What is blockchain?
Blockchain is a term for the unique, shared record of transactions in a business network. It is an asset tracking ledger.
In a blockchain, an asset is understood to be a tangible asset – whether it’s a house, a vehicle, or cash – or an intangible asset – like copyright or intellectual property. With this ledger, any item of value can be tracked and traded, reducing risk and costs for everyone involved in the process.
How does blockchain technology work?
The modern need to produce, manage, and store encrypted information in real-time has found the limits of human intervention. Thus, blockchain offers a solution to delegate this function in a fast, reliable, efficient way. Through computerized and automated technologies and systems, the information is organized in a block structure:
- Transaction information: where the data on an asset’s movement is shown, such as issuer, receiver, date, quantity, status, etc.
- Identification number, or hash: this is the block’s unique and unrepeatable number, and each block within the chain has its own identification number.
- Blockchain: as the asset moves from one point to another, a connection occurs between previous and subsequent blocks, establishing a sequence in the transaction; this prevents any block from being modified. That is, the transactions are grouped into an irreversible chain – a blockchain.
Is blockchain safe?
Under the constant threats of data manipulation in the computing environment, blockchain ensures its own protection through the very architecture of blockchain – hence, its guarantee of security. We must also consider that it is a decentralized process that many computers take part in, and each one has an exclusive, exact copy of the database. If one of the copies is altered, the community of participants knows, and it is null and void.
Finally, each node of the network requires certificates and digital signatures to verify the information and validity of the transaction and stored data; this addresses the barrier of having a single supervisor by offering verification of all the users who participate.
Why did blockchain technology come about?
Blockchain technology is linked to the emergence of cryptocurrencies. Little by little, though, it has spread to other sectors of the economy. It has come about for two main reasons:
- The loss of trust in large institutions as intermediaries; this is why certification and validation are provided by the users themselves in these systems.
- The lack of privacy for users in the digital age triggered the need to encrypt information shared on the network.
Advantages and disadvantages of blockchain
- With blockchain technology, data is stored on many devices in the network, and the system is strengthened to withstand technical failures and cyberattacks, unlike conventional databases that depend on few servers and are therefore more vulnerable.
- With blockchain, no intermediary is necessary since the network of nodes itself verifies the transactions carried out. Hiring a third party also means lower costs.
- The blockchain architecture enables a secure, reliable record to ensure the stability of the transactions carried out.
- The data encryption process uses public and private keys to access the information. If a user loses their private key, there is no way to access their funds.
- While the immutability of the information is a characteristic feature of blockchain, this can also entail a risk: if there is an error in recording the information, it cannot be modified.
What is the future of blockchain?
Blockchain technology’s implementation in the business world means advancements and innovation. One study carried out by a large technology consulting firm predicts a business volume expected to generate more than $170 billion by 2025, and by 2030, it will rise to $3 trillion.