Have you ever wondered why there is a sudden hype about blockchain technology and why so many people are getting involved daily? If you are new to web 3.0 or want to learn more about blockchain technology, this article is for you!
In this article, we have provided a straightforward explanation of what is blockchain technology and all its benefits.
So, let's get started!
What Does Blockchain Technology Mean?
Blockchain Technology is simply a way of storing information that makes it almost impossible for it to be changed, hacked, or forged.
Blockchain represents a digital ledger of transactions that cannot be changed and is duplicated and shared across a network of computers on the chain.
Every block in the chain consists of several transactions. When a new transaction occurs, it is recorded and stored in the participant's ledger.
Also, when many participants manage a decentralized database, it is called Distributed Ledger Technology (DLT).
Blockchain is a kind of DLT where transactions are stored with a cryptographic signature that is not subject to change.
In addition, blockchain is the technology behind cryptocurrencies, which are virtual assets built using cryptography.
Types of Blockchain Technology
There are four different types of blockchain technology, and they include:
1. Public Blockchain
Anyone can access this type of blockchain because they are open, and the decentralized networks are available to anyone that wants to carry out or authenticate a transaction.
Examples of such blockchains are the Ethereum and Bitcoin blockchains.
2. Private Blockchain
This type of blockchain is restricted, and anyone who wants access needs permission from the system administrator.
They require middlemen, which means they are centralized, e.g., Hyperledger.
3. Consortium Blockchain
They are also known as hybrid blockchains because they combine the features of the private and public blockchains. Examples include Dragonchain and Energy web foundation.
4. Side Chains
These kinds of blockchains work together with a major blockchain. They allow users to switch between blockchains to enhance scalability and efficiency.
A good example of this type of blockchain is the Liquid network.
Benefits of Blockchain Technology
Now that you've learned what blockchain technology means, let's go ahead to discuss what its pros are:
Transactions recorded on the blockchain are immutable with the date and time attached to them.
All the participants with access to a particular blockchain can see the information recorded on the blockchain at once, thereby giving greater room for transparency to prevent fraudulent activities.
Blockchains usually have a high level of security since the transactions are stored with end-to-end encryption that prevents unauthorized activities on the platform.
Also, information on the blockchain is recorded and distributed across various computer networks, making it almost impossible to hack.
Low Cost of Transaction
Blockchain allows several organizations to spend less by removing the need for middlemen and other centralized entities.
Also, blockchain cuts down the cost required for collecting and amending data together with reporting and auditing processes.
Blockchain replaces manual processes with technology and provides a quick method of facilitating transactions when compared to the usual method.
Although the time it will take for a transaction to be completed may vary due to factors such as large data size or network traffic.
Despite the challenges that may alter the speed of blockchain technology, it still beats the conventional system of carrying out transactions when it comes to speed.
Blockchain is still in its infantile state and has already made a name for itself as several investors and organizations get involved daily.
The technology seeks to make transactions more accessible, efficient, accurate, and inexpensive for its users.