Ever wondered what all the fuss is about Blockchain? Or even what it is? Read our beginners guide and find out about Blockchain and its role in cryptocurrencies.
What is Cryptocurrency?
Currency is a medium we use to exchange for goods and services. Traditional paper-based currencies are usually issued by governments and are heavily regulated. Notes and coins have no inherent value and therefore their value lies in the trust which we place in the currency issuer. If you’re interested in learning more watch The History of Money.
Cryptocurrency is a new type of currency which came about in the twenty-first century.
A cryptocurrency is a digital asset which uses advanced encryption technology to provide the trust that gives the currency its value. The first cryptocurrency, Bitcoin, was released in 2009. Since then thousands of cryptocurrencies, known as altcoins, have been released.
Unlike government-issued currencies, cryptocurrencies use a decentralised system of control to create new assets, manage and verify transactions – powered by Blockchain.
What is Blockchain?
Blockchain is essentially a new method of record keeping. Rather than the records or ledger being kept in one centralised place, it’s shared or distributed in lots of places.
Each record in the ledger of data is known as a ‘block’ and these blocks are linked together into a chain using cryptography. Once a block is added to the chain the previous block is altered to record this – therefore all blocks in the chain are interdependent and secure.
Blockchains are managed by peer-to-peer networks. Each member of this network has a copy of the entire Blockchain. On a private network, you must be a member to submit any change requests to the Blockchain. On a public network, you do not need to be a member.
A set of rules (or a protocol) is set for each Blockchain. When a request is made to the chain a series of steps (or algorithms) are taken in order to find a solution to the query. Consensus must be met across the member’s network for any request to be successful.
Blockchains are highly secure methods of storing, sharing and modifying data.
The Possibilities of Blockchain
There are many usages of Blockchain that go beyond cryptocurrencies. For example, Blockchain has proven to be a useful tool in sharing personal data such as medical records securely. Blockchain has also been used by governments to secure voting, for contract management, shipping logistics and in the application of the Internet of Things (IOT).
There are many more current and potential uses of Blockchain technology which will speed up and secure existing processes – creating and disrupting entire industries.
As with anything new – opportunities abound with Blockchain. But so too do risks.
When it comes to cryptocurrencies being an early entrant has led to some people making a lot of money. Investing and trading in cryptocurrencies has also led to a lot of people losing money, either due to lack of understanding or through the actions of unscrupulous players. Remember if it looks too good to be true it probably is…
For technologists and entrepreneurs Blockchain presents an array of possibilities.
Consider everywhere you use data – can Blockchain be utilised to improve existing processes? What about the core of your business offering – can Blockchain revolutionise your product or service offering? Is there a gap in the marketplace Blockchain can fill?
In conclusion, as with all financial or time investments if you want to make money you need to really understand what you’re investing in – otherwise, you’re just gambling.
Learn as much as you can about Blockchain and other emerging technologies. Know your own technical limitations and find an expert you can trust. But don’t forget to be brave!
Read more Dachshund Digital blog articles now.