The blockchain is used to maintain the records of unalterable transactions, therefore people can trust it. Blockchain technology was introduced in 1991 to create a system to prevent document manipulation. However, in the real world, the advent of bitcoin in 2009, was the first use of blockchain.
Why Blockchain? Decentralized nature – An influential characteristic of blockchain!
Put not your trust in princes. — Dutch proverb
Blockchain, by dispersing its operations across a network of computers, enables cryptocurrencies to function without the need for a central authority. For example, in the present world, the world’s financial system is governed by governments. Paper notes or coins are normally government property and are often accepted as a mode of payment at the face value established by the authorities. currencies issued by the governments are at the mercy of the same authority. A bank failure or political instability in a country could affect the value of the client's currency.
Remember the demonetization that occurred in India in 2016, which caused impoverished people, such as daily laborers, to struggle due to cash shortages? India's GDP has dropped as small industries struggled to stay in business. Without cash, there was no consumption, which implies there was no demand for things in the domestic market. People began to lose faith in government-issued banknotes as a result of this.
On the other hand, the blockchain provides trust. Blockchain technology such as bitcoin keeps a decentralized record of transactions. Not only does this lessen the risk, but it also removes many of the processing charges. It can also provide more stability and peace of mind to those in countries with unstable currencies.
What exactly is a blockchain, and its features?
A blockchain saves electronic information. A blockchain accumulates information in blocks, and a block is a set of data. As the storage capacity of a block is reached, a new block is created and each block is linked to the previous filled block, forming a data chain known as the blockchain, and providing a specific timestamp. Blockchain enables information to be recorded and distributed, and the transaction cannot be altered, erased, or destroyed.
Benefits of Blockchains
The blockchain is spread across a network of computers without a centralized location. When a new block is added, it is notified to the computers in the network to update. This makes it almost impossible to manipulate the information over blockchain in a network. In the event of a hacker attacking a copy in the blockchain, he could try to alter only a single copy of the information. The entire network is humanly impossible to access and therefore cannot be compromised.
An accurate chain of events
A network of thousands of computers is involved in the blockchain network, eliminating all human involvement in the process and ensuring a secure and accurate chain of events.
Reductions in costs
The use of blockchain doesn't need third-party verification and the costs associated with it. In general transactions, banks are paid to verify their transactions. Banks and financial institutions charge a fee for processing transactions whenever they accept credit cards or process any business transactions. Cryptocurrencies such as Bitcoin, on the other hand, are a decentralized system, thus, offering nil or very low transaction fees.
Transparency and efficiency
Traditional financial institutions operate during business hours, but blockchain transactions happen 24x7, giving them an edge. The speed of cryptocurrency transactions makes them useful, particularly for transactions between countries with different time zones or holidays on different days of the week. For example, Sundays are holidays in the majority of the countries but Muslim countries generally observe Fridays as their week holidays.
Making banking available to the majority of the people in the developing world
There are approximately 1.7 billion adults without bank accounts to deposit their savings in developing countries, where the economy is unstable and most transactions are done in cash. The salary is low, and they have to protect the little amount they get in their little abode which leaves them vulnerable to theft and loss of life. On the other hand, cryptocurrency is safer and the password to it can be saved on a phone or memorized.
Disadvantages of Blockchains
The cost of technology
Blockchain computers consume a great deal of energy. It takes energy not only for the enormous computation but also for the cooling of the hard-working systems. These huge amounts of energy can equal the energy intake of some of the mid-sized countries in the world, such as Norway and Ukraine. Mining is a complex, time-consuming, and inefficient process since many miners work to obtain coins, but only one will find the reward, resulting in an enormous waste of energy, time, and technology.
Solutions are, however, being developed for these problems. Bitcoin mining farms, for instance, have recently taken advantage of solar power, natural gas provided by fracking sites, and wind energy, and they've been set up in cold climate areas like Scandinavia, Siberia, and so on.
Access to private keys
A Crypto password is hexadecimal means it has at least 16 characters. Once lost, these cannot be recovered. Unlike any password such as social media, email account passwords crypto passwords are irrecoverable.
Unlike a bank, which stores your know-your-customer (kyc) information, a Blockchain system retains the user's anonymity. Criminals can use anonymity or a lack of user identity to conduct unlawful transactions such as dark web transactions or drug trafficking.
To conclude, blockchain is a tamper-proof digital record that may be used to record global transactions. Blockchain technology improves transparency and trust in the currency. Future blockchains are also searching for ways to store medical data, property rights, and a variety of other legal contracts. It also has a few drawbacks, such as high energy consumption and unlawful transactions. However, with a properly regulated system, blockchain can provide us with greater freedom and it can change the way we live and work.