We as human beings, are driven mainly by the trust. The trust of something in someone is what keeps us going, in this not so trust-worthy world.
We may not trust everything but we all trust in the power of money and the possibilities it can bring with it. That is where comes the trust on the provider and aggregator of all our hard-earned money i.e., public and private banks or any digital platform or gateway. But as we all know how trustworthy today's world of banks and platforms are. Then where do we save and store our precious money or perform any kind of transaction digitally?
This is when cryptocurrency comes into the picture, and you will be really crazy if you haven't heard about it. But at the same time, it's not a big deal if you haven't heard about it because a lot is going on in this world currently, and it's a real challenge to cope up with everything. But the real question is - what is a cryptocurrency and why it is used?
"Cryptocurrency is a medium of exchange, such as any country's currency like Indian Rupee. But it is universal and not restricted to any nation or geographical location. It is digitally managed and uses advanced encryption techniques to control the money flow and verification of all your transactions." - Some of the top examples of cryptocurrencies are Bitcoin, Dogecoin, Ethereum, etc.
And for doing any kind of digital transaction using your cryptocurrency you need some solid technology such as Blockchain.
But what is Blockchain?
Well, it is a first-of-its-kind technology that enables the existence of things like cryptocurrency. You can track the status of your digital asset and all the other things which exist inside it. It is also well known as Distributed Ledger Technology (DLT) because it provides a distributed environment to all transactions of any kind and also makes the history of any digital asset unalterable and transparent using advanced hashing mechanisms. It has the potential to be applied in the fields such as automobiles, healthcare, financial services, and voting.
One of the most basic examples for understanding Blockchain is like imagine a distributed online document (having some data) and that same document is with your team members and all of them can see what you are doing in that document and you can see what all others are doing in that particular document. Yes, we are talking about something like Google Docs or Microsoft's SharePoint. These kinds of documents are distributed and not copied or transferred to their users. The same concept is used in Blockchain. But here it is used mainly for controlling the flow of digital assets like cryptocurrencies.
So basically, users can use Blockchain to perform any kind of digital transaction without the need of any third party such as central banks or intermediaries for storing and securing their digital assets or transferring their funds across different geographical locations.
Benefits of using Blockchain:
1) Increased Transparency: It brings a lot of transparency to everything that happens around it and inside it. The basic flow and working of Blockchain introduce a new level of security and increased transparency which is why it appeals to many of its potential users.
2) Accurate Tracking: It uses advanced hashing mechanisms to store and secure every transaction and every payment performed and that is why it provides accurate tracking of every step of the completed transaction.
3) Permanent Ledger: Every transaction and payment that happens in Blockchain is stored in the records after getting validated and verified by all the existing members in the system and then only it gets added to the chain and that transaction is now permanently stored there for lifetime. This is the same as we input each detail of any transaction in our standard ledger book.
4) Cost Reduction: Everything happening in the Blockchain requires very little to no effort whether it is transferring funds over the network to one another OR buying any goods or services using your digital currency i.e., cryptocurrency. It reduces the cost of any kind of taxes or any additional charges or any other amount to be incurred while doing those transactions.
Challenges in using Blockchain:
1) Complex Technology: If you dig deep in the Blockchain then you know how complex technology or how complex the algorithms are used in it to add the new block in the chain and get reward for finding the spot in the chain. It requires someone to be really smart in solving complex math problems or algorithms.
2) Regulatory Implications: It is still a newly launched concept for performing digital transactions over the standard modes of transaction. Due to which different government bodies react differently in support of implementing Blockchain in their country. Some are quick to understand the concept and agree to accept it as the new way of doing transactions over the network and some are still figuring out how it can be trusted and implemented in their nation.
3) Implementation Challenges: There are many challenges in the implementation of choosing the suitable Blockchain application because many are still growing and don't have accurate knowledge of the inherent concept of Blockchain and others are consuming high energy for performing any transaction on it. Many people and organizations are still vulnerable to using Blockchain technology for their businesses as it allows each participant to access other's data or transactions which might become critical for their profits and security.
4) Increasing Competitors: As many are exploring and diving into cryptocurrency and digital asset management, the competition for existing Blockchain companies is increasing day by day. We are noticing a huge rise in the numbers of Blockchain companies who are ready to transform your transactions into a secure and tamper-proof unalterable chain of record(s).
Some Bonus information about Blockchain:
There are 3 main concepts which are essential for Blockchain:
- Blocks: Every chain in the Blockchain consists of multiple blocks and each block has sections for actual data, 32-bit randomly generated block nonce, and, 256-bit hash for block header.
- Nodes: Nodes in the Blockchain can be any kind of electronic device that is responsible for maintaining the copies of the blockchain and keeps the transactions stable.
- Miners: Miners are the person who creates new blocks in the chain by applying advance algorithm solving techniques for finding that particular nonce which can be verified, validated, and added to the existing chain.
Contact Space Stem Experts for your next Blockchain project.