turnout, since the voting could be done electronically instead of in-person.
How widely is it used?
Blockchain is used worldwide, with most of its technology concentrated in the U.S. and China. According to Statista, blockchain spending is estimated to reach $19 billion by 2024; and most global business leaders plan to invest in blockchain in the near future. Just about everyone is using it, from financial institutions and healthcare providers to agricultural producers—and more blockchains are added every day, with the current count above 10,000.
Why is it so popular?
Because it eliminates the need for a third-party, especially in things like financial transactions and contracts, blockchain is often seen as a more cost-effective option. It’s also popular as a secure banking alternative, particularly for those living in unstable or war-torn countries.
Other benefits of blockchain include:
- High accuracy
- Low risk of human error
- No processing fees
- Data validation
- Instant processing
- Security and privacy
Since blockchain is stored across a network of devices, it’s hard to tamper with. Several copies of the database exist, so if someone does manage to hack the blockchain on one device, the information on the other systems would still retain its integrity. Plus, it’s nearly impossible for the information in a block to be changed without someone noticing.
How does it tie into cryptocurrency?
Many people use blockchain to store, exchange, and process cryptocurrency. As mentioned, blockchain technology is often seen as a more stable alternative to banking, and since it eliminates the need for a third-party, such as a bank or fund manager, it’s cheaper than traditional methods. Some experts think cryptocurrency and blockchain will eventually replace physical monetary transactions.
Is blockchain right for you?
With all the hype, it’s easy to get excited and jump on the blockchain bandwagon prematurely. While blockchain can be an invaluable tool for your organization, it’s not always the answer, and sometimes there’s a far simpler solution.
Ask yourself the following questions to decide if blockchain is right for you:
- Does the data need to be unalterable, a.k.a. tamper-proof?
- Are you willing to give up the ability to edit or remove any of the data?
- Will multiple organizations/entities be using this database?
- Is transparency important?
- Do you need to know who or what is involved in each transaction?
- Does your database need to be widely distributed?
- Will blockchain integrate with your application?
- Can you afford to invest in blockchain technology?
If the answer to all or most of these questions is yes, then blockchain may be just the fit you’re looking for.
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