How the Blockchain Works
Blockchain is a term that has many different meanings. For the purpose of this article, we will define it as an unchangeable, globally-identifiable database of all transaction data. It may be likened to the MySQL or Oracle databases where you can change or add information to your data without changing the root of the database itself. The core concept of the Blockchains is based on the idea that one person cannot change the world while the block of transactions that have already happened are irrevocably set into stone. Transactions that happened within a specific time frame will always be recorded in the Blockchain, even if the individual is deceased.
Blockchain is a source of pride for its developers. In late 2021, Blockchain was sold to the private investor’s market and received bids from a number of companies. At that point, Blockchain had been chosen over other potential projects such as Distributed Ledger Technology (DLT), which was sold to investors by a number of financial institutions.
Blockchains provide several benefits to enterprises that use it. The most important benefit to enterprises is that the technology provides a more secured and efficient way of recording and transferring data. The word “blockchain” means a group of computers which together act as a ledger. Consistent layers of proof-of-work make the transactions secure, while the speed in which the transactions occur is a result of the collective effort of the network of computers. The lack of significant lag time during transfers speeds up business operations and cuts down on costs.
A second major benefit comes from how the ledger and the network are able to identify any two particular transactions that have happened in the past. If you go back to your parent chain, you will know that you’re looking at the last recorded transaction. The benefit to the developers of the Blockchains is that you don’t need to worry about having your transactions mixed up with other people’s because they were both created within the same computer-networking network. The system basically ensures that all the transactions on the ledger are recorded into a single ledger and are identified by the particular block they originated in. Blockchains have the ability to rebuild the trust that was lost following the break-up of a marriage or a divorce, a theft of company secrets, or a hacking attack.
When an investor or merchant creates a transaction on the Blockchains, it is actually a process of creating a new public key and linking together two previous private keys that refer to the same account. Once the two keys are linked, each new transaction is visible to the entire network. Because the entire network sees the same transactions happening at the same time, the speed in which business hours run is greatly reduced and the time between trades is drastically reduced. This allows a significant amount of time to be shaved off the delivery time of products and services, allowing a business owner to increase profitability and/or start a new venture.
In the case of the latter benefit of the Blockchain, the benefit occurs when a business begins a new venture. With a central authority controlling the distribution of transactional keys, there is no longer a need for a third-party intermediary. Also, because all transactions are broadcast to the complete network, there is no need for a second party to trust the information provided by a transaction. Lastly, if a transaction cannot be completed, it is not sent to another party as a failure, but rather dealt with locally. If a transaction cannot be completed within the hour, it will not send to anyone else until the next day.
Another use for the Blockchains comes in the form of legal contracts. Unlike the traditional Internet, where a lawyer makes each contract personally, the Blockchains are made electronically. Instead of a lawyer, there are “consent machines” that allow two parties to agree on the terms of a contract, then the contract is processed locally and only one party signs the document. The major advantage to this system is that all parties involved in a transaction are signed onto the transaction in real-time, making it impenetrable to hackers who would attempt to manipulate the system. In addition, the majority of paperwork can be handled electronically versus in paper form. Additionally, the paperwork can be protected from tampering, making it much harder for identity theft.
Because the Blockchains are open and downloadable, anyone can participate in the global network without needing to know how to code. Transactions are recorded digitally, which prevents fraud and doubles, since each transaction is paired with a previous transaction. Because it is downloadable, the network does not need to validate the integrity of the ledger. This means that anyone can add any number of transactions into the mix and that the ledger is irrelevant. Because the chain is open and downloadable, anyone can participate in the global network without needing to know how to code.