In my opinion, there are three main functions that Blockchains serve. First, they are an on-block ledger that maintains the transactions and records for the entire network. Second, they are a distributed ledger that maintains the transaction history for every single node on the network, including the end-user. Finally, they are a Distributed Ledger Technology (DLT) that tracks real-time financial activity on the entire network.
What is so unique about the Blockchain? The primary feature that separates the Blockchain from other types of Distributed Ledger Technologies is how it operates on a distributed ledger. A Distributed ledger is one in which the transactions are not restricted by one or even several computers. Instead, every computer that runs the system is part of a worldwide network. Therefore, a number of computers with varying technologies can all be part of the same ledger. When you think about how this would impact finance, you will see that the ability to transfer money is greatly increased.
In addition to the ability to transfer money, businesses can take advantage of the new capabilities afforded by the Blockchain. The feature of being able to quickly process and settle transactions in real-time opens up new ways to conduct business and gain an edge over competitors. With instant confirmations and the ability to monitor and trace previous transactions, a business can trace where their traffic is coming from and figure out their next steps. All transactions would be recorded on the Blockchain, making it easy to determine which block the transaction belongs in.
The second function of the Blockchain is that the ledger acts as the backbone for the entire system. Every transaction is recorded in a block along with proof that the block was created by a specific creator. In the future, these blocks may include other features such as additional incentives for generating certain coins or other programs that benefit the network. However, the most common uses are the ability to verify and record nearly every transaction that occur and the ability to add new blocks to the chain.
With this capability, businesses stand to benefit more than ever. Because the transactions are kept on the Blockchain, there is no way for anyone to manipulate how the ledger works. There is also no third party involved in the process, making the system much more secure. The decentralized nature of the system allows users the ability to modify their chains as they see fit, ensuring that the most legitimate individuals have a stake in the system.
The use of the Blockchain goes far beyond just verifying and recording transactions though. Because the blocks are always being generated by different users around the world, the system is also able to move forward in an almost non-blockchain fashion. While the users are still not allowed to tamper with the ledger, they can participate in the system by sending each other blocks that have been encrypted.
One of the most exciting aspects of the Blockchain technology is the possibility it has to help with new forms of online commerce. This is done through the use of nodes. Nodes are websites that download the necessary blocks, encrypt them, and then distribute them across the Internet. Because the entire system is decentralized, every site that downloads a new block will ensure that it is secure before actually putting up the request. Since it is not necessary for a site to store a copy of every transaction it performs, this feature gives Internet users the ability to transact without worrying about their data falling into the wrong hands.
The Blockchain technology will continue to take shape as developers continue to add features to the system. One of the biggest concerns is the ease of replacing old transactions with the new ones that are stored on the ledger. Transactions can be transferred between chains if there is an effort to rebuild the ledger from scratch. However, most experts agree that the chances of this happening are extremely slim because the Blockchain is based on open source software which cannot be hacked into or reproduced. Since nothing is being kept private, the chances of having your digital information stolen is also slim.