what is a blockchain ?
How does a blockchain work ?
As the name suggests, Blockchains are formed from a chain of blocks, each of which store information. The exact information they store differs between blockchains. Bitcoin, as an example, contains information about the total BTC being transferred as well as the sender and receiver.
The core elements on which blockchain technology operates are its distributed ledger technology, immutable records and smart contracts.
Immutable records, mean that the information on a blockchain network can’t be changed without re-writing all of the following blocks.
Every single transaction that occurs through smart contracts and payments are scrutinized by other nodes within that network to ensure their authenticity and validity.
The interconnected nature of the blockchain allows for smart contract agreements that are automatically executed once their requirements are met, such as receiving payment or certifying a certain data point has been collected.
It’s an agreement set out in coded language through which two parties agree to perform or not perform some action. If the transaction takes place between known entities, smart contracts make it easier to verify the rules are upheld.
Smart contracts can be created for anything from property sales to car rentals, smart energy grids and even employee contracts.
Types of Distributed Ledger Technologies
There are two distinct types of distributed ledgers and blockchains: permissioned (private) and permissionless (public).
In essence, this determines who can participate in validating transactions on the network.
In a permissionless distributed ledger, anyone can join the network without needing to be approved by anyone, like in the case of Bitcoin or Litecoin.
A permissioned ledger requires participants to be approved before they can be part of the network, for example Facebooks’ Diem stablecoin project (formerly known as Libra).
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- Security and transparency
- No intermediaries needed
- Permissionless system state
- Data integrity & reliability
Use of Distributed Ledgers
Distributed ledgers have shown that they have what it takes to be used by private corporations, governments and institutions.
Governments can utilize decentralized ledgers to minimize fraud, data security and streamline processes.
The technology can be used in several industries such as:
- Finance (Capital Markets)
- Peer-to-Peer (P2P)
- Secure sharing of medical data.
- NFT marketplaces.
- Music royalties tracking.
- Cross-border payments.
- Real-time IoT operating systems.
- Personal identity security.
- Anti-money laundering tracking system.
- Manufacturing, Supply chain and logistics monitoring.