What is blockchain?
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What is blockchain? A brief description and possible uses
At this point, it is likely that you have already heard of blockchain on many occasions. You’ll know that it has something to do with Bitcoin and other digital coins, and that some technology gurus claim that it will change the world (yes, another technology that promises to change even the colour of our slippers) forever and ever.
But all that might sound strange to you, you might not understand a word and blockchain might sound like a video game of the 80s.
In this article we will explain in the simplest possible way what blockchain is and what it is or could be used for in the future. Or at least we’ll try…
What is blockchain?
On the Internet, as in real life, people exchange money, services and all kinds of goods. However, as in real life, we don’t trust too much the one we have “on the other side”. And this is aggravated if we bear in mind that, online, “the other” is often many kilometres away and many times we don’t know who he or she is.
Internet transactions have been carried out through multiple intermediaries: banks, electronic payment systems, etc., which served as “guarantors” that they would be carried out safely. The problem is that many people do not feel comfortable using these types of intermediaries, for a variety of reasons, including data privacy.
What is blockchain? Blockchain is an alternative to this system of exchange of goods that has been the most common to date. Blockchain consists of a kind of “ledger” or “general record” to which all participants in the blockchain can access and in which each transaction is recorded immutably. In other words, blockchain is a database with very particular characteristics.
Let’s take a closer look. What is blockchain?
Blockchain, as its name suggests, is a virtual “chain”, made up of a large number of blocks. When a user participates in a blockchain and carries out a transaction with another user (generically called a “token”), the transaction is recorded in one of its blocks (the corresponding one).
Once a certain number of transactions have been reached, the block is “filled” with the record of all the operations that have been carried out, and the following ones are recorded in a new block that is linked to the previous one through a link, called “hash”.
All blocks are linked consecutively (that’s why they are called “chain”) and all participants in the blockchain (called “nodes”) can access the complete copy of the blockchain (if it is public).
At this point, some clarifications need to be made:
- There is more than one blockchain. Or it would be even more correct to say that there are several “registers” using blockchain technology or variants of it. One of them, the best known and in which the blockchain technology originated is the one that supports the digital coin called Bitcoin, but there are others, including those used in other digital coins, such as Ethereum. And it is expected that there will be many more in the future, dedicated to multiple activities.
- As we mentioned earlier, blockchain can be public or private, depending on which members are allowed access.
- Blockchain works in a distributed way, that is, all nodes have a complete copy of the registry.
- Each transaction, which involves a new record in the chain, before being recorded must be previously verified by the participants in the blockchain (the nodes). It will be for a part or for all of them, depending on the specific operation of the blockchain in question.
- Keep in mind that these are some very general considerations about blockchain technology. Each blockchain has its particularities and works differently; in addition, blockchain is a very recent technology (it has barely a decade in practice) and it is in a continuous process of change and improvement.
What is it for and what could blockchain be for?
At present, the main use of blockchain is on its paper as a means to convey “digital coins”. Thousands of participants in blockchains such as those already named Bitcoin or Ethereum use them as a means of payment or currency exchange. In addition, financial institutions have also been very interested in blockchain technology, to the point of creating their own digital (but centralized) currency systems, such as Ripple.
However, although it has been closely linked to financial transactions since its inception, there may be many other uses being proposed for blockchain technology, inspired by the nature of what blockchain is in the background: a database that allows information to be stored.
Thus, it has been proposed to use blockchain to register all kinds of digital documents, such as deeds of sale, patents or medical records.
It has also been proposed for use on the Internet of Things (IoT), as a means for the various devices to communicate with each other.
Or as a cloud storage system, as an alternative to existing centralized services such as Google Drive or Dropbox.
Some people even propose its use in electoral procedures, or for the management of public accounts.
The truth is that the potential of blockchain is immense, but it is also that it faces a few difficulties.
On the one hand, all kinds of institutions (from governments to large financial corporations) have looked at blockchain technology with suspicion for years, since it can mean a loss of power for these institutions and has been used by some individuals or groups to carry out criminal activities.
On the other hand, some people argue that, although it is a useful mechanism, the use of blockchain will not be massive, since it is a difficult tool for the general public to understand.
In addition, the large computing capacity that is involved in the operation of different registers that use blockchain technology translates into a major problem of energy consumption, with the expense and risk to the environment that this entails.
What is blockchain? What do you think about blockchain? Do you think it’s a useful technology? Do you think it’s going to succeed in the future? Or do you think, on the contrary, that it’s a trend that will be stored in the memory drawer in a few years’ time?
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