Beginners Guide: What is Blockchain Technology and its Advantages

The decentralized tech that underpins digital assets is known as the blockchain. It’s an indestructible ledger that keeps track of both financial and non-financial transactions and can be programmed to do so.

What is Blockchain technology?

Blockchain is a method of storing data that makes it difficult or impossible to change, hack, or cheat the system. A blockchain is essentially a distributed digital ledger of transactions that is replicated and distributed across the blockchain’s network of computer systems.

Each block in the chain contains several transactions, and whenever a new transaction occurs on the blockchain, a record of that transaction is added to the ledger of every participant. Distributed Ledger Technology refers to a decentralized database managed by multiple participants (DLT).

Blockchain technology, in a nutshell, is a digital, ever-growing list of data records. A list like this is made up of many blocks of data that are organized chronologically and linked and secured by cryptographic proofs.

Some of the advantages of blockchain technology are listed below

  • Enhanced security: Your data is sensitive and critical, and blockchain has the potential to significantly alter how your critical information is perceived. By creating a record that cannot be altered and is encrypted end-to-end, the blockchain prevents fraud and unauthorized activity. On the blockchain, privacy concerns can be addressed by anonymizing personal data and user permissions to restrict access. Information is stored across a network of computers rather than on a single server, making data access difficult for hackers.  
  • Transparency: Without blockchain, each organization must maintain its database. Transactions and data are recorded identically in multiple locations because blockchain employs a distributed ledger. All network participants with authorized access see the same information at the same time, ensuring complete transparency. Every transaction is immutably recorded and time- and date-stamped. This allows members to see the entire history of a transaction, virtually eliminating the possibility of fraud.
  • Trust: Blockchain fosters trust between entities where trust is either absent or unproven. As a result, these entities are willing to engage in business transactions or data sharing that they would not have done otherwise or would have required an intermediary to do. Its worth can be seen in early blockchain use cases, which facilitated transactions between entities that did not have direct relationships but needed to share data or payments. Bitcoin and cryptocurrencies, in general, are iconic examples of how blockchain enables trust between strangers.
  • Traceability: Businesses can use blockchain to focus on developing a supply chain that includes both vendors and suppliers. Tracing items in the traditional supply chain is difficult, which can lead to a variety of issues such as theft, counterfeiting, and loss of goods. Blockchain makes the supply chain more transparent than ever before. It enables each party to track the goods and ensure that they are not replaced or mishandled throughout the supply chain process. Organizations can benefit from blockchain traceability as well if it is implemented internally.
  • Reduce costs: Organizations can save money by eliminating the need for third-party vendors by utilizing blockchain. There is no need to pay for vendor costs because blockchain has no inherited centralized player. Furthermore, there is less interaction required when validating a transaction, removing the need to spend money or time on mundane tasks.
  • Increased efficiency and speed: Traditional paper-intensive processes are time-consuming, prone to human error, and frequently require the intervention of a third party. Transactions can be completed faster and more efficiently by using blockchain to streamline these processes. The blockchain can be used to store documentation and transaction details, eliminating the need to exchange paper. Clearing and settlement can be completed much more quickly because there is no need to reconcile multiple ledgers.

Blockchain achieves this by employing advanced cryptography that is designed to be resistant to hacking, thereby enhancing the transaction ecosystem’s trustworthiness.

Types of Blockchains

There are two types of blockchains: Private blockchains and Public blockchains. There are several variations as well, such as Consortium and Hybrid blockchains. There are four types of blockchain structures:

  • Public blockchain: A public blockchain is a distributed ledger technology that allows anyone to join and conduct transactions. It is an open version in which each peer has a copy of the ledger. It also means that anyone with an internet connection can access the public blockchain.
  • Private blockchain: One of the various types of blockchain technology is a private blockchain. A private blockchain is a blockchain that operates in a restricted environment, such as a closed network. It is also a permission blockchain controlled by an entity. Ideal for use within a privately held company or organization that wants to use it for internal purposes. This allows you to use the blockchain effectively while restricting access to the blockchain network to only a few participants.
  • Hybrid blockchain: A hybrid blockchain is a distinct type of blockchain technology that combines elements of both public and private blockchains or attempts to use the best aspects of both public and private blockchain solutions. In a hybrid blockchain, transactions and records are made private but can be verified when necessary, such as by enabling access via a smart contract. Although private information is kept within the network, it is still verifiable.

What’s the history and Who Invented Blockchain technology?

Given the ripple effect it is having on various sectors, including finance, manufacturing, and education, blockchain technology has to be one of the most significant innovations of the twenty-first century. Many people are unaware that Blockchain has a history dating back to the early 1990s.

For Blockchain enthusiasts and aspirants, understanding the history of Blockchain is critical. Stuart Haber and W. Scott Stornetta, two mathematicians who wanted to implement a system where document timestamps could not be tampered with, proposed blockchain technology in 1991. Nick Szabo, a cypherpunk, proposed using a blockchain to secure a digital payment system known as bit gold in the late 1990s (which was never implemented).