Blockchain: What it is, How it Works, and Why You Should Care
The what, how and whys of blockchain technology
You may have heard of blockchain technology in relation to Bitcoin, NFTs, or other cryptocurrencies, but what exactly is it and how can you benefit from it? In this article, we will break down the blockchain into three parts: what it is, how it works, and why it matters.
What is the Blockchain?
According to McKinsey & Company, a blockchain is a type of distributed database or ledger, in which the power to update is distributed among the nodes or participants of a public or private computer network. In simpler terms, a distributed ledger is a record of transactions that is shared among participants in the system. This system can be public, meaning it is open to everyone, or private, meaning it is owned by a single person or entity. Both public and private systems rely on nodes, which act as gatekeepers to the blockchain. Each node must adhere to the same set of rules, and no node can change or alter the information once it is validated or let through into the block.
These nodes are what make the system secure and accept or reject all transactions made to the blockchain. Through encrypted keys, each user that uses the blockchain can be identified, and each participant has an encrypted set of private keys that only they can access. This makes each set of keys unique to the user and ensures the safety of the system. As long as only the user holds their private keys, no one else can access their account full of information and assets.
How Does the Blockchain Work?
Each participant in the blockchain opens a “wallet,” which creates two encrypted keys: a public key and a private key. The public key is a public address on the blockchain that anyone can visit if they know the user’s address. Here, users can store assets such as cryptocurrencies, NFTs, content, personal or business information, and more. With the private key, users can access those assets and perform transactions like trading, buying, and selling.
As more and more users onboard their products and services on the blockchain, more participants will have the opportunity to trade, sell, or buy in the blockchain ecosystem. It is important to keep private keys safe on paper, not to share them with anyone, and always be wary of phishing hacks. If others have a user’s private keys, they have access to what is inside that wallet. The blockchain only cares about who has possession of the keys, and it is up to the user to be safe and not share them.
Why Does the Blockchain Matter?
The blockchain matters because it offers a more secure and efficient way of verifying transactions, preventing fraud, and engaging with communities. In traditional payment systems, one has to trust that a payment of $20 cash is real and not fake. With the blockchain, this is no longer necessary. Additionally, the blockchain could solve issues such as lost sales on tickets or lost loyalty points in a change of system, resulting in lost customers. By using the blockchain, we can verify transactions more easily and prevent fraud, ultimately providing a better result overall.
In conclusion, the blockchain is a type of distributed ledger that allows for secure and efficient transactions. By using encrypted keys, users can access their assets and perform transactions like trading, buying, and selling. The blockchain offers benefits such as preventing fraud and engaging with communities, ultimately providing a better result overall. As more and more products and services onboard onto the blockchain, more participants will have the opportunity to benefit from its use.
