Blockchain technology: everyone talks about it but do you really know how it works?
The blockchain technology is the most debated invention in fintech at the moment. Even though it has been on the market for a couple of years now, the hype around it does not stop. Typically, the blockchain technology is immediately associated with cryptocurrencies but only few interested in technology trends can explain how it works.
Blockchain is a complex invention of Satoshi Nakamoto. A lot can be found on the usage of the blockchain technology, its advantages and disadvantages, but very rarely simple explanation of how it works is explained in the articles online. To put it simply, as it name suggests, blockchain is a chain of blocks, which are composed of sets of collected and processed data. Each block is identified with the use of a cryptographic hash and timestamp. When a new piece is formed, it includes a hash of the previous block, which means that blocks can form a chronologically ordered chain from the very first block (the Genesis Block) to the subsequently formed block. This process can be repeated endlessly, to grow and maintain the network. Basically, the blockchain technology consists in a public ledger of information that is collected endlessly through network. The information that is recorded can relate to anything – money transfers, transactions, personal identification, etc.
What distinguishes blockchain from other technologies is the lack of a centralisation. The information is not kept in one central point but plenty of copies of the recorded data are simultaneously kept in different locations, on different devices on the network. The so called peer-to-peer network provides stability of the system. If some of the chains of blocks are removed or changed without the consent, there are numerous copies stored on the countless devices everywhere in the world.
The blockchain technology is said to be the most secure technology available at the moment as it allows for accurate verification of the stored information. It finds more and more ways to
be used in: e.g. cryptocurrencies, smart contracts, exchange trades, audit, insurance, voting systems, etc. The possibilities are endless. With many practical ways to implement the blockchain technology, the question concerning its omnipresence in all kinds of industries is no longer a matter of “if” but “when”.