Anyone who keeps even the briefest of eyes on the news will have heard of Blockchain. It seems to be the new buzzword in town and something everyone is talking about. Indeed, you can hardly pick up a newspaper, switch on the TV or head online now without hearing about it!
All this might leave you wondering one thing – “what the heck is Blockchain and how does it work?”
Understanding Blockchain made easy
This technology was actually first developed to underpin digital currencies like Bitcoin. Since then though, people have realised it has much more to offer. This is especially true in the world of banking and finance, for example.
Let’s say that you are transferring money from your bank account to a friend’s one. The first step would be to contact your own bank and make arrangements to transfer the money. When they complete this transfer, both banks keep a record of the transaction.
So far, so good, you would assume – but this would be wrong! The big downside with traditional money transfers like this is that they can be tampered with quite easily. Transaction records are prime targets for cyber-criminals who could hack into them and change the details shown. For this reason, many people now are looking to find more secure and alternative ways of banking.
This is where Blockchain comes in.
What exactly is Blockchain?
In simple terms, Blockchain enables financial transactions to take place but in a much more secure way. A good example to help understand it more is thinking of a Google spreadsheet in Microsoft Excel. You might share this among various networks and let other people have a copy of it but without anyone being able to edit it. This is how Blockchain works in essence.
The basic setup is blocks of data which are then formed into a chain in chronological order. The setup of Blockchain is one of a distributed ledger. This means that a full copy of the ledger is shared with peers across the relevant network to view.
This gives Blockchain a number of advantages over traditional banking systems. As no one central authority controls it, then data is exchanged directly between parties without any middleman being involved. In addition, the ledger is practically impossible to tamper with due to high-level cryptography and even if it was, everyone on the network could easily spot what had happened.
But how does Blockchain really work?
Although we have generally looked at how Blockchain is set up, you may still wonder how it works in more detail. The below should help:
- a transaction is started by a node creating it and then digitally signing it off securely.
- the transaction then validated by peers on the network according to pre-set criteria. Once this happens, the transaction is included in a single block, confirmed and put onto the network.
- the new block becomes an official part of the ledger. The next block created will link itself securely to this one to maintain the chronology of the ledger. This stage sees the block confirmed for the first time but the transaction for the second.
- transactions are reconfirmed each time another block is made for security.
Blockchain has many uses
As we noted earlier, this technology has many uses which is why so many people are talking about it. E-commerce is a great example and we could begin to see Blockchain underpinning payments on websites soon.
If you want to know more about how incorporating new elements like this into your web design can help your business grow, contact us today. At Digital Group, we have many years of experience in building top-class websites, so we can answer your questions.