BLOCKCHAIN: THINGS YOU NEED TO KNOW
May 10, 2018
Initially developed to manage the cryptocurrency Bitcoin, the Blockchain technology has since advanced to something bigger – revolutionizing the business world. Since this technology has been all the rage in recent years, here are some basics you should know about Blockchain.
In summary, Blockchain is a global online database of all cryptocurrency transactions. It consists of blocks of data that is constantly growing as more digital transactions are completed and recorded. This avoids double-charged problems and the need for a trusted authority. As a decentralized system, users are able to keep track of all transactions that happen over the internet without central recordkeeping. Currently, the uses of Blockchain includes cryptocurrency transactions. However, advocates believe that with its Distributed Ledger Technology (DLT), it can be useful for the stock exchange, accounting and even other fields such as music and insurance in the near future.
The advantages of Blockchain
Now that we’ve understood the basics of Blockchain, what are some benefits that we can reap?
- Lowered transaction costs. Without third-party intermediaries and overhead costs, electronic ledgers are much easier to maintain and can save you a pretty penny.
- Greater Transparency. The decentralized nature of this technology means that all parties in the network can view any changes being made publicly. Hence eliminating the possibility of altering or mutating data, bringing us to our next point.
- Enhanced Security. Since every Blockchain requires a digital signature using private-public key infrastructure, any changes made to the data immediately indicates inauthenticity.
The limitations of Blockchain
Despite the myriad of benefits, there are still certain barriers which limit the usability of the Blockchain technology.
- Data Redundancy. As every node in the network collectively runs the Blockchain, transactions have to be processed independently. Hence requiring a larger amount of computation.
- Risk of error. When using Blockchain as a database, it crucial that all events are recorded accurately in the first place. When unreliable, inaccurate data enters the Blockchain, then unreliable and inaccurate data will also go out of it.
- Security Flaw – The 51% attack. If miners gain more than half of the computation power (51%) to influence the entire Bitcoin network, there will be no centralized authority to stop them. This would be a costly endeavor as they can prevent verification of new transactions and even stop payments between users.